“Broward and Palm Beach counties are… seeing retail growth, but at a much slower pace than Miami,” according to the South Florida Business Journal. Accordingly, Reis’ reporting on the community-neighborhood shopping center segment for the county shows a market struggling with the residual effects of several years of negative net absorption. While net absorption for the first half of 2012 was positive at 52,000 square feet, it made only a small dent in the overall losses suffered over the preceding five years. Vacancy, accordingly, is elevated. The rate for the second quarter stood at 12.1%, down 10 basis points for the period, down just 30 year-over-year and 130 points higher than the second quarter national rate for this property category. July followed with a 4,000-square-foot loss and no change in the vacancy rate. Following three years of decline, rent growth made its return in 2011 with gains of 0.8% for both the asking and effective averages. Minimal improvement is expected for 2012, however. At $21.36 psf and $18.54 psf, respective second quarter averages were up 0.4% and 0.5% for the period following small losses the quarter before. July brought losses of 0.1% to each rate. Reis reports one project in this category under construction with a scheduled completion date as of late August: the 258,000-square-foot Publix-anchored Delray Marketplace in Delray Beach is scheduled to complete this November. Construction started in November 2011.
Even as the community-neighborhood shopping center segment continues to grapple with the effects of the downturn, several major large format projects are lining up. The recently approved $300 million Transit Village mixed-use transit-oriented development (TOD) in West Palm Beach, described elsewhere in this report, will include 87,500 square feet of “retail/civic/educational space,” the South Florida Business Journal reported in August. Developers of the $200 million Atlantic Plaza II mixed-use development in Delray Beach are hoping to break ground by year-end. The first phase includes about 40,000 square feet of retail and restaurant space.
In July, county commissioners, over community objections, approved construction of a “warehouse-sized store… on 64 acres of undeveloped land near… Seminole Pratt Whitney Road and Southern Boulevard,” Palm Beach Post reported at the time. “County rules allow up to 280,000 square feet of commercial space to be built on the land.” The new proposal, awaiting state approval, eliminates the 65,000-square-foot maximum single-store size restriction, “ultimately allowing a larger ‘big-box’ store… to be built on the property.” And Reis reports a March 2013 start date for the $150 million, 1-million-square-foot Palm Beach Fashion Outlets outlet center planned as a replacement of the 1960s-built 1.2-million-square-foot Palm Beach Mall in West Palm Beach. Massachusetts-based New England Development, Eastern Real Estate and Lubert-Adler bought the 80-acre mall in October 2011 for $35.5 million, according to the Post. A JCPenney store at the mall will remain open during the demolition and new construction.
No power or regional centers have been built in the county since two power centers, one in Royal Palm Beach and one in Boynton Beach, delivered in 2008. No projects of either type were under construction per report date and none is found on Reis’ list of planned and proposed retail developments. Second quarter power center vacancy was 7.0%, down 70 basis points for quarter, down fully 200 year-over-year. Backfilling, accordingly, has been a notable trend (see Special Real Estate Factors for a recent example). The second quarter national power center vacancy rate was 6.3%, down 50 points year-to-year. At $23.28 psf, the second quarter average asking rent for local non-anchor power center space was up a penny for the quarter and was down six cents (0.3%) since the second quarter of 2011.
Reis expects about 300,000 square feet of net absorption for the second half of 2012, about 50,000 more than will be added at the new community center and a continuation of the favorable if slow pace set during the first half. Vacancy should drop under 12.0% by year-end. Rent growth at about 1.0% is anticipated for the year as a whole. Slow progress should follow in 2013.