The lack of Covid-19 restrictions in the Sunshine State is attracting an “unrelenting migration” of restaurants to South Florida, according to the latest retail market reports from Collier International (CIGI).
That migration, in turn, has jacked up retail rates in Miami-Dade, Broward, and Palm Beach counties. It’s also made it extremely difficult for new restaurants and stores to open in high-trafficked areas, said Jonathan Rosen, Colliers’ director of retail services in South Florida.
“I think the over-arching message is [South Florida] over the past 12 months has been a safe haven for a lot of these out-of-market retail and restaurant operators,” Rosen said. “…They don’t have to worry about being closed down by the government or Covid-19 restrictions.”
And when the retail and restaurant operators do move from, say, New York, that attracts other New York operators to move to South Florida.
“They feel comfortable seeing their peers…coming down to this market,” Rosen explained.
Restaurateurs and retailers aren’t just coming from New York. Vacant “second generation restaurant space” is being taken over by restaurateurs from the northeast United States and South America, according to Colliers’ latest restaurant and retail reports.
“True Class A retail space is in the highest demand, as well as stores at grocery-anchored and mixed-use centers,” Colliers noted.
The scarcity of space has had an effect in Miami-Dade, where the asking leasing rates increased 12.5% to $38.98 per square foot this third quarter, from $35.54 a square foot year-over-year. Miami-Dade’s overall vacancy is 3.9% this third quarter, whereas in last year’s third quarter the vacancy rate was 4.5%.
In Broward, the asking rental rates increased 3.5% to $22.96 a square foot, from $22.18 a square foot year-over-year. The vacancy rate also fell to 5.1% compared to 5.4% in last year’s third quarter.
In Palm Beach County, third quarter rental rates climbed 9.8% to $24.98 per square foot, from $22.76 a square foot year-over-year. Overall vacancy also plummeted to 4.8%, compared to 5.2% at last year’s third quarter.
Rosen said the market is particularly strong in Miami’s Brickell, downtown, and the Wynwood Arts District, where retail and restaurants are in close proximity to offices. Not only are people starting to return to the office, Rosen said, but there are also new exciting tenants coming into the Greater Downtown Miami market such as Microsoft (Nasdaq: MSFT) opening an office at 830 Brickell and venture capitalists like OpenStore and Founders Fund moving into Wynwood. Retail is also doing well in other densely packed places such as Aventura, Fort Lauderdale’s Las Olas Boulevard, Miami’s Coconut Grove, and Miami Beach, Rosen added.
Although the Downtown Miami submarket does have an unusually high direct vacancy rate of 19.9%, according to Colliers’ Miami-Dade County Retail Market Report. Rosen explained that the retail in Miami’s Central Business District has been “left vacant strategically” due to an ongoing streetscape plan funded by the City of Miami and developer Moishe Mana, who owns 60-plus properties on or near the Flagler Street corridor.
“There are long-term plans to transform it into more of a retail and restaurant hub,” Rosen said.
There are also plans to construct even more retail. The Colliers reports note that 3.7 million square feet of new retail is under construction in Miami-Dade, 363,000 square feet in Broward, and 389,000 square feet in Palm Beach County.
Headquartered in Toronto, Colliers is a diversified investment management company and brokerage that specializes in commercial real estate. The company has offices in 67 nations. Its South Florida operations include Fort Lauderdale, Boca Raton, and West Palm Beach.
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