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 in Sunrise. The well-known international brand has created quite a bit of competition with local furniture stores. Sunrise is Ikea’s first location in South Florida. Also, Five Guys Famous Burger & Fries and Firehouse Subs are adding locations throughout both counties.
Who are the active retail developers in your area?
Two active developers are Stiles Corporation and Woolbright Development.
Please name one or two significant retail developments in your area. What impact will these projects have on the market?
In Broward County, the 300,000-square-foot Ikea was a significant delivery. Davie Commons, a planned 152-acre, 2 million-square-foot, office and shopping center is in the pipeline. The center is being developed by Turnberry Associates in the suburban town of West Davie. It will be the first major lifestyle center of its kind in this submarket.
In Miami-Dade County, a 450,000-square-foot center in Kendall is projected for delivery this year. Anchored by Costco, the center’s tenants will also include TJ Maxx and Ross Dress for Less.
Where is the majority of development taking place? Why is this area doing well?
In Fort Lauderdale, builders added 1.8 million square feet of retail space in 2007, almost double the output from 2006. This year, 1.2 million square feet is anticipated with 942,000 square feet headed for the Coral Springs/Margate submarket. With strong demographics and market fundamentals, this suburban area has not been hit as hard by the housing market.
In Miami-Dade County, builders also added about 1.8 million square feet of new retail space, but this number is down almost 12.5 percent from deliveries in the previous year. The majority of development is taking place in the Coral Gables/Kendall submarket where there are currently 580,000 square feet of retail space under construction.
What area do you expect to be the next big retail development market? Why?
In Broward County, developers are forecast to shift their focus to the Dania/Hollywood/Hallandale and Plantation/Sunrise/Tamarac submarkets, as 63 percent of planned projects are currently being scheduled for those areas. The Dania/Hollywood/Hallandale submarket thrives on its gaming entertainment centers whereas the large outlet-shopping center, Sawgrass Mills Mall, brings traffic to the Plantation/Sunrise/Tamarac market.
In Miami-Dade County, the largest proposed development found in the planning pipeline is the 700,000-square-foot Hialeah Gateway retail center at NW 97th Avenue and NW 138th Street. There are about 37 projects in the planning pipeline that could add 4.7 million square feet of inventory to Miami-Dade, if all reach fruition.
Please describe the retail leasing activity in your area.
I doubt we will see rent growth this year in South Florida. Leasing is hard in particular for non-anchored centers as vacancies are increasing and owners are having trouble collecting rents. Rent concessions are back on the market in some areas because there are not as many tenants actively seeking space.
What major leases have been closed recently?
In Broward County, two of the largest lease signings included: Garment & Linen Services (84,959 square feet, Federal Highway) and Pompano Auto Property (46,516 square feet, Ford of Pompano).
In Miami-Dade, a few of the largest lease signings included: the 59,000-square-foot lease signed by Floor and Decor Outlets at 3250 W 18th Ave., and the 45,000-square-foot deal signed by David Barton Gym at Gansevoort South Hotel.
Please give a measure of retail vacancy rates and a measure of available sublease space.
The prolonged housing market downturn and credit crunch — not just in the debt market but for all credit lines — coupled with the inflation of food and gas prices could lead to a vacancy rate of eight to 10 percent for unanchored centers. This will be evident in both Broward and Miami-Dade counties.
What types of retailers should look into your market in the coming year? What type of retail is needed?
Quick-serve, moderately-priced restaurants such as Chipotle Mexican Grill and Five Guys — or restaurants with similar concepts — should seek space in South Florida.
Barry Wolfe
Michael Zimmerman