Job growth, rising consumer retail sales, and increasing tourism are positive factors contributing to the revival of retailing and retail real estate in Broward County. While the market as a whole may be progressing, however, the community-neighborhood shopping center segment, last counted by Reis at 40.2 million square feet, continues to struggle. Indeed, the vacancy rate, rising more or less steadily since the mid-2000s, may not yet have reached its cyclical peak. Reis puts the second-quarter rate at 11.3%, same as the quarter before, up 50 basis points year-over-year. While July brought some respite—a decline to 11.2%—additional increases currently are expected before year-end.
Year-to-date net absorption through the first half of 2012, following five successive years of negative totals, was subzero once again at minus 65,000 square feet. Although the total for the second quarter alone was positive at 19,000, it was outweighed by the delivery of 32,000 square feet of new supply, all in the Shoppes on Arts Avenue neighborhood center at N.W. Seventh Avenue and N.W. Fifth Street, which completed in June. Rent growth in this sector, negative for four consecutive years, finally has turned positive. At $18.70 psf and $15.85 psf, asking and effective averages for the second quarter were up 0.4% each for the period and were up 0.7% each since year-end. July brought 46,000 square feet of positive absorption and gains of 0.2% for both average rents.
Construction of retail real estate product overall remains limited mainly to small projects. In addition to the above-cited neighborhood center, a 45,500-square-foot expansion of the Oakwood Plaza power center in Hollywood completed in July following a January start, and the 23,700-square-foot freestanding Fresh Market shopping center delivered in Fort Lauderdale in March. A December finish is scheduled for a 157,600-square-foot Walmart Supercenter at 7800 W. McNab Road in North Lauderdale. The 40,000-square-foot University Professional Campus neighborhood center is reported under way in Hollywood without a specified completion date. And a 40,000-square-foot expansion of the Colonnade Outlets at Sawgrass outlet center in Fort Lauderdale began in June.
“As consumer confidence increases and tourism dollars drive retail sales in 2012, more tenants will be attracted to the retail market,” predicts Marcus & Millichap. Still, Reis expects slow progress for the community-neighborhood shopping center market. Vacancy is projected to rise to 11.5% by year-end; a definitive downward trend should start thereafter. Rent growth at slightly above 1.0% is anticipated for 2012 all told; growth rates should creep upward slowly thereafter.