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


EXECUTIVE SUMMARY

MARKET TRENDS

PALM BEACH’S RETAIL MARKET SHOWS SLOW BUT STABLE GROWTH

Q3 2017 RETAIL REPORT

Q3 2017

Q2 2017

FORECAST

4.22%

h

h

NET ABSORPTION

243,908

g

h

CONSTRUCTION

762,888

g

h

93,902

g

h

21.77

g

g

The Palm Beach retail market experiences stable but slow VACANCY

growth, despite shifts currently undergoing in the retail segment. That can be attributed to an older but also more affluent population, which enjoys living in a suburban environment. As more baby boomers are entering retirement age and moving to South Florida, Palm Beach can be seen as stable for traditional retail stock.

COMPLETIONS

In the last quarter, rental rates increased by 4.22 % to $21.77 per square-foot. At the same time, vacancies decreased by 22

ASKING RENT NNN

basis-points, while absorption rates were increasing to 243,908 square-foot. Investment activity dwindled in the last quarter

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

as overall transaction volume declined by 61%. Construction in the retail segment is currently 762,888 square-foot, with 129,816 square-foot being delivered in the next quarter, which

OUTLOOK

marks an increase from this quarter’s 93,902 square-foot.

Palm Beach continues to remain prone to the changes currently undergoing in the retail segment. With more baby boomers, who are entering retirement age traditional retail is likely to perform in the future. As most supply is attributed to an already fully leased project, which is anticipated for Q2 2018, and hardly any significant projects in the pipeline vacancies are expected to drop further with rising rental rates.

JOB GROWTH BY INDUSTRY PALM BEACH

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION FINANCIAL ACTIVITIES TRADE, TRANSPORTATION AND UTILITIES -6.0%

-5.0%

-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 OTHER GOVERNMENT CONSTRUCTION LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES PROFESSIONAL AND BUSINESS SERVICES

ONE COMMERCIAL REAL ESTATE | PALM BEACH | RETAIL | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 243,908 square-foot of retail space were absorbed in the past quarter and 93,902 square-foot of new supply added to the market. Palm Beach’s vacancy dropped slightly to 4.22%

450K

% to $21.77 per square-foot.

400K

property types. The rapid expansion of e-commerce has been space, conventional shopping center as major retailers and

200K

behaviors are changing. Nowadays shoppers mainly prefer

4.80%

4.60%

4.40%

4.20%

100K 50K

centers are responding by reinventing the brick-and-mortar

0

enabled, experience-driven shoppers — including incorporating

5.00%

150K

experiences to possessions. Forward-thinking shopping shopping experience with innovations aimed at mobile-

5.20%

300K 250K

shutter larger numbers of existing stores. Also, consumer

SOURCE: COSTAR PROPERTY®

350K

accompanied by sharp cutbacks in the development of retail others to continue to cut back on expansion even as they

VACANCY

500K

from the previous period with NNN asking increasing by 0.29

The retail segment is undergoing the biggest shifts of all

ABSORBTION

4.00%

3.80%

-50K

Q2 2016

non-traditional anchor stores, introducing new open-air mall

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

formats with park-like atmospheres and offering shoppers a hyperlocal mobile retail experience that increases their connection to real-time mall benefits and personalized retailer offerings. Developers have responded to this new trend by

ECONOMIC OVERVIEW

introducing new mixed-use concepts, often in urban settings. Despite the shifts in the retail segment, Palm Beach remained prone to major changes. That can be attributed to an older but also more affluent population, which enjoys living in a suburban environment. As more baby boomers are entering retirement age and moving to South Florida, Palm Beach can be seen as stable for traditional retail stock. Currently

Q3 2017

GROWTH

UNEMPLOYMENT RATE

3.9%

- 11.4%

POPULATION GROWTH

1,493,750

+ 2.77%

MEDIAN HOUSEHOLD INCOME

61,683

+ 4.61%

LABOR FORCE

617,500

+ 2.61%

there are 762,888 square-foot under construction of which the 356,089 square-foot development for Braman Motorcars

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

marks the largest project. Construction is underway for a five-story parking garage and four new dealership locations: Porsche, Bentley, Rolls Royce and Pre-Owned.

LEASING ACTIVITY

AVERAGE ASKING RENTS TRENDS GENERAL RETAIL

Leasing rates for retail increased by 0.29% in the last quarter to

MALL

SHOPPING CENTER

TOTAL

SOURCE: COSTAR PROPERTY®

$21.77 per square-foot. New leases in the Palm Beach area were usually of smaller scale and most often stayed under the radar.

40 535

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

30 25

PoshPlum a furniture signed a 13,000 squarefoot lease in Boca Raton.

20 15 10 5 0

Q2 2016

ONE COMMERCIAL REAL ESTATE | PALM BEACH | RETAIL | Q3 2017

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

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SALES ACTIVITY

PRICE TRENDS CAP RATE

Investment sales took another slump by 61% to $64million. Investors currently face uncertainty of retail product, as sales in the category are declining and many brick-mortar stores 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

445

8.50% 8.00%

395

7.50%

345

7.00% 6.50%

295

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

6.00%

245

5.50% 5.00%

195

Barings from Connecticut sold LA Fitness Plaza,

4.50%

145

4.00%

a 106,032 square-foot shopping center for $25 million to

Q4 2014

Coral Gables based Fondo Atlas. The price equated to $236

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

per square-foot. In addition to LA Fitness, tenants include Tunie’s Natural Grocery, Hurricane Grill & Wings, Pita Grill, and Green Turtle Luxury Hand Car Wash.

TRANSACTION VOLUME CENTER

CC Realty sold The Village Sqaure of Tequesta

$.70BN

shopping center for $122.51 millin. The 75,419 square-

$.60BN

foot retail center was acquired by Redfearm Capital and

$.50BN

Moran Russell. The property has two national tenants Pet Supermarket and West Marine, plus local businesses such as Helix Urgent Care, Tequesta Brewing and Nautical But Nice.

SHOPS

SOURCE: REAL CAPITAL ANALYTICS

$.40BN $.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 | PALM BEACH | RETAIL | Q3 2017

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RETAIL STATISTICS SUBMARKET

TYPE

Boca Raton East

Total

3,827,859

2.53%

64,530

43,630

5,724

30.12

General Retail

1,508,538

2.70%

23,182

43,630

5,724

33.15

Mall

317,695

0.52%

3,354

-

-

38.97

Shopping Center

2,001,626

2.71%

37,994

-

-

27.25

Boca Raton North

Total

721,774

1.28%

39,204

32,000

3,783

40.87

General Retail

549,518

0.37%

-

-

3,783

-

Mall

-

0.00%

-

-

-

-

Shopping Center

172,256

4.19%

39,204

32,000

-

40.87

Boca Raton West

Total

6,139,705

1.98%

52,588

46,400

48,999

32.89

General Retail

863,632

0.58%

-

-

7,000

45.26

Mall

2,132,968

0.55%

(3,645)

-

-

50.00

Shopping Center

2,913,826

3.08%

58,221

46,400

41,999

27.77

Boynton/Lantana

Total

10,698,794

5.00%

35,519

14,673

16,240

19.50

General Retail

3,018,803

1.48%

14,363

3,531

2,200

24.11

Mall

1,286,134

0.18%

(2,300)

-

-

-

Shopping Center

5,077,797

6.14%

39,408

11,142

-

20.70

Delray Beach

Total

7,862,776

5.16%

51,528

10,384

153,054

27.57

General Retail

3,381,072

1.64%

41,212

8,284

16,016

52.15

Mall

259,753

0.00%

-

-

-

40.61

Shopping Center

3,228,689

10.54%

15,466

2,100

137,038

19.41

Jupiter

Total

4,330,094

2.71%

23,220

34,726

-

21.49

General Retail

1,403,922

3.44%

36,233

34,726

-

18.71

Mall

122,899

5.89%

(7,233)

-

-

30.00

Shopping Center

2,803,273

2.20%

(5,780)

-

-

22.81

North Palm Beach

Total

10,901,699

4.18%

(5,034)

15,751

-

26.66

General Retail

4,633,265

4.14%

26,367

11,751

-

22.43

Mall

1,821,902

0.40%

6,338

-

-

30.36

Shopping Center

4,025,047

5.97%

(37,739)

4,000

-

26.59

Palm Bch Cty Outlying

Total

3,966,212

5.40%

1,295

36,170

-

15.39

General Retail

1,382,914

3.20%

18,420

31,170

-

12.05

Mall

-

0.00%

-

-

-

-

Shopping Center

2,583,298

6.58%

(17,125)

5,000

-

16.09

Palm Beach

Total

977,596

3.21%

(3,820)

-

-

71.47

General Retail

701,585

4.48%

(3,820)

-

-

69.23

Mall

153,526

0.00%

-

-

-

150.00

Shopping Center

122,485

0.00%

-

-

-

-

Palm Springs/Lake Worth

Total

2,800,823

2.30%

11,753

-

44,364

18.19

General Retail

1,474,837

2.00%

(7,159)

-

44,364

25.93

Mall

-

0.00%

-

-

-

-

Shopping Center

1,325,986

2.64%

18,912

-

-

15.01

Royal Palm Bch/Wellington

Total

7,835,052

3.77%

118,770

5,427

-

18.90

General Retail

1,279,810

1.35%

29,027

5,427

-

29.51

Mall

1,964,806

0.79%

1,380

-

-

-

Shopping Center

3,766,817

4.72%

61,673

-

-

18.36

West Palm Beach

Total

16,048,275

5.75%

(87,778)

77,352

490,724

16.36

General Retail

7,449,678

2.95%

31,038

71,352

480,313

19.43

Mall

-

0.00%

-

-

-

-

Shopping Center

7,773,591

8.52%

(83,971)

6,000

10,411

15.58

West Palm Beach CBD

Total

3,457,410

2.44%

21,644

-

-

19.32

General Retail

2,185,846

3.80%

21,644

-

-

19.75

Mall

1,209,527

0.00%

-

-

-

-

Shopping Center

62,037

2.06%

-

-

-

13.00

Total

79,568,069

4.22%

323,419

316,513

762,888

21.77

General Retail

29,833,420

2.73%

230,507

209,871

559,400

28.92

Mall

9,269,210

0.49%

(2,106)

-

-

37.72

Shopping Center

35,856,728

6.00%

126,263

106,642

189,448

19.49

ONE COMMERCIAL REAL ESTATE | PALM BEACH | 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

SUBMARKET

9789-9889 Glades Rd

Posh Plum

13,000

Boca Raton West

244 N Congress Ave

Boynton Physician Group

8,940

Boynton/Lantana

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

7100 Fairway Drive

Fondo Atlas

106,032

25,000,000

236

Palm Beach Gardens

221 South US Hwy

Redfearn Capital

75,419

12,510,000

166

Tequesta

7289 Garden Road

Vineland Construction Co

6,119

6,900,000

1,128

Riviera Beach

SIZE

DEVELOPER

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SUBMARKET

2901 Okeechbee Rd

Q2 2018

356,089

Hedrick Brothers

West Palm Beach

20 W Atlantic Ave

Q3 2018

70,069

N/A

Delray Beach

5385 Lake Worth Rd

Q4 2017

40,000

N/A

West Palm Beach

ONE COMMERCIAL REAL ESTATE | PALM BEACH | 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 - Palm Beach  
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