What a difference a year makes! Retail real estate in Miami is not dead nor in the depths of huge vacancy rates and declining rents; current vacancy rate is 4.3 percent and rental rates have slipped by 0.1 percent over the past year.
Let’s explore several indicators of the value and use of the current state of the shopping center industry, restaurant space, entertainment space and big-box retailers.
South Florida restaurant space, due to COVID-19 restrictions, was not open to customers over the last 18 months. Many anticipated only a few restaurants to survive with lots of second-generation restaurant space expected to be given back to landlords. Due to the U.S. Small Business Administration’s Paycheck Protection Program and restaurateurs flocking to Miami from across the country — mainly the Northeast, especially New York City — the glut of restaurant space vacancy never occurred.
Josh Rodstein, NAI MIami
When there is available second-generation restaurant space, it gets leased quickly. South Florida has seen national chain quick-service restaurants (QSR) looking for ghost kitchens which restricts customers to pick-up and delivery. Restaurant sales are back to pre-COVID-19 levels beginning the second quarter this year. The restaurant market appears to be healthy, again.
News is not so great for the entertainment retail real estate users. Movie theater chains that are still financially viable are attempting to determine their futures. Two factors helping to create optimism for theaters include that they are beginning to slowly open for visitors with limited seating and it’s happening just in time for their prime season: summer.
The entertainment industry had to evolve through COVID-19, including the adaption of live streaming first-run movies on Netflix, Hulu, HBO Max and Disney+, to name a few. This major change will continue to shrink the number of movie theater chains and reduce their footprint for new locations in the future.
Transitioning to pre-COVID-19 times for other entertainment-based retailers like Splitsville, Bolero, comedy clubs and nightclubs should happen much faster. As we move to a fully vaccinated population, those venues will continue to draw customers looking to be entertained.
The viability of big-box space and regional malls has been in a state of despair over the last five years or more. Due to the pandemic, the death of several retail chains has occurred, and some are imminent. Sears, JC Penney and other big-box retailers have closed their doors, causing the regional malls housing those retailers to be adapted for reuse. Repositioning those spaces will become a hot topic in the coming years. Some adaptive reuse options are medical, residential or distribution/warehouses for the coming economy.
Retail real estate in Miami is in a transitional period due to the COVID-19 pandemic. However, the commercial real estate professionals and owners that are open to change, thinking outside of the box and listen to consumers’ needs will have and continue to have successful retail properties.
— By Josh Rodstein, Partner, NAI Miami. This article originally appeared in the May 2021 issue of Southeast Real Estate Business.