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


EXECUTIVE SUMMARY

MARKET TRENDS

BIG SHIFT’S IN MIAMI’S RETAIL MARKET AS E-COMMERCE PRESSURES TRADITIONAL MALLS AND DEPARTMENT STORES

Q3 2017 RETAIL REPORT

Q3 2017

Q2 2017

FORECAST

3.46%

h

g

238,946

g

b

2,461,821

g

h

222,879

h

g

34.47

g

h

VACANCY

The Miami 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

NET ABSORPTION

problems for malls, department and other brick-and mortar stores. CONSTRUCTION

In the last quarter, rental rates fell by 5.29 % to $34.47 per squarefoot. At the same time, vacancies decreased by 13 basis-points,

COMPLETIONS

while absorption rates were increasing to 238,946 square-foot. Investment activity dwindled in the last quarter as overall

ASKING RENT NNN

transaction volume declined by 84%. Construction in the retail segment is currently 2.4 million square-foot, with 799,051 square-

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

foot being delivered in the next quarter, which marks a significant completion increase from this quarter’s 222,879 square-foot.

OUTLOOK 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. A trend 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. With new supply of about 799,059 square-foot in the next quarter, vacancies are expected to increase slightly but are expected to remain low as Miami’s tourist marked is facing a rebound and the Miami area remains one of the fastest growing regions in the nation.

JOB GROWTH BY INDUSTRY MIAMI

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION MANUFACTURING FINANCIAL ACTIVITIES CONSTRUCTION PROFESSIONAL AND BUSINESS SERVICES -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%

TOTAL NONFARM MINING AND LODGING OTHER GOVERNMENT TRADE, TRANSPORTATION AND UTILITIES LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | RETAIL | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 238,946 square-foot of retail space were absorbed in the past quarter and 222,879 square-foot of new supply

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

1.2M

4.00%

1M

3.50%

can be attributed to decline in rental rates in malls.

800K

3.00%

The retail segment is undergoing the biggest shifts of all

600K

2.50%

400K

2.00%

200K

1.50%

0

1.00%

-200K

0.50%

added to the market. Miami-Dade’s vacancy dropped slightly to 3.46% from the previous period with NNN asking rents dropping by 5.29% to $34.47 per square-foot. Which mostly

property types. The rapid expansion of e-commerce has been accompanied by sharp cutbacks in the development of retail space, conventional shopping center as major retailers and others to continue to cut back on expansion 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

-300K

0.00%

Q2 2016

at mobile-enabled, experience-driven shoppers — including

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

incorporating non-traditional anchor stores, introducing new open-air mall formats with park-like atmospheres and offering shoppers a hyperlocal mobile retail experience that increases their connection to real-time mall benefits and

ECONOMIC OVERVIEW

personalized retailer offerings. Developers have responded to this new trend by introducing new mixed-use concepts,

Q3 2017

GROWTH

5.1%

+ 4.1%

POPULATION GROWTH

2,760,930

+ 1.42%

MEDIAN HOUSEHOLD INCOME

46,962

+ 4.14%

LABOR FORCE

1,173,000

+ 1.73%

often in urban settings. Of the 2.4 million square-foot under construction, about 500,000 square-foot belong to mixed-use

UNEMPLOYMENT RATE

projects. Most prominent among these is the 450,000 squarefoot retail component of Miami Worldcenter, which broke ground in May. The retail component of the project, which is also going to feature hospitality, office and residential was inspired by the world’s great pedestrian streets. Like the 3rd Street Promenade in Santa Monica, the Place de l’Horloge in Avingnon and Lincoln Road in South Beach. This street

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

life will be palpable, with European-style outdoor cafés, bars, restaurants, and boutique retail shops.

LEASING ACTIVITY Leasing rates for retail declined by 5.29% in the last quarter

AVERAGE ASKING RENTS TRENDS

to $34.47 per square-foot, mainly driven by the shifts malls

GENERAL RETAIL

MALL

SHOPPING CENTER

TOTAL

SOURCE: COSTAR PROPERTY®

are currently undergoing. Leasing activity is focused on urban areas with high foot-traffic. Some landlords are open

60

to incubating lease concepts, offering short-term leases to pop-up stores to fill up vacant storefronts.

50

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

40

30

Family-owned Milam’s Markets has leased space for a new store in Pinecrest and will move in after Whole Foods Market relocates. Milam’s Markets leased a 31,000-squarefoot location at 11701 S. Dixie Highway. The Pinecrest store should open in summer 2018 with about 125 employees. Currently the retailer is remodeling the whole store, stripping it down to the bare walls and floor to rebuilt it. ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | RETAIL | Q3 2017

20

10

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 84% to $77million. Investors currently face uncertainty of retail product, as sales in the category are declining and many brick-mortar stores are downsizing. As the retail sector is shifting in new directions and new concepts are introduced this trend will eventually come to an end.

$/SF

SOURCE: REAL CAPITAL ANALYTICS

800

6.50%

700

6.00%

600 5.50% 500

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

5.00% 400 4.50%

300

A pair of mixed-use buildings on South Beach’s

200

4.00%

Lincoln Road, including a parking garage notable for its

Q4 2014

striking architecture, sold for $283 million. The 1111 Lincoln

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

building has 300 parking spaces, 94,448 square-foot of office space, 51,839 square-foot of retail, and several apartments, including a penthouse with a pool and a garden with hanging vines and was fully leased at time of sale. Tenants include Viacom International, JeffreyGroup, Taschen bookstore, Rosa Mesicano South Beach, Nespresso coffee, Juvia Restaurant and Shake Shack. CBRE Global Investors in Los Angeles and

TRANSACTION VOLUME CENTER

German investment firm Universal-Investment purchased the

$.80BN

building. The buyers purchased it on behalf of Bayerische

$.70BN

Versorgungskammer, a German institutional investor.

$.60BN

SHOPS

SOURCE: REAL CAPITAL ANALYTICS

$.50BN $.40BN

A recently completed CVS pharmacy building just

$.30BN

west of Coral Gables sold for $16.5 million. Miami-based

$.20BN

Astor Property Holdings, sold the 15,683-square-foot store to Enrique Gomez de Orozco. The property was leased by CVS at a 25-year NNN lease.

$.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 | MIAMI-DADE | RETAIL | Q3 2017

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RETAIL STATISTICS SUBMARKET

TYPE

TOTAL INVENTORY (SF)

Aventura

Total

6,317,236

1.02%

(56,278)

21,485

354,832

39.04

General Retail

836,333

1.01%

(51,623)

21,485

-

48.34

Mall

3,350,166

0.31%

(10,350)

-

315,000

-

Shopping Center

1,739,741

2.62%

5,695

-

39,832

37.22

Biscayne Corridor

Total

2,582,432

9.61%

(128,366)

-

94,595

42.47

General Retail

2,037,811

11.46%

(136,932)

-

94,595

44.78

Mall

-

0.00%

-

-

-

-

Shopping Center

544,621

2.68%

8,566

-

-

29.34

Brickell

Total

1,727,615

19.16%

(8,342)

-

50,000

63.88

General Retail

1,063,151

2.30%

(9,555)

-

50,000

57.35

Mall

505,000

59.58%

-

-

-

-

Shopping Center

159,464

3.52%

1,213

-

-

95.02

Coconut Grove

Total

1,814,822

4.53%

20,510

39,034

6,626

48.30

General Retail

1,103,218

4.77%

23,429

39,034

6,626

35.68

Mall

199,683

7.70%

4,026

-

-

-

Shopping Center

511,921

2.76%

(6,945)

-

-

57.74

Coral Gables

Total

4,318,865

1.41%

(21,497)

-

34,000

40.45

General Retail

2,878,101

1.84%

(15,567)

-

34,000

40.15

Mall

1,046,671

0.09%

(195)

-

-

-

Shopping Center

394,093

1.80%

(5,735)

-

-

43.24

Coral Way

Total

2,662,151

2.04%

14,499

19,292

53,057

30.27

General Retail

1,973,055

2.32%

10,275

19,292

53,057

30.63

Mall

-

0.00%

-

-

-

-

Shopping Center

447,824

0.89%

4,224

-

-

30.97

Downtown Miami

Total

2,817,340

10.44%

1,574

-

702,508

35.86

General Retail

2,482,914

11.52%

(326)

-

252,508

34.51

Mall

213,438

0.00%

-

-

450,000

-

Shopping Center

120,988

6.69%

1,900

-

-

65.00

Hialeah Gardens

Total

3,064,383

2.19%

45,672

19,682

3,660

19.01

General Retail

1,519,853

2.28%

7,379

19,682

3,660

19.06

Mall

463,690

0.61%

(2,835)

-

-

-

Shopping Center

1,080,840

2.75%

41,128

-

-

18.93

Kendall

Total

19,599,085

2.69%

64,726

11,512

85,177

33.42

General Retail

6,240,860

2.13%

64,202

11,512

85,177

34.07

Mall

3,339,116

1.48%

(21,585)

-

-

36.15

Shopping Center

9,656,616

3.57%

22,109

-

-

32.41

Medley/Hialeah

Total

13,364,451

1.77%

464,631

400,318

75,695

29.63

General Retail

5,789,831

0.74%

39,110

20,000

43,789

19.17

Mall

815,174

0.00%

-

-

-

-

Shopping Center

5,985,367

3.22%

420,125

380,318

31,906

34.67

Miami

Total

14,717,365

5.21%

138,463

113,632

198,287

44.35

General Retail

11,935,558

5.26%

76,994

86,132

198,287

45.59

Mall

37,019

0.00%

-

-

-

-

Shopping Center

2,286,323

5.82%

26,689

27,500

-

24.30

Miami Airport

Total

16,630,904

1.98%

435,724

465,442

185,147

27.12

General Retail

5,180,962

1.25%

7,874

23,875

185,147

28.20

Mall

4,103,970

2.48%

429,356

432,001

-

17.73

Shopping Center

6,327,938

2.59%

(1,506)

9,566

-

29.44

Miami Beach

Total

8,635,963

4.81%

159,726

166,901

67,591

69.63

General Retail

6,252,230

3.53%

153,172

92,199

67,591

61.89

Mall

1,671,667

10.94%

(2,216)

74,702

-

135.76

Shopping Center

532,066

2.29%

8,770

-

-

...

... ...

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | RETAIL | Q3 2017

VACANCY (%)

YTD NET ABSORBTION

... ...

YTD DELIVERIES

UNDER CONSTRUCTION

... ...

QUOTED RATES NNN

54.85 ...

5


RETAIL STATISTICS (CONTINUED) SUBMARKET

TYPE

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES

UNDER CONSTRUCTION

QUOTED RATES NNN

Miami Lakes

Total

4,950,929

4.85%

(68,899)

67,699

-

23.71

General Retail

2,055,383

0.42%

43,066

43,966

-

17.95

Mall

-

0.00%

-

-

-

-

Shopping Center

2,895,546

8.00%

(111,965)

23,733

-

24.12

Northeast Dade

Total

12,038,132

2.73%

3,334

13,786

454,867

29.09

General Retail

5,606,052

1.55%

3,668

4,786

409,627

24.20

Mall

681,469

5.72%

-

-

-

-

Shopping Center

5,750,611

3.53%

(334)

9,000

45,240

31.01

Outlying Miami-Dade Total

306,066

3.60%

4,129

-

-

23.76

General Retail

97,235

0.00%

-

-

-

-

Mall

-

0.00%

-

-

-

-

Shopping Center

208,831

5.28%

4,129

-

-

23.76

South Dade

Total

11,623,404

3.95%

(89,345)

121,477

80,690

20.85

General Retail

5,409,970

1.58%

(25,271)

44,378

80,690

19.30

Mall

983,031

1.58%

(104)

-

-

-

Shopping Center

4,627,204

5.79%

(40,066)

77,099

-

21.91

West Miami

Total

6,635,642

1.68%

81,139

39,862

15,089

25.60

General Retail

2,470,733

0.29%

21,296

15,683

15,089

37.40

Mall

-

0.00%

-

-

-

-

Shopping Center

4,164,909

2.50%

59,843

24,179

-

23.02

Total

133,806,785

3.46%

1,061,400

1,500,122

2,461,821

34.47

General Retail

64,933,250

3.10%

211,191

442,024

1,579,843

35.31

Mall

17,410,094

4.13%

396,097

506,703

765,000

24.15

Shopping Center

47,434,903

3.78%

437,840

551,395

116,978

30.07

SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

LEASE TYPE

SUBMARKET

11701 S Dixie Highway

Milams Market

31,000

New

Dadeland

425 S Dixie Highway

Bassett Furniture

12,827

New

Coral Gables

Point Rayale Shopping Center

Tuesday Morning

12,666

South Dade

SIGNIFICANT SALES TRANSACTIONS Property Address

Buyer Name

Size

Sales Price $

$/SF

Submarket

1664 Lenox Avenue

CBRE Global Investors/ Universal-Investment

12,000

32,000,000

2,667

Miami Beach

SW 57 Avenue

Enrique Gomez de Orozco

15,683

16,500,000

1,052

South Miami

805 S Miami Avenue

Related Cos.

30,000

12,300,000

410

Brickell

16250 NW 57 Avenue

Augusto Ham

59,925

12,230,000

204

Miami Lakes

SIZE

DEVELOPER

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SUBMARKET

NE 1 Avenue

Q4 2017

450,000

Miami Worldcenter

Downtown

19505 Biscayne Boulevard

Q1 2018

315,000

N/A

Aventura

200 NW 1 Avenue

Q1 2018

130,000

N/A

Downtown

300 SE 3 Avenue

Q4 2017

113,508

N/A

Downtown

2525 NW 82 Avenue

Q1 2019

90,000

N/A

Miami Airport

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | RETAIL | Q3 2017

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STEVEN NOSTRAND President & COO ONE Commercial Real Estate snostrand@onecommercialre.com

BROWARD

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com Miami | North End Aventura Golden Beach Bal Harbour Surfside Sunny Isles The Islands Bay Harbor Islands Indian Creek Normandy Isles La Gorce Sunset Islands Venetian Islands Fisher Island Key Biscayne Miami Beach South Beach Mid Beach North Beach Downtown Miami Midtown Edgewater Downtown Miami

MIAMI-DADE COUNTY

Palm/Hibiscus/Star Islands

Brickell Western Miami Doral Miami | South End Coconut Grove Coral Gables Pinecrest Palmetto Bay CocoPlum Gables Estates Snapper Creek Lakes Ponce-Davis & High Pines Old Cutler Bay Deering Bay

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 - Dade  
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