Retail Market Pulls Strong Numbers in Palm Beach County

PALM BEACH, FL-Palm Beach County is experiencing strong investor demand for retail centers as well as new retail development, according to a new county retail market report by CB Richard Ellis.Prices of strip centers in South Florida are growing more rapidly than any market in the nation, the report states. “Even smaller, lesser-quality assets are garnering strong demand from a wide range of aggressive buyers,” the report states. Eight notable retail properties were sold in the first half of the year, and each had at least a 90% occupancy rate when sold.In addition, of under-construction retail centers, 95% had been pre-leased and most are 100% leased before their completion. Centers being developed include North American Properties’ 110,000-sf Mirasol Walk in Palm Beach Gardens, expected to be finished by early next year. With a $34 per-sf nnn average rental rate, the center has leased space to anchors Publix, Bank of America and SunTrust. Also planned for Palm Beach Gardens is Legacy Place, a 330,000-sf mixed-use center with anchors Barnes & Noble and Linens ‘n Things. It is set to be completed next spring. Other submarkets, including Boynton Beach and Wellington, have retail centers planned as well.The recovering economy has contributed to investors’ attraction to the area. Also, a rapidly growing local population is contributing to demand for retail services, along with housing. In the West Palm Beach and Boca Raton submarkets, home sales have increased 19% and prices are up 29%, compared with last year, the report adds.Another emerging trend, says Greg Masin, director of retail services for Cushman & Wakefield of Florida Inc., is a shift in the local retail market to ground-floor and street-front retail. This is caused by rising densities with much vertical residential development in the area. The shortage of land available for development is the driving force. While the entire tri-county area of South Florida is experiencing this, “This emerging verticality is at the highest degree in Miami-Dade County,” Masin says. “Dade is basically finished building out to the west.”With the increasing demand for vertical residential housing, “You’re obviously going to see retail start to fill in to meet the need of that demographic.”It’s an emerging phenomenon,” he says, with new retail projects either under construction or on the drawing boards. “You have a lot of people looking at space where they wouldn’t have looked at space five years ago. The days of absolutely, positively having to have an enormous parking field in front of the premises–that’s changing. … Those days are gone in South Florida.”According to the CB Richard Ellis report, the retail vacancy rate in the county ranged from 4.1% in the Boca Raton submarket to 16.3% in Palm Beach in the second quarter, with the average 5.6%. Overall net absorption was 53,037 sf. The average asking lease rate per sf nnn was $18.57, on the lower end, $13 in Lake Worth, and on the high end, $28.99 in Boca Raton.The South Florida retail market overall is expected to continue to have a growing demand for space, which should translate to more development and higher rental rates. Leasing activity is expected to stay strong with solid net absorption in the market, the report adds.