Multi-Tenant Retail Market Overview
Palm Beach County, Broward County, Martin County
Florida is home to several thriving cities and counties that help benefit the state’s overall economic well-being. South Florida was severely impacted by the substantial economic disruption that occurred because of the COVID-19 pandemic forcing tourism to a complete halt. Palm Beach County, Broward County, and Martin County were all impacted by the disruption; however, each has steadily made their way back to pre-pandemic retail and economic levels.
Palm Beach County is a highly liquid investment market characterized by heavy trading. The Broward County retail market is one of the largest in the country. And retail properties regularly trade in Martin County as investors are constantly engaged with the submarket. Each area has a sector that thrives, making them vital assets to the state.
Hurricane Ian Impact
Hurricane Ian has brought on life-threatening conditions to the Florida area. Airlines have cancelled over 1,700 flights over the September 30th weekend. According to Travel Pulse, the airports dealing with the largest impact of the storm include facilities in Orlando, Charlotte, Charleston, Jacksonville, Atlanta, and more. Cruise lines and theme parks in the Florida area have also been negatively impacted by the upcoming storm. Three major Florida ports have been closed off, forcing cruise lines to extend their voyages and stay at sea. The National Weather Service has said that Hurricane was one of the strongest hurricanes to ever strike in the United States, reaching maximum sustained winds of 150 miles per hour, heavy rain, and flash flooding. There will be several damages that will need to be fixed after the flooding has subsided, an effect to hospitality is guaranteed, but the magnitude is unknown.
Vacancy & Rent Fundamentals
Each area had similar market rent growth trends over the past few years, each of which had a spike during 2022.
Since Palm Beach County is a liquid investment market, prospective retail tenants searching for affordable space will find several options throughout the area. Rents in the submarket are around $25 per square foot triple net on average. The West Palm Beach area has a relatively high proportion of neighborhood center space. For that slice specifically, rents run at about $24.00 per square foot in the submarket, a sizeable discount to the $31.00 per square foot average neighborhood center rent in the metro. Rents saw an increase of 7.5 percent over the past 12 months, surpassing a submarket that experienced average annualized rent growth of 5.8 percent over the last three years. Over the past decade, rent growth has also been outstanding in the West Palm Beach area. Rents have risen by 59.9 percent when looking at the entire Palm Beach metro.
Broward County has also seen significant rent growth over the past few years. The market rent per square foot for retail properties has risen to $31 and is forecasted to continue growing to about $53 per square foot by 2026 based on the most recent market trends.
In Martin County, the retail space commands $21 per square foot triple net on average, which aligns with the Port St. Lucie metro’s average asking rent. Over the last 12 months, the county has seen a significant increase in rent rates to 5.7 percent. This growth rate was close to the highest annualized rate in the past three years. Martin County’s overall rent growth has been quite solid in the last ten years. Retail rents in the submarket are 26.5 percent higher than in 2012, a positive indicator of further growth for the county.
Construction
Palm Beach County has completed minuscule new developments and demolition projects since 2020. The project lull began at the pandemic’s peak, and the city was more focused on other economic aspects over the past two years. Experts have forecasted that the town is about to begin several development projects over the next four years, beginning at the end of 2022. This is exciting news for the city to foster more growth and economic prosperity.
Broward County has seen a steady flow of new developments and demolition projects. There was a slight lull in 2020, which is to be expected, but other than that section, the city has been consistent over the past four years. There are currently 29 properties under construction, a total of 367,675 square feet. A few of these properties include Seneca Town Center, W Hallandale Shoppes, and the Waterfront.
Martin County shows similar trends in construction to that of West Palm Beach. They have had minimal new developments and no demolitions since 2020. Experts have predicted a significant incline of projects nearing the end of 2022 and a steady flow until 2026. Two of the most recent new developments include a Taco bell and a 7-Eleven.
Sales
Investors have been particularly active in the capital markets in Palm Beach County, making it one of the most heavily traded submarkets in the region over the past several years. Throughout the past five years, annual sales volume has averaged $165 million, including a 12-month high of $380 million. During the 4th quarter of 2022, the estimated price movement of all properties in the submarket sat at $287 per square foot. That pricing has dramatically increased from last year’s records, growing by more than 10 percent. However, the market cap rate’s have shrunk to an average of 5.9 percent, hitting a record low in the last five years.
In Broward County, 574 retail deals have closed this past year alone. This is a material increase compared to the five-year average sales count. Annualized sales volume has averaged $1.0 billion over the past five years, and the volume hit $2.2 billion within the past 12 months – the highest level recorded over those five years. Market pricing currently resides at $296 per square foot, a significant improvement from 2021. Fort Lauderdale’s cap rate is also at its lowest during the past five years, at 5.9 percent.
Martin County is a popular target among Port St. Lucie metro retail investors. Over the past five years, the annual sales volume has averaged $40.3 million; during this time, there was a 12-month high of $84.1 million. These sales can be attributed to the retail sector, which dramatically drove that volume. Market pricing has sat at $231 square foot throughout 2022. Martin County’s cap rates are trading at an average of 6.5 percent, this is the lowest they have been in the last five years.
Conclusion
Overall, each market has made great comebacks under extraneous conditions imposed on them in 2020. The markets are growing at fast and favorable rates, and the forecasts predict several new projects and construction over the next four years. Florida is an excellent place to invest in because there are always a robust amount of projects in the works, and the state is constantly trying to grow.
