Verada Commercial Real Estate Blog

The South Florida Retail Boom: Opportunities and Challenges

Written by Nathaniel Mallon | Nov 27, 2023 8:49:50 PM

Miami-Dade County's retail market continues to shine, demonstrating remarkable resilience in the face of changing dynamics. The region's retail sector maintains historically low vacancy rates, reflecting its attractiveness to retailers, while positive net absorption and robust retail sales underscore its adaptability and strength. In this blog post, we explore the current state of the South Florida retail market, leasing trends, challenges, and opportunities.

 

5 notable retail leases in South Florida during Q3 2023:

Submarket

Property Name

Property Address

Tenant

Square Feet

Landlord

Boca Raton West

Restaurant Row

5355 Town Center Rd

Fiolina Pasta House Boca Raton

7,000

PEBB Enterprises

Boynton/Lantana

Catalina Centre

1701-1797 N Congress Ave

Salons By JC

6,600

Roberts Equities, LLC

Brickell

Brickell City Centre

701 S Miami Ave

Motek

10,000

Northwood Investors LLC

Coral Gables

Miracle Mile

348 Miracle Mile

Eden Park Paris

5,702

Terranova Corporation

Delray Beach

Delray Corner

14802-14860 S Military Trl

Michaels

25,600

Berta Management of Florida Corp

 

These notable retail leases in South Florida represent a diverse range of submarkets, from the bustling streets of Boca Raton West to the vibrant culture of Brickell, each with its unique charm and appeal. The featured tenants, including Fiolina Pasta House Boca Raton, Salons By JC, Motek, Eden Park Paris, and Michaels, underscore the variety and vibrancy of South Florida's retail offerings. These leasing transactions exemplify the market's resilience and adaptability, even in the face of changing dynamics. By showcasing these leases, we aim to highlight the opportunities and challenges within the South Florida retail market, providing valuable insights for both investors and retailers looking to thrive in this dynamic region.

 

Market Overview

Despite a slight deceleration in leasing activity, South Florida's retail market remains a stronghold with historically low vacancy rates. The region's retail environment, particularly in Downtown Miami and Miami Beach, continues to thrive, attracting both residents and tourists with vibrant entertainment and outdoor attractions. Sales volume and pricing have experienced a temporary slowdown, but the market's resilience and appeal to a diverse consumer base remain unwavering.

 

Leasing Key Trends

The retail market in Miami-Dade County has maintained positive net absorption over the last 12 quarters, with a vacancy rate of around 3.0% as of Q3 2023. Looking ahead, vacancies are expected to increase slightly in Q1 2024 due to an elevated supply pipeline, concentrated in submarkets such as Miami Lakes, Downtown Miami, Northeast Dade, Coral Gables, and South Dade. However, Miami's retail vacancy rate is expected to remain the lowest in Florida, with anticipated absorption outpacing inventory additions.

 

Miami Submarket

Miami's retail submarket remains robust, with a low vacancy rate of 2.2%. Rents have steadily grown, and there's a minor expansion in retail space under construction. The submarket has seen an average price per square foot of $330, making it one of the most traded submarkets in the region.

 

Opportunity: Tenant Diversity

A notable trend in the South Florida retail market is the increasing presence of non-retail tenants. Gyms, co-working spaces, and medical practices are reshaping the brick-and-mortar retail landscape. These tenants not only generate off-peak traffic and reduce competition among retail tenants but also offer visitors a more immersive experience. Landlords benefit from increased optionality in tenant selection, enhancing the shopping center's overall appeal.

 

The result is a win-win-win situation, benefiting landlords, tenants, and visitors, and this trend is expected to continue as demand for space in top-tier centers increases.

 

New Format US Retailers



Store Type

Apparel

Home

Grocery

Drug & Beauty

Mass Merchant

Other

Larger stores

15.8

35.7

50

18.2

14.3

23.1

Smaller Stores

21.1

50

62.5

27.3

71.4

38.5

Stores in Different Locations

42.1

71.4

37.5

45.5

85.7

46.2

Automated Stores

31.6

28.6

75

36.4

28.6

23.1

Omni Channel Stores

57.9

78.6

62.5

90.9

71.4

53.8

New Layouts

47.4

42.9

62.5

45.5

57.1

46.2

New Technology Stores

15.8

50

37.5

72.7

28.6

15.4

 

This table showcases the changing formats US retailers are adopting. The flexibility in store size, the variety of products sold, and the locations are redefining the retail landscape.

 

Key Challenges

Despite the positive outlook, the US commercial leasing market faces significant challenges. These include uncertainties related to headcounts and space sizes due to changing work patterns, substantial interest rate increases disrupting capital markets, and the need for creative financing solutions. Higher interest rates are a top concern within the commercial real estate industry.

 

Key Takeaways

 

  1. Tenant Diversity: The South Florida retail market is evolving, with an increasing presence of non-retail tenants. This trend creates opportunities for landlords, tenants, and visitors, making shopping centers more immersive and appealing.

 

  1. Format Evolutions: Retail is becoming more flexible in terms of store size, product offerings, and locations. This flexibility empowers retailers to maximize the impact of each store and reach different audiences in premium locations.

 

  1. Migration: Understanding migration patterns allows companies to serve and develop relationships with recently migrated audiences, providing opportunities to address new needs.

 

  1. High Interest Rates: The commercial real estate market is closely monitoring interest rates, with their potential impact on financing and leasing decisions.

 

Miami Retail Capital Markets Statistics

 

Total Asset Value: $63.5B

12-Month Sales Volume: $1.5B

Average Market Cap Rate: 5.4%

12-Month Market Sale Price Change / SF: +4.7%

 

Miami Retail Real Estate Statistics: Leases, Sales, and Projects Under Construction – Q3 2023

 

In Q3 2023, Miami's retail market remains strong with a low vacancy rate and a growing presence of non-retail tenants. As the market evolves, retailers are embracing new formats and flexibilities to meet changing consumer demands.

 

Predictions for Q1 2024

 

The South Florida retail market is poised to maintain its resilience and continue attracting a diverse range of tenants. As the region evolves to meet changing consumer demands, the market is expected to adapt and thrive. This growth will be driven by the increasing presence of non-retail tenants, flexible store formats, and an overall positive outlook for the South Florida retail sector.