It’s no secret that inventory is low in both the industrial and retail sectors in South Florida. With an influx of new residents and business owners ready to set up shop across the Sunshine State, asking rates are at a historic high, with no signs of slowing down in the next few months.
Here’s a look at leasing activity across the two sectors.
Miami-Dade continues to be a top spot for e-commerce and distribution companies looking to expand into the growing population base, according to JLL’s Q1 Industrial Insight report.
In Broward County, leasing activity has outpaced the 2021 record with over 850,000 square feet leased this quarter.
Large leases in Broward include a 116,000-square-foot lease by International Distribution Corp. at Meridian Business Campus, shipping company Z Brothers Express signing a 116,000-square-foot lease at International Center, Fort Lauderdale logistics company Shipmonk signing a 110,000-square-foot lease at Bridge Pointe, and Pet Supermarket signing a 97,000-square-foot lease.
One commercial real estate firm continues to grow its industrial outdoor storage assets in Florida, the latest in Hollywood.
In early April, The Easton Group in Doral acquired a vacant 29,897 square-foot truck terminal for $14.35 million at 3811 Pembroke Road. The building sits on a 5.85-acre site.
C.J. Easton and David Wilf, both acquisition principals with The Easton Group, sourced the deal, and the seller, Dayton Street Partners, was represented by Walter Byrd of Transwestern, a commercial real estate firm headquartered in Houston. It previously leased the property to the now-defunct Central Freight Lines.
The Easton Group plans to prepare the property it for another tenant, as it believes the area will be in demand since it’s near the I-95 interchange and is close to Fort Lauderdale-Hollywood International Airport and Port Everglades.
“We are very bullish on the IOS space, and we continue to seek out more opportunities in the sub-sector,” said Easton. “With the unquenchable demand for industrial space and dwindling supply available, this niche product category is coming into its own. IOS has become increasingly more competitive over the last 12 months as more and more participants enter the market, particularly in South Florida.”
In Palm Beach County, rent growth has driven asking rates up about 50 cents from the previous quarter. So far, 200,000 square feet of new space has been delivered.
Dave Preston, executive managing director of retail services at Colliers in Miami said leasing supply is the lowest he’s seen in his career. With migration from the Northeast bringing more business, Preston said he’s seeing more long-term leases.
“The landlords like the security of the 10-year deals and it seems like right now, tenants, due to the competitive market, they’re willing to do it to land the right deals,” he said.
Besides an increase in restaurant leases, there’s also been growth in the medical and cannabis sector over the last few years. In the cannabis sector, Preston said there’s some kind of dispensary in every submarket, where local municipalities allow it.
“They believe that recreational will be approved at some point, so they’re planting the flag now,” Preston said. “They’re being very aggressive and most of them are national groups.”
Attorneys and real estate professionals on the tenant side have to move fast in this market, according to Preston.
“Get your deals done because there’s going to be so many behind you,” said Preston. “If you let too much grass grow under your feet, you’re going to lose your deals.”
The most surprising trend is that despite higher interest rates, retail properties continue to escalate, according to Claudio Mekler, CEO of Miami Manager, an investment group that owns shopping centers in South Florida.
“Usually, when inflation goes up, property values go down, fueling a deceleration of cap rates,” Mekler said. “But for now, cap rates continue to be tight as property values continue to rise. If interest rates keep going up, I expect values to start to go down by the fourth quarter.”
Rates Becoming ‘Untenable’
Rising construction costs continue to skyrocket every day, which affects rental rates since developers need a return on their investments.
“It’s driving up everything else and starting to squeeze the new construction. The rental rates are getting to a point where it’s getting a little untenable for some tenants,” said Preston. “It’s also making the deals harder and harder to counsel, especially with rent values increasing probably at a similar rate.”
In Q1 of last year, the retail sales prices per unit experienced all-time highs in all three markets, with a sales volume in Miami reaching $656 million, according to Franklin Street’s Q4 2021 South Florida Retail Report.
“Fort Lauderdale retail experienced a 7.9% increase in retail market rent while averaging $28.71 per square foot. Miami retail experienced a 6.5% increase in retail market rent while averaging $40.68 per square foot,” said Gregory Matus, managing director of investment sales for Franklin Street, a commercial real estate agency and insurance brokerage headquartered in Tampa.
“Palm Beach retail experienced a 5% increase in retail market rent while averaging $30.06 per square foot,” he said. “Market rent growth rates will continue to increase as will the average rent per square foot.”
Rents can’t rise forever, the way Preston sees it. He said he wonders whether macro conditions across the country will rule the day or micro conditions in South Florida, where there’s explosive growth, will set the pace.
“With the exception of the peak of COVID, we’re kind of continuing along with the 10 to 12-year trend of a rising economy. Especially in South Florida, we’re bucking the national trend, probably a lot,” said Preston. “It seems like inflation will cool the market to some extent, but to what extent remains to be seen.”
Leasing activity in Miami Beach’s Lincoln Road District remains hot as foot traffic has increased due to the return of international visitors and business migration to South Florida.
The eight-block district recently welcomed seven new restaurants and retailers, including Mediterranean restaurants Playa and Isabella’s, Peruvian restaurant Pollos & Jarras, a concept by Miami Chef Juan Chipoco of CVI.CHE 105, and athletic apparel retailer LuluLemon, which is expanding and opening a larger space on the 800 block.
Lyle Stern, president of the Lincoln Road Business Improvement District (BID) and Koniver Stern Group, said retailers and restaurants are choosing Lincoln Road because of its strong recovery from the pandemic, the unique partnerships it’s developed, plus the proximity to Class A office buildings, luxury hotel brands and high-rise condos.
“From exceptional culinary offerings and contemporary retailers to an array of arts and cultural activations, the Lincoln Road District continues to create unique experiences that attract visitors and locals alike,” said Stern.
Lincoln Road will also see another seven concepts this year, including global fashion retailer YOYOSO opening on the 1100 block, Andres Carne de Res, a Colombian restaurant, and The Cheesecake Factory, which signed a lease at 600 Lincoln Road, and Mexican taqueria Tacombi, expanding from New York.
Other retail and beauty brands have signed leases at the Cocowalk in Coconut Grove including GlossLab, a membership-based nail studio from New York, Infinity, a fitness studio focused on high-intensity interval training, Skin Lab by Barba Skin Clinic, founded by Harvard-educated dermatologist Dr. Alicia Barba, and 3D Brow Studio, a beauty bar specializing in perfect facial framing eyebrows.
In Hallandale Beach, Miami mortgage lender LV Lending closed on an $8 million loan for the refinancing of 20,844 square feet of retail space within Oasis Hallandale, a new 10.1-acre mixed-use development.
Oasis Hallandale, located at 1000 E. Hallandale Beach Blvd., is a multi-block village consisting of residences, shops, restaurants, parks and offices consisting of five buildings. It will have a combined 59,219 square feet of retail and restaurants, 34,691 square feet of offices and two 25-story condo towers with a combined 500 units.
The first tenant for the project, Oasis Fit, will consist of a gym and wellness center inside the first building on the south side of East Hallandale Beach Boulevard.
The loan was facilitated by Camilo Niño, Ricardo Uribe and Alen Hernandez of LV Lending on behalf of the borrower, XR22 LLC, a company managed by Giuseppe Iadisernia, a Venezuelan developer.
The developer said he believes the area will become a pedestrian-friendly city center of Hallandale Beach, as more people migrate to South Florida.
Oasis Hallandale is estimated to be completed in 2025. Also in Broward, Azor Advisory Services has signed three new retail leases totaling over 10,000 square feet. CEO and founder Beth Azor and leasing associate Chloe Burton represented the landlord.
Lion Arc LLC, a franchisee for My Salon Suite, which gives stylists and beauticians personal space to rent and build their businesses, signed a lease for 8,674 square feet of space at 12160 W. Sunrise Blvd. in Plantation in the Plantation Crossing shopping center.
Big Five Family LLC, a franchisee for Sharkey’s Cuts for Kids, leased 1,032 square feet of space at 16634 Saddle Club Rd in Weston in the Bonaventure Town Center Shoppes.
Azor Advisory Services also helped facilitate a lease for Wireless 4 All Inc., an authorized dealer for Metro by T-Mobile. It leased 950 square feet at 2601 S. University Drive in Davie in the Shoppes of Arrowhead.