In Miami-Dade, Broward and Palm Beach counties, retail landlords are raising rents to levels that surpass pre-pandemic pricing, according to a recently released third quarter report.
Vacancy rates fell across the tri-county region during the most recent quarter, and absorption increased as asking rents rose, the Colliers report shows.
“Asking rents are pretty aggressive across the board,” Colliers’ Dave Preston told The Real Deal. “Landlord concessions are down too, due to the competition in the market for high quality sites. If a tenant finds a space they like, they have to move on it pretty quickly.”
Restaurant leases primarily fueled the market in the last 10 to 12 months, but other service-oriented retail is starting to pick up, Preston said.
“We are seeing a little more diversity in the type of tenants expanding and getting deals done,” he said. “We are starting to see the health and fitness sector come back. We are also seeing a lot of medical [providers].”
Grocery stores and discount retailers like Ross Dress for Less and Marshalls continue to expand in all tri-county markets, Preston added. “We are seeing grocers continuing to be pretty aggressive,” he said. “That sector is still experiencing significant growth.”
Recently, traditional shopping centers anchored by grocery stores, discount retailers and medical providers have caught the attention of buyers. Horizon Properties of Miami picked up a Publix-anchored plaza in Hialeah for $33 million.
Hollywood-based real estate investor Todd Nepola acquired a Dollar General-anchored shopping center in Margate for $10.7 million, and Zenix Properties bought the fully-leased Promenade Shoppes in North Lauderdale for $13.5 million.
Milton Mekler, COO of Miami Manager, a real estate firm that owns five shopping centers across South Florida, said leasing activity is more active in shopping centers with smaller available spaces.
“We have a shopping center in Sunrise where occupancy dropped to 60 percent during the pandemic,” Mekler said. “Today, it is more than 90 percent leased and Miami Manager expects the shopping center to be 100 percent leased within six months. All the spaces leased were less than 5,000 square feet in size.”
At this stage of the pandemic, South Florida’s retail market appears to be entering a new cycle. “All the signs point to us being in the early stages [of a recovery],” Preston said. “I expect to see this level of activity continue for the next several years.”
Mekler said traffic at Miami Manager’s shopping centers increased exponentially since November, creating demand for retail space. “With only a limited amount of retail in certain areas, rents increased and retailers are willing to pay more to be in strategically located spaces,” he said. “It is a 180-degree change from over a year ago.”
The vacancy rate declined to 3.7 percent in the third quarter, down 0.3 percent compared to the previous quarter. During the same period last year, the vacancy rate was 4.4 percent.
Miami-Dade’s retail submarket absorbed 464,654 square feet in the third quarter compared to a negative absorption of 23,246 square feet in the third quarter of last year.
The average asking rent has bounced back since a previous high of $37.51 a square foot in the fourth quarter of 2019. In the latest quarter, the rate climbed to $38.98 per square foot, up more than $2 from the second quarter.
“We are really seeing markets with high density like Coral Gables, Doral, Brickell and Aventura are still strong,” Preston said. “Homestead is performing at a very high level, as well. We are seeing a lot of activity there.”
The third quarter vacancy rate in Broward dropped to 5 percent. It had peaked at 5.9 percent in the fourth quarter of 2020 and averaged 5.3 percent during the past year.
Broward absorbed 308,672 square feet in the third quarter, compared to a negative absorption of 194,765 square feet for the same period last year.
The average asking rent rose from a previous high of $22.83 a square foot in the fourth quarter of 2019 to $22.96 in the latest quarter. Broward’s average asking rent in the second quarter was $22.74.
“In Broward, everything around Las Olas Boulevard, downtown and Flagler Village is very active,” Preston said. “But high streets are still not as active as some of the traditional assets like open air shopping centers.”
Palm Beach County
The vacancy rate fell to 4.7 percent in the third quarter, compared to 5.2 percent in the third quarter of 2020. It was 5 percent last quarter.
Palm Beach County absorbed 335,516 square feet of retail space, versus 44,362 during the same period last year.
In the fourth quarter of 2019, the average retail rent hit a high of $22.48 a square foot. From there, rents steadily fell all of last year, but began rebounding in the first quarter of 2021. In the latest quarter, the average asking rent jumped to $24.98.
“In East Delray, there is a lot of activity,” Preston said. “We are seeing restaurants and retailers wanting to be there. Downtown West Palm Beach is also hot.”