"The developers are taking it on the chin," Bill Chalmers, Trammell Crow vice president of development services, tells GlobeSt.com. "The only beneficiaries are the credit tenants. They have the leverage when it comes to rent."
In contrast to high retail vacancies found elsewhere in the country, the survey estimates that the South Florida vacancy rate dropped by about 7.6% by midyear from 8.59% as of Dec. 31. The midyear report includes the following averages for Broward, Miami-Dade and Palm Beach counties:
Vacancy rates now average 7.94%. Net absorption totaled about 432,000 sf. Asking rents averaged $15.01 per sf, down 13 cents from the year-end report, but still above the 2000 mid-year estimate of $14.46 per sf.
The problem for developers essentially comes down to what Chalmers considers two basic issues--a short supply of land and government regulations.
"There's scarcity of land," he says. "What is out there that hasn't been developed has some type of problem. Then there is the difficulty with government entitlements. As land becomes scarcer, we're not seeking any loosening of government entitlements. If there was an easing of government regulations then there wouldn't be as many hurdles."
GlobeSt.com recently reported on one such case.
Paradise Development Group Inc., a Tampa Bay area commercial real estate developer that partners with Publix Supermarkets Inc., spent nearly three years negotiating an off-site mitigation plan and a roadway expansion plan in exchange for approvals to build a 30-acre, mixed-use neighborhood retail center and office building in the Broward community of Cooper city.
Of 56 acres owned at the site, the developer also agreed to contribute 26 acres to an on-site wetlands mitigation program.
"It's a matter of pure economics," Chalmers notes. "There's a lack of supply. Prices are going up exponentially for land, but the landlords are not seeing an exponential increase in rents."
That is forcing developers to consider urban infill projects, Chalmers says. Publix and its development partners, for instance, developed five new urban projects last year--two in Miami, two in Fort Lauderdale and one in West Palm Beach.
"The population density in the urban areas really mitigates the risk associated with the pioneering of urban developments," Chalmers says. "But what you encounter is a whole new set of problems--parking, closing streets, increasing water and sewer capacity."
Consequently, Chalmers notes, the market is seeing a new dynamic emerging as developers cope with the scarcity of developable land and the ensuing government regulations on available property.
"You now have to be a developer who can spend a lot of time putting property together; a developer with a ton of staying power, in order to stay in there for that length of time as well as speculating a property down before you have approvals," he says. "What I think you'll see is a smaller and smaller pool of retail developers."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
