Analysts project strengthening of Miami retail realty market
By Marilyn Bowden
The Miami retail realty market is in great shape as the new year starts, retaining its vigor in the face of slumps in many parts of the nation, say analysts — and numbers look relatively good for the years ahead.
With single-digit vacancy rates, the Miami market started 2008 in solid shape, says Cushman &Wakefield's Miami-Dade Retail Report. The report cites a weak US dollar and a second storm-free season as inducements for strong European and South American tourism to the area, key factors in the Miami-Dade retail market's health in 2007.
In a report compiled by Staubach Capital Markets, the International Council of Shopping Centers reported overall retail occupancy in Miami-Dade County at 95% last year, with retail rental rates continuing to rise even as growth in the overall market declined slightly in the third quarter to 2.4%. That growth rate compares to an earlier 3.2% posted for first quarter 2007.
The Staubach/ICSC report, which breaks the Miami area into five sections, reports that Coral Gables and Kendall continued to post the county's lowest retail space vacancies, 97.6% at the start of 2007. And while retail rental rates in the county overall rose an average of 2.4% in third quarter 2007 to $24.32 a square foot, it was the Opa-locka and Hialeah area that saw the highest increases — up 4.6% over the course of the year.
Grubb & Ellis, meanwhile, predicts in its most recent market summary that the South Florida retail market overall will weaken this year because about 5 million square feet of new space is rising or on the drawing board.
"Developers with long-term outlooks continue to plan for new construction," Grubb & Ellis reports. "For example, Aventura Mall developer Turnberry Associates is seeking government approval for The Commons, a $300 million high-end mixed-use project in Davie."
That project would include 1.1 million square feet of retail space.
In its report Cushman & Wakefield concurs: "Projects currently under development and slated for future delivery in 2008 are less likely to continue to benefit from the rapidly expanding rents experienced over 2006 and 2007."
One factor in bullish projections about the Miami-Dade market is the area's population and job growth. Miami is expected to continue adding to its population at a rate of 1.4% a year, Staubach estimates. Staubach sees a rosy retail horizon for Miami against a backdrop of a 2.59% increase in employment here in 2007.
"Southeast Florida is poised to be one of the nation's forerunners in employment growth over the next five years," this company reports. "Thanks to a diverse local economy, including tourism, financial and business services, Dade County added 177,000 jobs since 2000 and is forecast to add another 145,000 by 2012."
"Statewide," says Justin Greider, senior financial analyst with Staubach, "retail fundamentals have remained very strong, and new development has slowed to a healthier pace than a year ago."
That, he says, should prevent the overbuilding evident in the residential market from spreading into the commercial market.
"However, many people are very hesitant to move forward in any real estate transaction right now," Mr. Greider says, "due to uncertainty about the overall economy."
In any event, he says South Florida remains the most sought after market in the southeast US.