Barry Wolfe and Michael Zimmerman of Marcus & Millichap sit down with REBusinessOnline.com to give their take on the South Florida retail sector.
• What trends do you see presently in retail development in your area?
While a recovery in the retail property sector may not start for several more quarters, the slowing in construction will help to set the stage for an eventual rebound in occupancy and rent growth. There is little to no construction currently beginning in South Florida; therefore, completions in 2009 will fall considerably less than the average posted over the past 5 years.
• What type of retail product is doing well in your area?
Retailers holding up well during the on-going recession are necessity-based retailers such as grocery, drug stores and gas stations. Retailers offering lower price points on their goods and services, such as Dollar General and Family Dollar, are also doing well.
• What retailers are new to your area?
Kohl’s continues to open stores throughout South Florida. Anthony’s Coal Fire Pizza is also expanding. Otherwise, we are seeing minimal retail expansion and development in the current market environment.
• Please name one or two significant retail developments in your area. What impact will these projects have on the market?
With the current economic downturn, retail development has slowed and will likely pick up in the second half of 2010. The 2 million-square-foot Davie Commons regional mall is the metro’s largest planned property and is undergoing a review by the state. One of the issues to be overcome is a need for an expanded interchange at Interstate 75 and Royal Palm Boulevard. Turnberry Associates is developing the project with an anticipated opening of Fall 2011.
• What area do you expect to be the next big retail development market? Why?
It will be a while before development picks up. Because there are dense residential areas and more available land in the western suburbs of Fort Lauderdale, this area will see more retail construction as the market stabilizes.
• Please describe the retail leasing activity in your area.
Existing tenants continue to ask for concessions and owners often have consented rather than risk creating a vacancy. Some tenants are taking advantage of the market conditions and moving to better quality locations for less rent. Landlords are focusing on asset management, improving operating costs and retaining their current tenants. We see rents being reduced by 10 to 15 percent from market highs.
• What major leases have been closed recently?
Some of the recent largest lease signings occurring in 2009 included: the 16,000-square-foot lease signed by Doris Italian Market & Bakery at Nob Hill Plaza in Sunrise and the 15,200-square-foot deal signed by Dollar Tree at Magnolia Shoppes in Pompano Beach.
• Please give a measure of retail vacancy rates and a measure of available sublease space.
Vacancy is forecast to rise to 10 to15 percent market-wide. Vacancy is higher out west and lower in grocery-anchored centers. In Broward County, net absorption was negative (649,919) square feet, and vacant sublease space increased by 89,168 square feet.
• Would you like to make any additional observations about the retail market in your area?
Investors who can make it through the current cycle and buyers who can purchase and hold assets will excel in the new cycle.
— Barry Wolfe, vice president Investments, and Michael Zimmerman, vice president Investments, focus on retail and single-tenant properties in South Florida. Both Barry and Michael work out of Marcus & Millichap’s Fort Lauderdale office.