Commercial Real Estate, Capital, Insurance, Leasing & Management

Restaurants Are Leading South Florida’s Retail Resurgence

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Greg Matus, Franklin Street Real Estate Services’ regional managing partner for Broward and Palm Beach counties.
Greg Matus, Franklin Street Real Estate Services’ regional managing partner for Broward and Palm Beach counties.

Retail is hot, and Franklin Street Real Estate Services wants a piece of the pie.

The brokerage house has hired 10 employees since May for a new office in Fort Lauderdale, adding a director of leasing, junior investment broker and tenant representatives to strengthen its foothold in that sector.

“Retail’s strong. We’re seeing just a tremendous amount of activity,” said Gregory Matus, Franklin Street’s South Florida regional managing partner. “If tenants are going to invest in their stores, it’s going to be in a market like we have right now. People are spending money, they’re eating out, and generally the commercial business starts to rise after the residential business. It’s a natural cycle. The housing business was dead in 2007. Now it’s on fire. You can’t buy a house without 20 people competing for it, and that’s what the commercial business is following.”

Online sales, which once threatened to torpedo traditional retail, are on the rise, but analysts say food-related businesses and nontraditional tenants have buoyed the sector, expanding their leases or investing into new space across South Florida.

That’s what happened with a shuttered Borders bookstore in Sunrise on Sunrise Boulevard east of Flamingo Road, which the Fresh Market is converting into a grocery store.

“The dominant retailers, the ones who are paying the highest rents, are food or restaurant-related,” Matus said. “The fast-food business is on fire.”

‘Dramatically Different’

That’s meant good news for South Florida retail space.

“The market is really dramatically different than what it was a few years ago,” said Barry Wolfe, vice president of investments at Marcus & Millichap’s Fort Lauderdale office. “The market in South Florida is really booming right now. It’s quite attractive and very strong.”

Occupancy in most submarkets hovers around 93 percent to 95 percent, versus 75 percent to 80 percent three years ago, he said, with restaurants providing a strong boost.

“It’s a nice recovery, and I think it’s going to continue for the next 18 months,” Wolfe said. “It’s hard to gauge beyond that, but assuming the economy stays on a pretty stable path, retail will continue to see the nice uptick we’ve been seeing.”

CBRE’s second-quarter Retail Market View reported economic growth boosted consumer confidence and retail sales, driving real estate expansion. A University of Florida survey released Tuesday reported consumer confidence in the state rose in July to another post-recession high for a second consecutive month.

In Miami-Dade County, for instance, Bal Harbour Shops announced plans for a third anchor store, luxury retailer Barneys New York, while current tenants Saks Fifth Avenue and Neiman Marcus committed to expand their stores. At the proposed Miami Worldcenter, national retailers Macy’s and Bloomingdale’s have signed as anchor tenants. Along Lincoln Road, the space housing American Apparel and Cache commanded $34.5 million, or $4,119 per square foot.

More To Come

“The rush of new businesses and residents into the area is making Miami’s lack of quality retail space apparent,” according to the CBRE report released Monday. “The result is a surge of 11 new developments with over 1.9 million square feet currently under construction in addition to numerous planned projects estimated at close to 2 million square feet.”

Palm Beach County, too, is recording a spike in retail business, with seven investment transactions this year valued at $232 million, according to CBRE. Leasing also rebounded with average occupancy at 92 percent.

National brands like Fresh Market, Wal-Mart, Trader Joe’s, Baskin-Robbins and Urban Outfitters announced entry or growth plans for the county where thousands of residential and hotel units are in the construction pipeline. In northwest Boca Raton, the last large vacant tract is set to become University Village, a master-planned community of 420 residences, 126,000 square feet of office and 252,000 square feet of retail.

And in Broward County, investors like Beth Azor, principal of Azor Advisory Services Inc., are investing in new retail plazas and report 20 percent spikes in occupancy.

“It’s rare that a market offers lucrative potential for both buyers and sellers, but that’s the case today in South Florida,” Kirk Felici, Marcus & Millichap first vice president and regional manager, wrote in a June email. “Inventory is more limited than it has been in recent years because vacancies are going down as demand is going up—a situation that favors sellers by enabling them to list their properties at top price. But even as sellers are getting premium prices, buyers are also getting premium yields because they can leverage their purchases with low interest rates.” Download PDF

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