Retail Asking Rents Trending Up in South Florida

The retail market dynamics in South Florida are pointing to rising rents as available space continues to get harder to find.

Robust tourism, including the return of international visitors, and consumer spending that is outpacing the national average are driving the market, with the demand for space outrunning the supply.

Retail rental asking rates have increased in South Florida by nearly 5% thus far this year, while the vacancy rate is 2.8%, according to CoStar data. Meanwhile the shortage of retail space continues to tighten, with nearly 95% of new construction in the area pre-leased before delivery.

The limited availability of premium retail spaces with high visibility, favorable co-tenancy and ample parking is crimping leasing volume while increasing tenant ownership preferences, according to a report in RE Business.

The gap between supply and demand and the expectation that asking rates will continue to increase during the second half of the year are driving a trend toward owner-user retail spaces in South Florida as financially capable tenants explore ownership options, the report said.

The retail pipeline under construction in South Florida in Q1 2024 totaled 2.3M SF, down from 3.6M SF in a year-over-year comparison. Net absorption has outpaced deliveries for each of the past three years, according to report from Lee & Associates.

The vacancy rate declined by 30 bps to a record low of 2.7% in Miami-Dade County in the first quarter-the lowest level in the past decade.

Despite the addition of more than 396K SF of new retail space, net absorption in Q1 outpaced new supply, with nearly 663K SF taken off the Miami-Dade market by the end of the quarter, according to a market report from Colliers.

According to Visit Florida data, Florida maintained its position as the top domestic tourism destination in the U.S. in 2023, with 123M visitors, while attracting 12M international visitors.

Earlier this month, Florida announced record tourism numbers for Q1 2024, with totals for international visitors moving closer to pre-pandemic levels, CBS News reported.

An estimated 37M people traveled to Florida from other states in the first quarter-the most ever for a single quarter, the report said. More than 2M overseas travelers came to the Sunshine State in Q1, as well as nearly 1.3M visitors from Canada. In Q1 2019, a total of 2.28M overseas visitors came to Florida.