Miami
Demographic Overview*
Population: 5.0 million
Rate of Population Growth: 2%
Median Household Income: $48,200
Unemployment Rate: 5.7%
Retail Overview
2002 Retail Completions: 1.2 million sq. ft.
Retail Vacancy Level 2002: 8.2%
Retail Vacancy Level 2001: 7.7%
Average Rent Per Square Foot 2002: $19.01
Average Rent Per Square Foot 2001: $18.63
* Includes Miami-Dade, Broward and Palm Beach counties Source: U.S. Census Bureau, Marcus & Millichap
Dismal tourist traffic hasn't done much damage to South Florida's retail business, thanks to seemingly perpetual population growth in the region. In Broward, Miami-Dade and Palm Beach counties, the population grew from 4 million to more than 5 million between 1990 and 2000, according to the Census Bureau.
Not that the fall in tourism hasn't left scars. According to 2002 estimates by Greater Miami Convention and Visitors Bureau, a 9 percent dip in travel to South Florida cost local business about $2 billion in 2002. (In 2001, visitors pumped $21.9 billion into the local economy.) Post-September 11th cutbacks in domestic travel and the financial crises in Argentina, Brazil and Venezuela are mostly to blame.
Though South Florida's unemployment rate of 5.7 percent exceeds the rate of 5.1 percent in all of Florida, it remains slightly better than the national average of 6 percent. And the continuing growth of the full-time residential population seems to be generating enough retail activity to keep the retail real estate market relatively healthy.
In terms of vacancy rates, South Florida's malls and shopping centers beat the national average. Vacancies were 5 percent at year-end vs. 6 percent for regional malls across the country, says CB Richard Ellis. Though some 1.5 million square feet of new space will be delivered in 2003 for the region, CB Richard Ellis predicts most of the new space will be absorbed quickly.
Real estate services firm Colliers International calculates average regional rental rates of $12 to $25 per square foot in community centers, $12 to $21 per square foot in neighborhood centers and $14 to $21 per square foot in strip and specialty centers. The lowest rates tend to be in Miami, the highest in Palm Beach. In all, CB Richard Ellis pegs the average retail rent at $19.74 per square foot, up 50 cents since January 2002.
Among the major trends in retail development in South Florida is redevelopment of urban commercial space. The cities of Miami, Fort Lauderdale and Palm Beach, which were first built up during the 1920s land boom, are now experiencing an influx of new residents as well as inner-city gentrification. This is not only a demographic phenomenon (young professionals are increasingly seeking downtown amenities), it is also a geographical certainty: With the Everglades to the west and the Atlantic to the east, there is virtually no undeveloped land left between Palm Beach and Miami. “Everyone is thinking urbanization,” says Peter Schlang, director of retail leasing for Continental Real Estate Co. in Miami. “Even the older neighborhoods of Fort Lauderdale are trying out this new trend.”
As an example, Schlang points to The Rouse Co.'s Kendall Town Center, which should be completed by 2008. The complex, located on a 160-acre site in West Kendall, southwest of Miami, includes 1.3 million square feet of retail along with an office complex, a medical center, a hotel and an assisted-living facility that will rise on another 1 million square feet.
In Coral Springs, two developments of varying size are in the pipeline. Locally based Amera Corp. is master developer of Downtown Coral Springs, a redevelopment on a 140-acre site at the intersection of Sample Road and University Drive. The project will ultimately comprise 2.5 million square feet of combined office, retail and residential space.
On a smaller scale, Amera recently completed The Walk, a two-block project in Coral Springs that includes 100,000 square feet of offices and 140,000 square feet of retail space. Opened last year, the project is 90 percent leased to a mix of local and national tenants including Barnes & Noble, Jamba Juice, Starbucks and Baja Fresh.
Amera CEO George Rahael is bullish on urbanization, noting that developers have submitted proposals to build 5,000 apartments in Fort Lauderdale. “We think it will transform the city,” Rahael says. Amera has just broken ground on a 60,000-square-foot Winn-Dixie-anchored neighborhood center designed to serve the new residents.
The shortage of empty land combined with never-ending population growth are forcing changes in conventional development, too, according to Robert Breslau, president of Stiles Retail Group in Fort Lauderdale.
He says deals that developers and tenants would have found inconceivably expensive five years ago, including $25 per-square-foot rent for a 40,000-square-foot tenant, now appear desirable. Breslau says this shift has been particularly evident in the past 16 months, as major retailers accept steeper rents in areas where greater population densities promise higher sales.
Rahael warns against painting too bright a picture of the area. He notes that Amera has several retail tenants struggling to stay afloat. Furthermore, Broward, Miami-Dade and Palm Beach Counties' median household income ranges between $40,000 and $45,000, near the national average and not nearly as promising as tourist dollars.
And population growth itself poses problems. “Transportation problems can slow us down,” Rahael adds, “But [local government is] working to bring more mass transit. Otherwise, as the gateway to Latin America and the best place to live in the country, we've got it made.”