About 40 percent of national retail chains once again skimped on their rent in May, according to the latest monthly report on collection rates.
Among those are 24 Hour Fitness, AMC Theaters and Pier One, all of which have either announced potential bankruptcy or plans to liquidate assets.
Overall, national retailers paid 60.1 percent of rent, a small increase from April’s 56.7 percent collection rent, according to a report from the data firm Datex Property Solutions. Total collections – from both national and local retailers – checked in at 58.56 percent in May, up from 54 percent in April, according to the data.
However, an increase in collections may not be a silver lining. Many retailers have negotiated rent relief with their landlords, which could make the numbers seem higher than they actually are, according to Datex CEO Mark Sigal.
At the end of May 2019, national retail chains were able to pay 96 percent of their rent. Even just two months ago, that figure was at 94 percent.
The plummet in rent collections is largely a consequence of the coronavirus pandemic, which has shuttered stores, in some cases permanently.
Fifteen companies, out of the 131 companies included, have not paid a dime of rent last month. Bed Bath & Beyond, H & M, Century City, AMC Theaters, Regal Cinemas, The Gap and Party City are among those. Seven others have paid very little, including Barnes & Noble and DSW Shoe Warehouse. On Wednesday, The Real Deal first reported that Simon Property Group sued The Gap for $66 million for withholding rent in April, May and June.
“A lot of the growth has been around more lifestyle oriented retail, the kind of retail where there’s a goodness to being present,” Sigal said. “With social distancing, the retailers that most build around that, folks like gyms and yoga studios or movie theaters — the types of operators where people are in the same space and close quarters — are the ones that have been most existentially impacted.”
The report counts major chains as those that have a minimum gross monthly rent of $250,000 or lease 10 or more locations. It is based on verified collections from Datex’s portfolio of clients that report payment information from thousands of U.S. properties.
However, not all companies are on their landlord’s naughty list this month. Unsurprisingly, grocery stores like Giant and Aldi have paid almost all their rent.
Between competitors, companies’ collections differed greatly. PetSmart, according to Datex, paid 89 percent of its collective bill, while Petco paid 42 percent. Hobby Lobby similarly paid 99 percent, while Michael’s trailed behind at 39 percent, per the data.
In part, this may be due to different franchisees or unsuccessful expansions in different areas, according to Sigal.
“This is a tsunami that is unanticipated,” Sigal said. “Within that, you may have heard of this quote, ‘bad companies are destroyed by crises; good companies survive them; great companies are improved by them.’ Retail is that story”
The restaurant sector experienced similar contrasts. McDonalds and Taco Bell, for example, paid the majority of their bills, while Jamba Juice and Five Guys paid less than half of theirs.
Despite the challenges caused by the coronavirus pandemic, a panel of five South Florida real estate veterans said Wednesday they feel optimistic about the market.
The webinar, called “Lessons from the Past,” featured professionals who managed their firms during the Great Recession and are using those experiences to inform current strategies.
On the panel were developers Adolfo Henriques, vice chairman of Related Group, and Masoud Shojaee, chairman of Shoma Group; Al Dotson Jr., managing partner of Bilzin Sumberg law firm; Bruce Moldow, CFO of Moss Construction, and Judy Zeder, Realtor-Associate with the JillsZeder Group.
The event was hosted by the Miami Herald’s RE|source Miami newsletter; a recording is available online at https://bit.ly/2KsJPZS. (Password: 7i*=$s7@)
Owners of the nation’s malls, retail plazas and Main Street storefronts are sounding alarms over the magnitude of the financial wreckage in store for the U.S. economy as efforts to contain the coronavirus appear destined for a prolonged slog.
The clearest sign to date of the pandemic’s potential to inflict deep and long-term damage was made clear as details emerged last week about thousands of so-called Watch List loans. The disclosures are a monthly ritual on Wall Street to keep investors in commercial mortgage-backed securities apprised of the health of the properties backing their portfolios.
Nearly 700 retail properties ranging from strip malls to stand-alone big-box stores were slapped with the “Watch List” moniker between March 15 and April 15, as the nation rolled out shelter-in-place policies and saw waves of business closures to combat the Covid-19 outbreak. The increase in CMBS properties flagged for concern marked a 45% increase over the number of Watch List retail properties recorded a month earlier.
Retail in South Florida is defying the harsh reality facing the rest of the country.
Even with delivery of approximately 178K SF of new retail product in Q4 2019, vacancy rates remained at 4.5% in Miami-Dade County, same as the prior quarter, according to Colliers International research. Net absorption for the year was over 671K SF.
Dave Preston, Colliers executive managing director of retail services, marveled at the continuing strength of the sector. The average asking rent per SF was $38.18, up from $34.81 the year prior.
“Something at some point is going to have to give, but right now we’re still seeing upward trajectory,” he said.
Notable big-box leases included a 37K SF 24-Hour Fitness in the airport submarket, a 34K SF Ross Dress for Less in Downtown Miami and a 30K SF Pinstripes at The Plaza Coral Gables. Ross alone added 98 stores nationwide last year.
“Discount stores like Target, Marshalls and Ross Dress for Less continue to be thriving in today’s market and absorbing vacated box space,” Colliers officials wrote in the report. “Their business models have protected them from the threat of e-commerce, as well as their convenient location in busy grocery-anchored plazas.”
Colliers pointed out the strength of entertainment retail concepts, evidenced by the growth of Pinstripes, and also noted the record sale of The Shops at Merrick Park in Coral Gables — part of Brookfield’s acquisition of four top-tier malls across the country. Brookfield intends to redevelop surrounding land with complementary uses such as hotel, office and residential.
“I would say that, as usual, South Florida is doing a pretty good job bucking some national trends,” Preston said. Miami’s density, tourist dollars and foreign money make it so that “our market is a different animal in a lot of ways.”
“Your Ross or Marshalls in South Florida, a 20K or 30K SF space, will do anywhere between $6M to $15M-$20M in sales,” Preston said, adding that even though customers can now get nearly any product delivered to their door, “nobody wants to sit in the house day and night. People want get out of their houses for something.”
Stores like Marshalls, TJ Maxx and Yoyoso (a Chinese retailer that recently leased a prime 41K SF space on Lincoln Road) give shoppers a reason to return frequently because they offer high turnover of product.
“People want to be a little bit surprised,” he said. If and when the economy contracts, Preston said, weaker players may fall out, but he expects health and fitness to remain strong.
“If the sales are there, they’re opening more stores,” Preston said.
While many areas of bricks-and-mortar retailing face headwinds, one shows signs of growth and promise: health care and medical services offered within stores and shopping centers. These services extend beyond the pharmacies and optical shops that have long had a presence within many retail outlets, and now include checkups, vaccinations and management of chronic conditions like high cholesterol.
Two large drug store chains are among those at the front of this trend. Working with health care provider partners, Walgreens operates more than 230 retail clinics run by nurse practitioners. On top of that, since 2018 the Chicago-based retailer has introduced primary care centers staffed by physicians in about a dozen stores.
In 2006, CVS acquired MinuteClinic and now operates 1,100 MinuteClinic locations in 33 states and Washington, D.C. The clinics offer vaccinations and help with minor illnesses and diabetes monitoring, among other services.
Drug store chains aren’t the only companies mixing retailing and health care. In late 2019, the Mall of America in Bloomington, Minn., opened a walk-in clinic in partnership with M Health Fairview, itself a partnership between health care provider Fairview and the University of Minnesota. The 2,300-square-foot clinic offers five exam rooms and services including laboratory and radiology.
Now open in two Georgia locations, Walmart Health offers primary care services.
Walmart Health, now open in two Georgia locations, offers primary care. The company plans to expand to other communities and is opening a handful of additional sites in 2020, says Walmart spokeswoman Marilee McInnis.
Driving factors
Several considerations are behind the desire to bring health care to retail locations. “Patients can benefit from more convenient access to high quality care,” says Jim OConor, Walgreens’ senior vice president of U.S. health care strategy and development. Many retailers and shopping centers are positioned to address this need; about 78 percent of Americans live within five miles of a Walgreens store, OConor says.
What’s more, many malls have excess space, says Wendy Liebmann, CEO of consulting firm WSL Strategic Retail. Retailers and shopping centers can attract and retain customers, who like the convenience of handling both their health care and shopping needs in one trip. For 100 Oaks Mall in Nashville, Tenn., bringing health care into its retail mix was key to its survival: The mall was struggling when Vanderbilt Health took over about half its 850,000 square feet, now used for both clinic and office space.
Using retail locations to provide health care also might help drive down costs. While Liebmann isn’t an expert on the cost of health care, she talks with many people who are. “They see community-based health care as one way health care costs can be contained,” she says.
Americans’ interest in health and wellness is another motivator. This includes both preventative care as well as the need to manage chronic conditions, many of which become more prevalent with an aging population. “This huge focus is one of the biggest consumer spending opportunities in decades,” Liebmann says. “It’s the ‘big business of well.’”
At the same time, many hospital systems are in “growth mode,” says Todd Caruso, senior managing director with a focus on retail at commercial real estate firm CBRE Group. Moreover, executives with many systems recognize the opportunities available in outpatient care, much of which can be handled in a retail setting.
Some newer doctors and dentists, especially those graduating with mountains of debt, might decide a position at a retailer with a nice salary is more feasible than trying to buy out a practice when a doctor retires. “It’s not for everyone, but some may feel under the gun, and pressed financially, to start generating income,” Caruso says.
The models
Retailers are taking somewhat different approaches in the ways they provide health care services. Through its physician-led primary care centers, Walgreens combines its core pharmacy expertise with care provided by organizations like Partners in Primary Care, Village Medical and Southwest Medical Associates. The result is “a neighborhood health destination around a modern pharmacy that brings affordable health care services to customers,” OConor says.
Walgreens combines its core pharmacy expertise with care provided by organizations including Partners in Primary Care.
While it might seem that the expansion of services to primary care would overshadow the need for pharmacies, that’s not necessarily so. As OConor notes, many older individuals have chronic conditions, and pharmacists often play a significant role in these patients’ efforts to manage their conditions.
Walgreens’ pharmacists have “specialized knowledge and training to help manage chronic diseases, provide medication therapy management support, administer life-saving immunizations and provide education and counseling to assist patients with their health care needs,” he says.
In addition to its primary care centers, Walgreens offers clinics across the country through partnerships with local health systems. These are run by nurse practitioners and provide acute care. By partnering with local health systems, patients are able to receive care at their local Walgreens while seeing a provider that may be within their larger health system network, OConor says, and with whom they have an existing relationship.
Walgreens also offers weight loss management and diagnostic lab testing, and select stores are trialing dental, optical and hearing services. In addition, UnitedHealthcare and Walgreens have opened a handful of UHC Medicare service centers, where Walgreens customers can learn more about Medicare plans, meet with service advocates to discuss their UnitedHealthcare benefits and enroll in plans.
For its foray into more extensive health care services, Walmart Care Clinic focuses on bringing accessibility, affordability and transparency to primary care. The clinic encompasses diagnosis and treatment of chronic and acute illnesses, as well as preventative services and additional screenings. Patients booking appointments receive estimates of the costs, and the website lists prices for common services. The transparency “is taking the guesswork and complexity out of getting care,” McInnis says.
Feedback from both medical providers and patients has been positive, she says. Clinicians say they appreciate the integrated care model and the ability to address the diverse health needs of the community, and patients like accessing health care conveniently and affordably.
Accessibility and quality underpin the approach to health care by M Health Fairview, says Jakup Tolar, dean of the University of Minnesota’s medical school. “Our general approach to health care is to meet patients where they are,” he says. “We seek to make it as easy as possible for patients to interface with their health care providers.”
The M Health clinic at the Mall of America offers physicals, vaccinations and other services, as well as help for travel-related issues.
The reception to the clinic has been positive, says Jill Renslow, senior vice president of business development with the Mall of America. It’s easily accessed by the approximately 13,000 employees working at the mall, as well as guests staying at the two hotels connected to the property. That’s in addition to customers shopping at the mall. To serve the diverse group, the clinic offers physicals, vaccinations and other services, as well as help for travel-related issues.
“We’re fully prepared to scale this,” Tolar says. “We’ll go to different malls and different places where people go. We’re making health care simpler without compromising care.”
Halifax Shopping Centre in Halifax, Nova Scotia, is home to a range of health service providers, including medical, dental and breast-screening clinics and opticians. “We are looking to be a destination for customers, from shopping to dining, as well as health and wellness,” says marketing director Stephanie Schnare. The mall, which is on a bus line, is connected to several office buildings and near six universities, which host more than 50,000 students, including a large percentage of international students. “They find it convenient to hop on the bus, come to the shopping center and visit the clinic and dentist,” Schnare says.
Challenges
While the move to combine health care and retail shows no sign of stopping, it’s also not without challenges. One is building trust. “How do you show people they can trust you to deliver quality services?” Liebmann says. The idea of a “doc in a box” providing care from a retail location has rarely inspired confidence in potential patients. Similarly, some health care providers may balk at providing care in a non-traditional setting.
Another key is ensuring the quality and transparency of the services. At times, it’s hard to tell if some store-based clinics are staffed or even open, Caruso says. Who is providing care — that is, an MD or another medical professional — also can be unclear. “That fosters some skepticism,” he says.
Incorporating health care services within a retail setting often changes the business model. It could require an investment in space and medical equipment, as well as a trained medical staff. The product mix in the store could change, with more space devoted to medicines and equipment like walkers. “That conversion is important and not inexpensive,” Liebmann says.
And, as always, location is key. “The easier to access, the better,” Tolar says. The M Health Clinic is near an entrance to the Mall of America, where it has reserved parking.
Clear wayfinding also is critical, especially for medical services provided within shopping centers. Patients entering a mall may be nervous and focused on their upcoming visit; a confusing trek to get to a medical provider only adds to their anxiety. To alleviate this, Schnare says Halifax Shopping Center recently launched a text concierge service to help with wayfinding.
While the challenges are real, the promise of offering health care in a retail setting is as well. Changing demographics — most notably, an aging society with a generally increasing need for health care — along with growing interest in health and wellness will drive continued interest in the mix of retail and health care. “I don’t think we’re in the ninth inning,” Caruso says.
Similarly, consumers have grown increasingly used to the idea that the products and services they need be as convenient to access as possible. Adding health care to a retail mix is one way to accommodate this.
Tens of thousands of people passed through the turnstiles into Hard Rock Stadium for Super Bowl LIV, taking part in the spectacle and competition. And when it ended, nearly all of them bypassed the neighborhood entirely on their way out.
While the stadium’s privately-funded, $500 million renovation boasts an open-air canopy along with other impressive additions, the surrounding city of Miami Gardens stands in sharp contrast.
The city has so far failed to attract the wide-scale investment that some sports stadiums in other cities have brought, and has not seen a blossoming of new residential properties outside the stadium.
Hard Rock Stadium owner — and Related Companies’ founder and chairman — Stephen Ross began the massive renovations of the venue in 2015, which brought the Super Bowl back to South Florida after a decade of absence. In addition, the money that Ross invested in the stadium — he also owns the Miami Dolphins — led to the Miami Open tennis tournament there in April and potentially, a Formula 1 race.
Some real estate developers who have built or proposed projects in Miami Gardens believe the renovations may bring about new interest in the city as a whole. The city, incorporated in 2003, is a historic African-American community with a population of about 110,000. It largely consists of older residential properties and commercial and industrial properties. In 2017, the household median income was $41,000 — below the county’s average of $46,388.
“The stadium is starting to be an asset. It was just a football stadium, but now… you are seeing an active asset, you are drawing people,” said Barron Channer, the CEO of Woodwater Investments, a Miami-based real estate investment firm. He previously proposed building a mixed-use project near the stadium.
Some developments are already in the works.
Los Angeles-based Latigo Group recently broke ground on a 259-unit apartment project at 19279 Northwest 27th Avenue in Miami Gardens. Rents will range from $1,700 to $2,300 per month, and the project is one of the first new market rate apartment developments in the city. It’s part of a bigger mixed-use project that will include a 37,000-square-foot building on a 4.63-acre parcel that will be leased to 24 Hour Fitness.
Jonathan Roth of Miami-based 3650 REIT, which provided a $50 million construction loan for the project, said Miami Gardens could become an attractive place to build housing at reasonably priced rents, since land prices are cheaper.
“What is happening nationally, you have a lot of development, but it is all Class A going up. By going into Miami Gardens you are going to pay slightly less for the land,” Roth said.
Sitting right off the Florida Turnpike and I-95 and in between downtown Miami and Fort Lauderdale, Miami Gardens has become a hub for logistics and warehouses, the less sexy part of real estate.
In recent years, institutional industrial investors have been snapping up properties in the area. In October, private equity giant Blackstone acquired two industrial properties in Miami Gardens for $13.6 million at 5120 Northwest 165th Street. And in July, Longpoint Realty Partners bought an industrial park in Miami Gardens from Prologis for $25 million.
In the northeast Miami-Dade County submarket, which includes Miami Gardens, more than 197,000 square feet of industrial space was under construction at the end of 2019, according to a report from Avison Young. The net absorption was 1.1 million square feet, the most of any submarket in the county.
Yet, the question remains whether the city will pivot from attracting industrial development to more residential projects.
Some real estate experts are betting on it, in part due to the rising cost of land in other parts of South Florida, and a lack of developable land to build new projects. The city could also become an alternative for renters on a budget, who would otherwise move further south or west in Miami-Dade County.
Colliers International South Florida’s Gerard Yetming and Mitash Kripalani are listing two parcels of land in Miami Gardens at 1255 Northwest 210th Street, totaling 82.5 acres, which allow for a maximum of 50 residential units per acre. Yetming said he is getting inquiries from developers who are looking to build workforce residential development, and that developer interest is growing in Miami Gardens.
“The level has increased over the past couple of years,” Yetming said. “A few years ago, developers were more interested in downtown and an urban type of environment.”
With new investment also comes the risk of gentrification and displacement of existing residents, something communities in places like Miami’s Little Haiti are trying to combat amid projects like the Magic City Innovation District.
“Miami Gardens is and has been heavily defined by the presence of black residents,” said Channer of Woodwater Investments. “If this is not reflected in who is courted to, and actually investing at all levels, then economic development efforts would have failed their ultimate test.”
More signs that Allapattah is the hot place to be: the heir to the Bill Seidle auto dealerships has put a portfolio of three tracts equaling 7.6 acres on the market. Asking price: $18.35 million.
The parcels belong to Bob Seidle — son of the late Bill Seidle — and Bob’s wife Tracy. Some are currently home to small shopping centers and parking lots. They are zoned T6-8, which means they can be redeveloped with buildings up to 8 stories tall, said listing agent Cesar Carasa of One Stop Realty. They are located in the city of Miami.
The three parcels lie south of the 112 Expressway between Wynwood and the Miami International Airport. Each of the three parcels edges NW 36th Street. The parcels are not contiguous; two of them sit on opposite sides of NW 36th Street.
One parcel includes five folios along the north side of NW 36th Street, beginning just west of NW 27th Avenue to 29th NW Avenue on the west and extends north several blocks.
The second parcel includes eight folios along the north side of NW 36th Street, beginning just west of NW 31st Avenue to NW 32nd Avenue; it extends two blocks to the north.
The third parcel includes 11 folios on the south side of NW 36th Street between NW 27th and NW 28th Avenues.
The properties were placed on the market two weeks ago and have attracted six inquiries thus far.
The central location of the parcels — a 12-minute drive to Miami International Airport and a 20-minute drive to South Beach — make them ideal for residential redevelopment, said Carasa. He said, “That section is very well located for the middle class.”
“People can’t afford to pay a lot of the rentals. Apartments in that part of town would be cheaper than other areas like Brickell,” said Carasa.
The neighborhood has attracted long-term residents.
Carasa said, “Because it’s a central location, I’ve seen people move from Homestead to here because of traffic.”
Tired of handling leases, the Seidle family decided to sell at market price of $54 to $55 a square foot. They hope to sell the three parcels for $18.35 million but are willing to consider individual sales.
The per-square-foot listing price is comparable to other area transactions, said Carlos Fausto Miranda of Fausto Commercial. But the total amount is rare, he said.
The listing price a square foot between $54 and $55 is comparable to other transactions in the area, said Carlos Fausto Miranda of Fausto Commercial, but what is unique is the amount of land offered in the portfolio.
Over the past year, the area just west of Wynwood has become Miami-Dade’s new real estate darling. The Rubell Family Art Collection has abandoned its former Wynwood space in favor of Allapattah, and art collector and developer Jorge Perez also will open a private museum this fall. Developer Robert Wennett has announced a massive residential-mixed use project in the area designed by star architect Bjarke Ingels, and developer Moishe Mana has also expanded his Allapattah holdings.
“It’s a great but underutilized neighborhood,” said Miranda. It’s one of the few east-west corridors that takes you straight from the beaches to the swamps.”
Due to increasing interest in the area, Carasa said, “For commercial properties it usually takes a year, but, for these it would take no more than two to three months to sell.”
A new Urban Land Institute report suggests city officials relax certain provisions of the Miami 21 zoning code to encourage denser developments on narrower lots and further incentivize developers who reduce or eliminate parking, among other recommendations.
Report co-author Andrew Frey presented his ULI focus group’s findings on Friday to Miami Mayor Francis Suarez, who declined to comment about how he will incorporate the report’s recommendations into a revamp of Miami 21 that is currently underway.
“We are focused that [growth] happens responsibly,” Suarez said. “That it supports things like transit; that it supports our resiliency efforts.”\
Frey, director of development for Fortis Design + Build, said the focus group was formed last year to look at aspects of Miami 21 that inhibit progress in areas of housing choice, affordability and mobility.
“We wanted to give specific textual recommendations that hopefully can shorten up the cycle between finding glitches or gaps in Miami 21 and filling them,” Frey said. “We tried to make the recommendations as concrete as possible.”
According to the report, city officials should consider deleting lot size minimums and density maximums in certain areas, such as those zoned T4, T5 and T6. The neighborhoods with T4 zoning allow a transition from single-family homes to multifamily buildings with room for small businesses and mom-and-pop retail such as Southwest Eighth Street in Little Havana. In T5 neighborhoods, developers can put up mixed-use buildings that accomodate retail, office and apartments such as Wynwood. And T6 neighborhoods allow developers to build multi-story condo, apartment and office towers such as downtown Miami, Brickell and Edgewater.
Getting rid of density maximums would allow developers to build more apartments sized smaller for mid-market renters because they would be able to build 100 or more units an acre . And by eliminating lot size minimums, Miami can encourage the development of more housing types such as townhouses, row houses and brownstones found in other major U.S. metropolitan cities, the report states.
The ULI focus group also suggested dramatic revisions to the parking standards in Miami 21, including having the Miami Parking Authority provide all on-street parking in single-family residential neighborhoods as residents-only at no cost. Other recommendations included significantly reducing parking requirements for new buildings and allowing developers to obtain parking reductions without having to pay impact fees.
Greg West, CEO of apartment builder ZOM Living and ULI Southeast Florida Caribbean District’s chairman, attended the mayor’s presentation. He noted that the report was produced with input from several heavy hitters from the real estate industry, including urban planner Elizabeth Plater-Zyberk, the original author of Miami 21. In addition to Frey, the focus group included land use attorneys Iris Escarra and Steven Wernick, developers David Martin and Kenneth Naylor and architects Reinaldo Borges and Raymond Fort.
“We had a pretty big tent on whom we sought input from, which also included the people who originally wrote and drafted Miami 21,” West said. “I think from the private side and development community, we got a good base.”
U.S. net-lease investment is outpacing the broader commercial real estate market in 2019, with increasing demand from both foreign and domestic investors for office and industrial assets, according to the latest research from CBRE.
Net-lease investment — comprising office, industrial and retail properties — climbed 17.2 percent year-over-year in the first half of 2019 to $33.4 billion, with total commercial real estate volume growth at 13.4 percent over the same period.
Net-lease investment volume in in Q2 2019 was the second-highest quarterly total on record at $20.6 billion and up by 33.8 percent year-over-year.
Net-lease investment volume for the year-ending Q2 2019 totaled $74.2 billion—the highest four-quarter total since CBRE began tracking the market in 2002.
“The high volume of net-lease activity has been a byproduct of an aggressive capital markets environment coupled with an influx of capital, both foreign and domestic, seeking compelling risk-adjusted returns,” said Will Pike, vice chairman of Net Lease Properties for Capital Markets at CBRE.
Net-lease investment volume in Q2 2019 was driven by gains in the office sector (65.7 percent year-over-year growth) and retail (52.2 percent), while industrial remained nearly unchanged (0.6%).
Investors are increasingly focused on net-lease investment opportunities in high-growth secondary markets. While gateway markets like San Francisco and Boston had the largest year-over-year gains in investment volume in Q2 2019, markets such as the Inland Empire, San Diego and the East Bay made the top-10 list.
The global search for yield and portfolio diversification is attracting global investors to the U.S. net-lease market. Cross-border capital for net-lease properties reached $3.9 billion in Q2 2019—a 78.4 percent increase from Q2 2018 and the second-highest quarterly total on record.
International buyers accounted for 18.8 percent of net-lease transaction volume in Q2 2019—their highest share since 2015. New York City, San Francisco, Miami, Houston, Los Angeles and Chicago received the most foreign capital for net-lease investment.
Over the past two years, the top country sources of capital have been Canada, Germany and South Korea.
The strong appetite of both local residents and tourists for fine dining should help South Florida’s restaurant industry grow in spite of the turmoil currently facing the retail sector.
A report released by commercial brokerage CBRE predicts a strong restaurant sector with spending increasing above non-food retail industries. The analysis also indicates that South Florida will remain a prime market for international restaurant expansions into the US.
“The food-and-beverage industry has helped diffuse the claims of the ‘retail apocalypse,’” says Brandon Isner, senior research analyst at CBRE. “Developers and landlords continue diversifying their tenant base to include food and beverage operators to drive foot traffic. South Florida has the added benefit of a strong, diverse tourism economy, bringing the region’s restaurants an entirely separate source of clientele.”
CBRE points to a number of key data points that back up its prediction of strong growth for the restaurant industry. For starters, restaurant spending now accounts for approximately 25% of all retail spending. Food-and-beverage has proven to be resilient to market conditions. Landlords are diversifying their assets with experience-driven retail, largely food and beverage tenants, in hopes of driving foot traffic and attract other retailers in South Florida.
The report also notes that tourism is providing a “turbo boost” of spending for the food and beverage sector in South Florida. CBRE adds that tourism affords the restaurant industry a level of resilience against future “economic hiccups.”
More than 44 million people visited South Florida in 2018 and spent an average of $315 per person on food and beverage during their visits, for an estimated total of $8.8 billion. This is more than double the restaurant spending from residents, CBRE notes.
“Restauranteurs, landlords and developers must stay abreast on the constantly changing factors, but consumer preferences and spending habits are among the most important,” says CBRE SVP Drew Schaul. “Consumers are influencing every facet of retail real estate, and identifying trends, shifting demographics and emerging urban neighborhoods are key to the success of food and beverage tenants.”
In a 2018 report, CBRE stated that not only is Miami the second largest international retailer market in the US, it’s 12th among global markets. Many international restaurant groups and chefs have chosen South Florida for their first location within their U.S. expansion strategy.
Based on those lofty rankings, CBRE predicts that South Florida will remain a prime market for international restaurant expansions into the U.S.
The report also predicts that Fort Lauderdale’s quiet boom will entice further restaurant expansion and that Palm Beach restaurants will take advantage of the region’s economic strength.
The properties were placed on the market two weeks ago and have attracted six inquiries thus far.
