Retail Market Stays Strong –– Except in Palm Beach County

South Florida’s retail market outlook this year appears bright with leasing and rents holding steady, though that’s until Palm Beach County enters the picture.

It was the only county in the region to show signs of softening in the second quarter, with both leasing and asking rents slightly dropping while vacancies crept up, according to Colliers’ new reports. For one, Palm Beach net absorption, or the difference between the amount of space tenants leased during the second quarter and the space they vacated, dropped for the first time since early 2021.

Taken as a whole, South Florida’s market has remained strong, even as expensive financing costs have burned a hole in business’ wallets, prompting some to reevaluate their real estate needs. The leasing activity was partly propped up by gyms and restaurants, tenants that aren’t impacted by e-commerce.

The average vacancy rate across the three counties was 3 percent in the second quarter, flat from the previous quarter and lower than the 3.3 percent during the second quarter of last year, according to a Lee & Associates report. At the same time, landlords weren’t shy about pushing up asking rents, which hit just above $36 per square foot, triple net, a 7 percent hike from almost $34 a foot rate during the second quarter of last year, according to the Lee & Associates report.

In total, more than 3.5 million square feet of retail space is under construction in South Florida.

Miami-Dade County

Miami-Dade leasing picked up in the second quarter, as the net absorption was more than 410,000 square feet, Colliers’ report shows. That’s much better than the miniscule net absorption of 6,700 square feet during the first quarter.

As tenants took space, the vacancy rate hit 3.1 percent, down from 3.2 percent in the previous quarter and from 3.3 percent during the second quarter of last year. Landlords kept average asking rents at almost $44 per square foot, flat from the first quarter but about 4 percent higher than in the second quarter of last year.

The biggest lease was by indoor entertainment center Flying Squirrels Sports taking 120,000 square feet at 12350 Southwest Eighth Street in an unincorporated area of west Miami-Dade, although that was a sublease, according to Colliers’ data. Goodwill trailed by renewing its term for 14,000 square feet at Plaza Algere retail strip, also in west Miami-Dade, and by good hall Shoma Bazaar expanding its footprint beyond its Doral space and to a 10,400 square feet space in Hialeah.

Broward County

Similar to its neighbor to the south, Broward experienced an uptick in leasing. The second quarter net absorption was nearly 230,000 square feet, marking an uptick from the nearly 120,000 square feet of net absorption in the previous quarter, according to Colliers.

The vacancy rate hit 3.5 percent, down from 3.7 percent in the first quarter and from 4.2 percent in the second quarter of last year. Property owners pushed up the average asking rents to almost $28 per square foot, or 1.8 percent higher than in the first quarter and 6 percent higher than in the second quarter of last year.

Crunch Fitness took 53,000 square feet at 9919 West Oakland Park Boulevard in Sunrise, marking the biggest lease in the second quarter.

Despite the robust leasing activity, investment sales were “muted,” the report says. The Federal Reserve’s interest rate increases since last year created bid-ask gaps, or chasms between what sellers expect for their well-leased properties and what buyers facing expensive financing can afford to pay.

The biggest deal in the second quarter was Flanigan’s Seafood Bar & Grill’s purchase of the properties at 615, 701, 707 and 715 East Hallandale Beach Boulevard for $9 million.

Palm Beach County

Palm Beach’s second quarter net absorption was a negative 75,000 square feet and vacancy rates crept up to 3.7 percent, according to Colliers. That marked a turnaround from the previous quarter when net absorption was nearly 187,000 square feet and the vacancy rate was 3.5 percent.

Palm Beach was also the only South Florida county to record a drop in average asking rents, which were just above $29 per square foot in the second quarter, down by 3.3 percent from the previous quarter.

The county “showed early signs of a slowdown,” the report’s authors wrote. With more than 409,000 square feet of retail real estate under construction across the county, it remains to be seen whether leasing will catch up to the new supply.

Office Depot renewed its term for 19,300 square feet Lantana Plaza in the biggest lease for the quarter, followed by Retro Fitness taking 17,300 square feet at Delray Landing.