South Florida retailers might be catching a break, thanks to lower rents
Retailers are finally getting a little breathing room. South Florida commercial landlords have dropped asking rents — at least slightly — and are poised to go lower.
So says Colliers International retail market first quarter 2020 report. Between the fourth quarter of 2019 and the first quarter of 2020, asking rents dipped ever so slightly in Miami-Dade — by 0.2% — and slightly more in Broward, by 2.7%. Vacancy rates were flat in Miami-Dade and up by a mere 0.1% in Broward.
“To have little to no drop speaks to the strength of the market,” said Dave Preston, Colliers International executive managing director of retail services. But that was before the outbreak. Now, he predicted, “We are going to see some form of a drop. We’re already seeing some bankruptcy filings.” Prior to the crisis, he noted, “retailers were already facing the challenges of increased online shopping, Amazon and reducing their foot prints.”
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Rents are expected to hold up better in Broward than in Miami-Dade since most of its retail is in outdoor shopping areas and strip malls, where customers may feel less vulnerable to germs. Miami-Dade, by contrast, depends more heavily on malls.
The report indicates that once the pandemic hit, most landlords chose to reduce rents rather than evict tenants, Preston said. “We saw landlords working with tenants and banks working with landlords.”
Miami-Dade
Retail vacancy rates remained level, at 4.4% in both the fourth quarter of 2019 and the first quarter of 2020. Asking rents dwindled by 0.2%, from $38.42 per square foot in 2019 Q4 to $38.33 per square foot in Q1 2020. Some 420,000 square feet were leased, about 100,000 square feet below the quarterly average for the county.
About one million square feet of new retail space opened. Another 2.5 million square feet is under development.
Wynwood and Miami Beach are most likely to see rent reductions and increased vacancies in the months to come, Preston said.
“Wynwood being a dense area where people are not going to want to cluster, landlords are going to have a tougher time justifying those rents,” Preston said.
Tourist-dependent areas, including Miami Beach, “are going to have its issues,” he said.
Broward
Vacancy rates increased from 4.4% to 4.5% from Q4 2019 to Q1 2020. Asking rents decreased by 2.7% quarter-over-quarter in Broward, from $22.84 per square foot to $22.22 per square foot. About 400,000 square feet was leased, 150,000 square feet below the quarterly average.
About 268,300 square feet of new construction came to market in the first quarter. More than 786,000 square feet are under construction.
The slowdown in office activity may inadvertently benefit retailers in the downtown Fort Lauderdale neighborhood. “That daytime population helped keep vacancies low and asking rents high,” Preston said.
This story was originally published May 29, 2020 at 7:00 AM.
