“A screeching halt”: South Florida retail construction drops off
Vacancy rates remained in low single digits, as demand outpaced supply in the fourth quarter of last year
In the fourth quarter of last year, newly completed retail construction was virtually zero in many of South Florida’s most well-known retail submarkets, according to a recent report.
Downtown Fort Lauderdale, downtown West Palm Beach and Miami neighborhoods such as Wynwood, the Design District and Brickell had no new retail completions during the final three months of last year, the Colliers report shows. Year-over-year, vacancy rates remained below 4 percent across the South Florida retail market as average asking rents held steady.
The slowdown in new retail space has resulted in high demand for limited space in the tri-county region, according to commercial brokers and landlords. Older shopping centers and retail plazas are being torn down to make way for multifamily-focused mixed-use projects, which is also contributing to an increase in tenants jumping into the leasing market.
“There hasn’t been a lot of new retail development that has occurred in the last cycle, especially in the urban cores,” Jaime Sturgis with Fort Lauderdale-based Native Realty told The Real Deal. “There has also been a lot of new multifamily development replacing [existing retail sites.] It has taken some inventory off the shelf.”
Todd Nepola, president of Current Capital Group, a Hollywood-based commercial real estate firm, concurred with Sturgis’ assessment. “New construction has come to a screeching halt,” Nepola said. “There is a lot of retail being knocked down and being turned into residential.”
For instance, Coral Springs-based Amera recently began demolishing a portion of Cocogate Plaza, an outdoor shopping center in Margate, to make way for a 220-unit apartment complex, Nepola said. The partial teardown has been beneficial for Current Capital, which owns a nearby shopping center that is drawing interest from Cocogate’s displaced tenants, Nepola added.
“I love it,” Nepola said. “It’s a win-win.”
Across South Florida, leasing activity and asking rents remained strong throughout the year, with virtually no tenant concessions, Nepola said. “Almost all our tenants are extending leases, renewing for five to 10 years,” he said. “With the renewals, we have bumped up rents by an average of 30 percent. And my properties are usually below market.”
Developers completed 255,383 square feet of new space in the fourth quarter, compared to 841,040 square feet during the same period of 2022, Colliers’ report shows. Roughly 1.2 million square feet of new retail was under construction in Miami-Dade in the last three months of last year.
The vacancy rate hit 2.8 percent in the fourth quarter, virtually the same as the 2.9 vacancy rate during the same period of 2022, the report states. Year-over-year, the average asking rent inched upward to $43.77 a square foot from $43.45 a square foot.
Among the fourth quarter’s notable new leases, mini-golf venue and restaurant Puttery opened in a 17,800-square-foot space in a repurposed industrial complex at 239 Northwest 28th Street in Miami’s Wynwood, owned by New York-based Thor Equities.
Roughly 86,000 square feet of new retail space opened during the fourth quarter, compared to 97,559 square feet during the same period of last year, the report states. Developers had roughly 586,000 square feet of new retail under construction in the fourth quarter.
Broward’s vacancy rate rose to 3.7 percent in the fourth quarter, compared to 3.5 percent during the same period of 2022. Year-over-year, the average asking rent rose slightly to $27.53 from $27.07.
In the fourth quarter, Oakland Park-based Newrock Partners and Fort Lauderdale-based Brickbox Enterprises signed five new tenants for the retail component of the joint venture’s Oaklyn mixed-use project in Oakland Park. The new tenants included fitness center Pure Barre and coffeehouse Imperial Moto Café.
Palm Beach County
About 51,000 square feet of new retail space was completed in the final three months of last year, compared to 97,925 square feet during the same period of 2022, the report shows. Developers had 586,000 square feet of new retail space under construction in Palm Beach County during the fourth quarter.
Similar to Miami-Dade and Broward, the vacancy rate remained stable, year-over-year, rising to 3.5 percent from 3.4 percent. The fourth quarter ‘s average asking rent dropped to $28.83 a square foot, compared to $30.10 a square foot during the same period of 2022, the report shows.
In the fourth quarter, Simon Property Group signed 11 new tenants for Town Center at Boca Raton, including Swimwear store Beach Bunny and jewelry store gorjana.