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Broward County
FORT LAUDERDALE – Positive trends continue to emerge in the Broward County retail market, further confirming the end of the most severe phase of the recession and the transition to a sustainable recovery.
Shop closures have waned from one year ago, while greater access to financing has supported the creation of numerous small retail businesses and generated positive net absorption in three of the last four quarters. A modest pace of hiring by local employers supported a 5% increase in retail sales in the 12 months ending at midyear.
Additional job creation and “catch-up” spending by newly employed residents in the months ahead will augment shopping center traffic and provide many retailers with an opportunity to rebuild business volume from the low levels of the recession. Store closures may occur in the months ahead, as they do in any economic cycle, but the prospect of large anchors going dark remains at its lowest point since the economic downturn began.
Although the county’s retail sector continues to make notable progress in reducing vacancy and stabilizing rents, investors remain relatively risk averse. Investments with lower risk profiles, such as net-leased drugstores with lengthy remaining lease terms, remain a popular target, but investor demand exceeds the supply of listed product.
Other single-tenant concepts, such as national auto-supply chains and convenience stores, continue to receive greater attention, especially when offered at cap rates starting in the mid- to high-7% range.
Investors’ risk aversion also remains in full view in the multitenant segment. Here, institutional-grade properties with strong grocery anchors and solid in-line tenancies remain a primary focus, and cap rates can typically start around 7%. Sales of lender-owned properties also continue to occur, providing investors with an opportunity to acquire assets at low cost.
Sales of properties considered slightly less than institutional caliber at prices of more than $10 million continue to gradually recover, but prospective investors continue to maintain a keen focus on the quality of anchors and performance of in-line spaces.
Forecast
Employment: Employers will create 13,000 jobs in 2011, equaling a 1.9% increase in total employment. Job growth will support a 6% increase in retail sales. Last year, employers in Broward County cut 200 jobs.
Construction: Developers will put 120,000sf of new space into service in 2011, down from 446,000sf in 2010. An average of 1.4 msf was completed annually in the four years preceding the recession.
Vacancy: Limited competition from new supply and a steady pace of new store openings will push down the vacancy rate 60 basis points this year to 10.8%. The vacancy rate in 2010 was unchanged at 11.4%.
Rents: Asking rents will tick up a mere 0.2% in 2011 to $18.12 psf, while effective rents will rise 0.3% to $15.18 psf. Last year, asking rents slipped 1.9% and effective rents receded 2.2%. – By Marcus & Millichap
