A relatively small amount of new space in the coming year will result in a continuation of the growing rental rates South Florida retail experienced this year, the report states.
This year, less than 1.8 million sf of new retail space was delivered in South Florida, the report says. Of that, 1.2 million sf was in Miami, 250,000 sf was in Fort Lauderdale, and 375,000 sf was in West Palm Beach.
This figure for Miami will drop in 2003, when the city is slated to gain 700,000 sf of new space. However, both Fort Lauderdale and West Palm Beach will see more space come online in 2003.
In the past year, retail rents saw continued growth of 2% to 3%. Rents have increased at a steady pace throughout South Florida. Asking rents for Miami retail averaged $19 per sf in the third quarter of this year and should grow to $19.60 per sf by the end of next year. In the Fort Lauderdale/West Palm Beach area, rents are expected to grow from $16.40 per sf in 2002 to $16.85 per sf next year, a 2.7% gain.
The report also found that while sales volume was low this year, that is expected to remain stable or pick up next year as stock market difficulties could drive more capital to commercial real estate. This year, national chain stores have been hesitant to expand and have cut costs, making some investors cautious when it comes to retail properties.
In addition, vacancy rates in the retail market increased slightly to 8.2% in Miami and 10.5% in Fort Lauderdale/West Palm Beach this year. A similar trend is expected next year in Miami, where the vacancy rate is expected to increase 0.2%. Due to effects of the recession, the vacancy rate for Fort Lauderdale/West Palm Beach should climb 0.3% next year before turning around. Currently, Coral Gables has a 5% vacancy rate--one of the lowest in South Florida.
Overall, tourism is down less than 10% from normal levels, enabling the area retail market to be healthy. Other factors that will positively affect South Florida's retail market are population and job growth.
Marcus & Millichap is a real estate investment brokerage firm based in Encino, CA.
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