(Carl Cronan is editor of Real Estate Florida.)
MIAMI-Declining tourism, weakening sales and additional job cuts are expected to put added stress on local retail properties, including those in the popular South Beach district where asking rents have soared, according to research reports on the market. Vacancy in the market is forecast to reach 8.1% this year, up from 6.7% at the end of last year and 5.1% in 2007.
Hotel room demand in Miami-Dade County fell approximately 2% over the past year, while retail sales are projected to decline 14% this year and employment is expected to lose 40,000 positions, or 3.9%, according to research by Marcus & Millichap. Asking rents are predicted to fall back 3.7% to $23.70 per square foot through 2009, with effective rents dipping 4.1% to $20.84 per square foot.
"Decreased visitor volume will weaken property performance," observes Kirk Felici, regional manager of Marcus & Millichap in Miami. He says vacant space has accumulated in buildings with up to 50,000 square feet in southwest Miami-Dade, as well as along Dixie Highway to the south. Increases in vacancy are also expected in Homestead, Kendall and Cutler Ridge because of lower employment in the county's core job centers, he says.
Prime retail rents last year ranged from $30 per square foot along Biscayne Boulevard to $130 per square foot on South Beach's fashionable Lincoln Road, according to Cushman & Wakefield of Florida. The weak US dollar attracted European and South American tourists to South Beach, boosting the success of the region's high streets.
Although vacancy rates throughout Miami-Dade remain at historically healthy levels, rent rates have shown nominal declines this year and class B assets are already experiencing rent erosion. "The leverage has clearly shifted to the tenant," says Greg Masin, senior director with Cushman & Wakefield in Miami.
Cap rates on multitenant retail properties will climb into the 8% range this year as vacancy rises, though assets with national tenants can trade in the mid-7% range, Marcus & Millichap predicts. "Buyers who are able to put considerable cash into deals are likely to wait for opportunities to become available when over-leveraged owners need to sell," Felici says.
Some of these prospects may emerge in northern Miami-Dade, where a significant amount of deals were done when credit wasn't as stringent, he adds. Furthermore, properties in areas with high population densities, such as Aventura, Coral Gables and Coconut Grove, will likely attract more aggressive bids in the months ahead, Marcus & Millichap states.
Furthermore, Felici says limitations on new supply will continue to attract investor interest. Projects totaling 700,000 square feet are scheduled to open in Miami-Dade this year, led by the 150,000-square-foot Park Square at Doral lifestyle center.
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