Market Reports

As with the rest of the nation, Central Florida is adapting to drastic changes to our financial system. The local retail market has been adversely affected by the severe downturn in construction and housing-related industries — those segments were large components the local economy. Although the area currently ranks eighth nationally for foreclosures and the median home price has stabilized at the 2002 level of $130,000, residential sales volume increased 51 percent year over year. Unemployment for the region peaked in March at 10.1 percent, but is now down to 9.7 percent. Fortunately, Central Florida continues to make progress in diversifying its workforce with significant growth in the defense, high-tech and medical fields. Burnham Institute, University of Central Florida Medical School, Nemours Hospital and Florida Hospital are all growing. Additionally, government-funded projects in infrastructure and community venues in Orlando should build momentum in the recovery. As it is occurring nationally, we are witnessing a stratification of retailers locally as well – a separation between the Good, the Bad and the Ugly. The Good retailers are focusing on marketing, remerchandising, remodeling, expanding, recruiting and taking advantage of deflated costs and weakened competition. Some are seeing increases in sales of 25 percent. …

Retail properties in Miami-Dade County recorded negative net absorption in the first quarter as accumulating job losses stymied retail spending and forced merchants to vacate the market. Additional increases in vacancy are expected through the end of 2009 as more tenants close and others reduce planned store openings. Higher vacancy will induce a further decline in rents, which dropped for the second successive quarter in the first 3 months of this year, and a slowdown in new store openings will undermine support for marketwide rent growth in the months ahead. In addition, tenants seem to be gaining the upper hand in negotiations on lease extensions or renewals. As a result, concessions will rise over the remainder of the year as owners attempt to retain traffic-generating merchants. While the demand side is decidedly weaker than it has been recently, a decrease in construction will mitigate the extent of the projected rise in vacancy and set the stage for a steady recovery in property fundamentals. A look at the numbers indicates that employment in Dade County will decrease by 43,000 jobs (4.2 percent) in 2009, compared with a loss of 36,400 positions last year. Due to the decline in employment, retail spending …

Kirk D. Olson and Drew Kristol are senior associates in Marcus & Millichap’s Miami office. What area is your expertise? • Miami-Dade County retail properties. What trends do you see presently in retail development in your area? • The only major retail developments in the area are those that were started prior to the market correction that occurred in fall 2008. There is an increase in vacancy rates — anywhere from 5 percent to 15 percent — in Miami-Dade County. Many shopping centers that have not had vacancy issues in the past 5 years are now experiencing vacancies for the first time. Owners are lowering their rents to keep current tenants and are not generating much interest from leasing signs and advertisements. What type of retail product is doing well in your area? • Centers in prime locations remain relatively well occupied compared to areas that have been harder hit by the softening economy. Even though the spending power of shoppers is less due to the economic downturn, Miami-Dade County is very dense and there are too many people shopping for there to be mass vacancies. Dollar stores are still in expansion mode, as are some restaurant chains, Applebee’s and …

Submitted by Barry Wolfe, VP Investments and Michael Zimmerman, senior associate with the Fort Lauderdale, Florida, office of Marcus & Millichap Real Estate Investment Services. Posted Online 5-28-08. What area is your expertise? Broward County (Fort Lauderdale)/Miami-Dade County (Miami), Florida What trends do you see presently in retail development in your area? The housing market downturn and credit market shake up have caused retail development in South Florida to slow. Developers are having difficulty getting as much leverage as they had grown accustomed and lenders are now requiring either total or partial recourse. Another reason for the decrease in construction is simply that there is not a lot of available land for new development. What we are seeing in the pipeline is discount retail centers, such as Super Wal-Mart and Super Target, adding locations throughout both counties. What type of retail product is doing well in your area? Class A assets, such as grocery anchored (and in particular Publix-anchored centers) are always viable whereas un-anchored Class B/C shopping centers are struggling with vacancies, in part due to increasing expense pass-throughs. What retailers are new to your area? One of the largest new South Florida retailers is Ikea, which recently opened …