Page 1

MARKET VIEW | RETAIL BROWARD | MIAMI-DADE | PALM BEACH


EXECUTIVE SUMMARY

MARKET TRENDS

BROWARD’S RETAIL MARKET FACING PROBLEMS FROM RISING E-COMMERCE

Q3 2017 RETAIL REPORT

Q3 2017

Q2 2017

FORECAST

3.39%

h

g

NET ABSORPTION

121,056

h

b

CONSTRUCTION

764,951

h

h

94,754

h

g

21.09

g

b

VACANCY

The Broward retail market ended the 3rd quarter under mixed circumstances. The segment is undergoing major shifts at the moment; especially the growth in e-commerce is causing problems for malls, department and other brick-and mortar stores. In the last quarter, rental rates increased by 0.69% to $21.09 per square-foot. At the same time, vacancies decreased by 26

COMPLETIONS

basis-points, while absorption rates were decreasing to 94,754 square-foot. Investment activity dwindled in the last quarter

ASKING RENT NNN

as overall transaction volume declined by 63%, a reaction of investors of changes currently undergoing in the retail sector.

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

Construction in the retail segment is currently 764,951 squarefoot, with 403,232 square-foot being delivered in the next

OUTLOOK

quarter, which marks a significant completion increase from this quarter’s 94,754 square-foot.

The retail market has been disrupted by the increasing dominance of online retailers such as Amazon. However, many retailers understand that experience that cannot be offered online is key in drawing customers. That marks a trend that is impacted by the revival of lifestyle centers and mixed-use developments. Nevertheless, the classical mall is facing rough times and repurpose and redevelopment of obsolete mall space seems likely. Broward, will face completions more than 4 times as in the 3rd Quarter, with absorption rates remaining low an uptick in vacancy rates can be expected. As the future of retail is uncertain, developers will refrain from new retail supply and will mostly focusing in repurposing existing retail and mixed-use developments.

JOB GROWTH BY INDUSTRY FTL

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION -4.0%

-3.0%

-2.0%

-1.0%

0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

TOTAL NONFARM MANUFACTURING MINING AND LODGING FINANCIAL ACTIVITIES OTHER GOVERNMENT CONSTRUCTION TRADE, TRANSPORTATION AND UTILITIES LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES PROFESSIONAL AND BUSINESS SERVICES

ONE COMMERCIAL REAL ESTATE | BROWARD | RETAIL | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 121,056 square-foot of retail space were absorbed in the past quarter and 94,754 square-foot of new supply added to the market. Broward’s vacancy dropped slightly to 3.39%

VACANCY

SOURCE: COSTAR PROPERTY®

700K

from the previous period with NNN asking rents slightly

600K

increasing by 0.69% to $21.09 per square-foot. Which mostly

500K

can be attributed to decline in rental rates in malls.

400K

The retail segment is undergoing the biggest shift of all

ABSORBTION

6.00% 5.00% 4.00% 3.00%

300K

property types. The rapid expansion of e-commerce has

200K

been accompanied by sharp cutbacks in the development

100K

of retail space, conventional shopping center as major

0

retailers and others to continue to cut back on expansion

2.00% 1.00% 0.00%

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

even as they shutter larger numbers of existing stores. Also, consumer behaviors are changing. Nowadays shoppers mainly prefer experiences to possessions. Forward-thinking shopping centers are responding by reinventing the brickand-mortar shopping experience with innovations aimed at mobile-enabled, experience-driven shoppers — including

ECONOMIC OVERVIEW

incorporating non-traditional anchor stores, introducing new open-air mall formats with park-like atmospheres and

Q3 2017

GROWTH

UNEMPLOYMENT RATE

3.8%

- 13.6%

personalized retailer offerings. Developers have responded to

POPULATION GROWTH

1,952,630

+ 1.81%

this new trend by introducing new mixed-use concepts, often

MEDIAN HOUSEHOLD INCOME

57,958

+ 3.99%

LABOR FORCE

845,000

+ 3.29%

offering shoppers a hyperlocal mobile retail experience that increases their connection to real-time mall benefits and

in urban settings. Currently there are about 764,951 squarefoot under construction in Broward. Similar to Miami, new retail development in Broward usually comes together with a mix of uses. However, there is not much activity in Broward

CHANGE AS PER YEAR-TO-DATE | SOURCE: US DEPARTMENT OF LABOR STATISTICS

in terms of new development. The most significant retail development in Broward is Hollywood Circle. The 25-story building will feature roughly 60,000 square-foot of retail space as well as 397 residential and 104 hotel units. Completion for the development is anticipated for Q2 2018.

AVERAGE ASKING RENTS TRENDS

LEASING ACTIVITY Leasing rates for retail rose slightly by 0.69% in the last quarter to $21.09 per square-foot. Areas with the highest leasing activities included Plantation, Pompano and Southwest Broward.

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

GENERAL RETAIL

MALL

SHOPPING CENTER

TOTAL

SOURCE: COSTAR PROPERTY®

30

25

20

15

Sawgrass Plaza marked leasing 19,680 square-foot to You-Fit marked the largest leasing transaction in the past

10

quarter. The plaza is planned for Tamarac and will host, once completed 60,000 square-foot of retail space. The property has attracted significant interest, as it offers great exposure facing Commercial Boulevard and is already 50% pre-leased with opening anticipated for mid-2018.

ONE COMMERCIAL REAL ESTATE | BROWARD | RETAIL | Q3 2017

5

0

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

3


SALES ACTIVITY

PRICE TRENDS CAP RATE

Investment sales took another slump by 60% to $133 million. Investors currently face uncertainty of retail

$/SF

SOURCE: REAL CAPITAL ANALYTICS

470

7.00%

brick-mortar stores downsizing. As the retail sector is

420

6.50%

shifting in new directions and new concepts are introduced

370

product, as sales in the category are declining and many

this trend will eventually come to an end.

6.00%

320 5.50%

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

270 5.00%

220

4.50%

170

University Marketplace in Pembroke Pines was sold

120

4.00%

by Arena Capital Holdings for $21.5 million to New York

Q4 2014

based Bellino Equities. The 143,345 square-foot center

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q4 2016

Q1 2017

Q3 2017

traded last time for $12.5 million in 2014. At the time of sale it was 90% occupied. After painting the buildings and upgrading the cosmetic appeal of the property, the company increased the occupancy to 98%, raised the rent and increased the net operating income.

TRANSACTION VOLUME CENTER

SHOPS

SOURCE: REAL CAPITAL ANALYTICS

$.90BN $.80BN

RK Centers owned by Miami Heat minority owner

$.70BN

Raanan Katz purchased two retail centers near Pembroke

$.60BN

Lakes Mall for a combined $20.74 million. Both buildings

$.50BN

equated to a total of 121,596 square-foot, which marked a

$.40BN

sales price of $180 per square-foot.

$.30BN $.20BN $.10BN $.00BN Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q2 2017

Q3 2017

INVESTMENT SALES | LANDLORD REPRESENTATION | TENANT REPRESENTATION | ASSET MANAGEMENT | PROJECT MANAGEMENT

ONE COMMERCIAL REAL ESTATE | BROWARD | RETAIL | Q3 2017

4


RETAIL STATISTICS SUBMARKET

TYPE

Commercial Blvd

Total

1,548,564

3.02%

2,003

-

-

15.45

General Retail

483,609

2.30%

(7,748)

-

-

-

Mall

-

0.00%

-

-

-

-

Shopping Center

816,237

4.00%

9,751

-

-

15.45

Cypress Creek

Total

2,652,372

3.81%

19,043

-

11,981

19.07

General Retail

1,044,087

2.05%

9,537

-

10,231

18.90

Mall

-

0.00%

-

-

-

-

Shopping Center

1,608,285

4.96%

9,506

-

1,750

19.24

Downtown Fort Lauderdale

Total

4,696,277

3.15%

(63,558)

17,156

107,245

35.97

General Retail

2,626,319

5.08%

(258,923)

17,156

107,245

32.51

Mall

978,568

0.00%

160,000

-

-

-

Shopping Center

1,091,390

1.32%

35,365

-

-

40.98

Fort Lauderdale

Total

19,112,278

3.76%

81,079

89,200

118,616

18.69

General Retail

11,370,359

2.68%

104,158

65,200

29,456

25.68

Mall

854,634

4.73%

6,216

-

-

6.95

Shopping Center

6,261,873

5.94%

(29,416)

24,000

89,160

21.26

Hallandale

Total

4,623,535

2.56%

29,832

-

99,035

23.32

General Retail

1,939,484

2.52%

8,524

-

99,035

23.20

Mall

535,717

0.00%

-

-

-

-

Shopping Center

1,806,968

3.85%

21,308

-

-

23.43

Hollywood

Total

11,864,234

3.56%

170,121

68,118

89,311

20.20

General Retail

4,631,667

2.00%

6,067

8,000

74,011

20.47

Mall

163,179

10.58%

45,026

-

-

-

Shopping Center

5,051,096

5.27%

111,789

60,118

15,300

19.81

NW Broward/Coral Springs

Total

13,603,743

4.16%

134,651

41,194

36,763

19.86

General Retail

4,203,790

2.46%

27,579

41,194

33,263

21.22

Mall

1,037,203

0.00%

-

-

-

-

Shopping Center

8,362,750

5.52%

107,072

-

3,500

19.48

Outlying Broward County

Total

457,619

3.55%

10,143

-

14,400

25.33

General Retail

10,338

0.00%

4,445

-

14,400

-

Mall

-

0.00%

-

-

-

-

Shopping Center

447,281

3.63%

5,698

-

-

25.33

Plantation

Total

11,876,515

4.28%

236,375

33,556

32,912

20.14

General Retail

3,073,982

3.33%

44,230

33,556

32,912

24.35

Mall

1,033,788

0.00%

5,377

-

-

-

Shopping Center

6,773,828

5.10%

161,516

-

-

18.88

Pompano Beach

Total

16,117,138

3.31%

100,599

17,608

120,588

18.09

General Retail

6,674,344

1.05%

18,896

10,858

104,188

21.39

Mall

227,798

8.16%

1,817

-

-

33.51

Shopping Center

7,891,387

4.62%

80,778

6,750

16,400

17.48

Sawgrass Park

Total

4,578,678

0.50%

(878)

-

5,632

27.83

General Retail

1,036,281

0.32%

(3,313)

-

5,632

35.88

Mall

2,416,115

0.00%

-

-

-

-

Shopping Center

1,126,282

1.74%

2,435

-

-

27.04

Southwest Broward

Total

15,130,165

2.65%

214,060

93,687

128,468

23.30

General Retail

4,966,279

1.50%

45,386

66,477

31,968

23.71

Mall

1,264,914

2.98%

(40)

-

-

-

Shopping Center

7,905,798

3.58%

146,910

19,210

71,500

23.63

Total

106,261,118

3.39%

933,470

360,519

764,951

21.09

General Retail

42,060,539

2.30%

(1,162)

242,441

542,341

23.74

Mall

8,511,916

1.34%

218,396

-

-

-

Shopping Center

49,143,175

4.73%

662,712

110,078

197,610

20.78

ONE COMMERCIAL REAL ESTATE | BROWARD | RETAIL | Q3 2017

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES UNDER CONSTRUCTION QUOTED RATES NNN

5


SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

LEASE TYPE

SUBMARKET

8356 West Commercial Blvd

YouFit Health

19,680

New

Tamarac

700 N University Drive

Elegant Beauty

14,820

Renewal

NW Broward

2301 N University Drive

Penn Dutch

13,865

Sublet

Plantation

9789 Glades Road

Posh Plum

13,000

Renewal

Boca Raton West

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

8390 Pines Blvd

Bellino Equities

143,345

21,500,000

150

8390 Pines Blvd

11251 Pine Blvd

RK Centers

121,596

22,600,000

186

11251 Pine Blvd

10299 Royal Palm Blvd

Beverlee Miller Raymond

131,976

13,500,000

102

10299 Royal Palm Blvd

2215 W Hillsboro Blvd

Joseph Edelman and Elena Edelma

68,166

12,750,000

187

2215 W Hillsboro Blvd

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SIZE

DEVELOPER

SUBMARKET

1776 Polk Street

Q2 2018

60,846

Gold Coast Florida Regional Center

Hollywood

8356 West Commercial Blvd

Q2 2018

60,000

Stiles

Tamarac

NE Miramar Pky

Q1 2018

43,000

N/A

SW Broward

801-821 N Federal Hwy

Q4 2017

33,819

Grupo Eco Developers

Hallandale

722 E Las Olas Blvd

Q4 2017

31,500

N/A

Downtown Ft Lauderdale

ONE COMMERCIAL REAL ESTATE | BROWARD | RETAIL | Q3 2017

6


STEVEN NOSTRAND President & COO ONE Commercial Real Estate

PALM BEACH

snostrand@onecommercialre.com

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com

Western Broward Southwest Ranches Plantation Sunrise Weston Parkland Broward | North End Hillsboro Beach Lighthouse Point Bay Colony Sea Ranch The Landings East Fort Lauderdale Las Olas Isles Harbor Beach Fort Lauderdale Beach

BROWARD COUNTY

Lauderdale-by-the-Sea

Rio Vista Victoria Park & Colee Hammock Sunrise Key Coral Ridge / C.R. Country Club Broward | South End Hollywood Beach Hallandale Beach

MIAMI-DADE

ONE Commercial Real Estate 1000 Brickell Avenue, Suite 500 Miami, FL 33131 305.704.9787

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Market View Q3 2017 | Retail - Broward  
Advertisement