Miami Dade County Retail (2007)
Miami Dade County has a population of more than 2,500,000 million residents and growing. In order to keep up with the demand for products and services developers are working at a frantic pace to bring more retail space to the market. Existing available space will bring some relief to small and mid size tenants, but big box retailers continue to feel the effects of space shortage. Almost all big box retailers coming into Miami Dade County will rely on new construction or redevelopment to meet their size requirements.
Although there is lots of activity in the southern and western parts of the county, development is active all over Miami. Cocowalk celebrated its grand reopening this spring and Shops in the Grove, a 12,000 square foot retail space next to Cocowalk, is expected to be completed by fall 2007. Metropolitan Miami, a mixed use complex that will include residential, retail and entertainment components is currently under construction and is expected to be delivered in September of 2009.
Broward County Retail
The population in Broward County continues to rise and is currently at more than 1.7 million residents. The increase in population translates into high demand for retail space as the need for products and services escalates. Broward County has seen a lot of activity since the beginning of the year in both sales and leasing with a variety of exciting projects have been delivered since the first of the year.
Since January 2007 Broward County added more than 400,000 spaure feet of retail space to the market. Mostly notable Paraiso Parc, an 88,500 square foot Publix anchored shopping center in Pembroke Pines was delivered and occupancy is at 98.4%. In addition, Pompano Citi Centre, the 211,040 square foot redevelopment at Federal Highway and Copans Road, is finalizing renovations and is 96.8% leased. Florida´s first IKEA store has opened at the northwest corner of I-595 and SW 136 Street.
Construction of retail properties is brisk in Broward County with more than 2 million square feet currently under construction. In April, GL Commercial broke ground on the Canyon Town Center, a 200,000 square foot office and retail development at the southeast corner of Boynton Beach Boulevard and Lyons Road Shoppes at Pembroke Gardens, a 400,000 square foot lifestyle center at I 75 and Pines Boulevard, is also under construction with delivery expected this fall.
South Florida Multi Family
The multi family marketplace ended the third quarter of 2007 in a favorable position. The condo conversion craze of years past has subsided, yet investment sale prices of multi family properties have remained steady. The demand for multi family investment properties is high and cap rates are increasing. As a result, the market has shifted to an investor driven market and buyers are scrutinizing properties much more closely. Land for multi family properties is available, but the prices have not yet stabilized and are still hovering at the higher price associated with land for condo developments. Prices are expected to level off in the coming year returning to traditional historic levels.
Rental units have regained popularity as the lack of affordable housing in South Florida continues to be a hurdle for many residents. Employers in South Florida are expected to add approximately 50,000 jobs to the area by the end of the year reinforcing the need for rental housing. The demand for housing could push rental rates up 5% from last year. Some of the condo conversions are reverting to rentals, so vacancy may be impacted in the short term, but the long term trend for multi family investment opportunities is positive.
Growth in commercial real estate follows Katrina
WASHINGTON Sept. 15, 2005 The demand for commercial real estate space has spiked in regions surrounding the Hurricane Katrina disaster zone, providing additional stimulus to major commercial market sectors that already were experiencing growth, according to the National Association of Realtors® Commercial Real Estate Spotlight.
David Lereah, NAR's chief economist, says key industries in the affected zone must rebuild or relocate to survive. "Over the last week, we've been hearing about rapid absorption of commercial inventories in nearby areas that survived widespread hurricane damage. In addition, the need has extended geographically to other areas with increased demand for space in adjacent states," he says. "The greatest demand appears to be in the industrial, multifamily and office markets, but the long-term impact from Hurricane Katrina is uncertain as displaced tenants rethink their future."
With operations shifting away from New Orleans, at least for the short term, markets like Houston, Dallas Fort Worth, Atlanta, Tampa and Miami could see vacancy rates for office and industrial space decline by two to three percentage points by the end of 2006. Rent growth will rise along with the new demand.
NAR President Al Mansell says it isn't known how much relocation may be permanent. "There is a critical need for shipping, warehousing and transit in the Mississippi delta region," he says. "The question is how much rebuilding will occur in New Orleans and stricken coastal areas, how much will be relocated to higher ground, and how much will stay in the areas that currently are experiencing increased demand."
The NAR forecast for four major commercial sectors is based on analysis of second quarter data in 57 metro areas tracked, including the office, industrial, retail and multifamily markets. It was adjusted by the recent developments in the Gulf Coast region, including activity in non-tracked markets. Data for the 57 monitored metros was provided by Torto Wheaton Research and Real Capital Analytics.
Office sector
In the office sector, vacancy rates are at the lowest level since 2001, resulting from a rise in space absorption and a decline in speculative building. Vacancy rates are expected to drop to 13.0 percent by the end of the year and 11.3 percent by the fourth quarter of 2006, down from 15.4 percent in 2004. Office rents should grow 4.4 percent both this year and in 2006, after rising only 0.4 percent in 2004.
Areas with the lowest office vacancies currently include Ventura County, Calif.; Orange County, Calif.; New York City; West Palm Beach, Fla.; and Washington, D.C., all with vacancy rates of 8.6 percent or less.
Net absorption of office space in the 57 markets tracked, which includes the leasing of new space coming on the market as well as space in existing properties, has shown strong gains and is forecast at 83.4 million square feet this year and 69.9 million in 2006. The total was 77.7 million square feet absorbed last year, and only 20.0 million in 2003.
Industrial sector
The industrial sector also is seeing gains as trade and shipping patterns continue to impact the market. Vacancy rates should drop to 10.0 percent in the fourth quarter and 9.3 percent by the end of 2006, down from 10.9 percent last year. Industrial rents are expected to rise 2.2 percent in 2005 and 2.7 percent next year; they declined 0.6 percent in 2004.
The areas with the lowest industrial vacancies are West Palm Beach, Fla.; Los Angeles; Riverside, Calif., Las Vegas; and Long Island, N.Y.; and all with vacancy rates of 6.5 percent or less.
The recently ratified Central American Free Trade Agreement should increase industrial demand in Florida, which also will benefit from China routing goods through the Panama Canal to avoid congestion in Southern California. Ports in Texas, and as far north as Charleston, S.C., also could gain from rerouted shipments. Midwestern markets are experiencing a rebound in demand for industrial space.
Ports in Houston, Tampa and Miami likely will see some industrial operations shifted away from New Orleans.
Net absorption of industrial space in the 57 markets tracked is forecast at 198.3 million square feet in 2005, and 178.1 million next year, up from 176.5 million square feet absorbed in 2004 and only 16.5 million in 2003.
Retail sector
In the retail sector, the vacancy rate is expected to decline to 7.2 percent by the end of 2005 and 7.1 percent in the fourth quarter of next year, down from 7.5 percent in 2004. Rent growth is projected at 4.0 percent for both 2005 and 2006; it was 3.3 percent in 2004.
The biggest concern in the retail market is the merger of Federated Department Stores with the May Department Store Co., with estimates calling for the closure of 68 stores across the country. Retail markets with the lowest vacancies include Las Vegas; San Francisco; San Diego; San Jose, Calif.; and Ventura, Calif., with vacancy rates of 3.1 percent or less.
Net absorption of retail space in the 57 markets tracked is seen at 56.2 million square feet this year and 29.6 million in 2006, compared with 27.1 million last year.
Multifamily sector
The apartment rental market multifamily housing should see vacancy rates drop to 5.1 percent in the fourth quarter and 5.0 percent by the end of 2006, down from 6.2 percent last year. Average rent is projected to increase 2.7 percent in 2005 and 3.0 percent next year, compared with a 1.5 percent rise in 2004.
Condo converters continue to influence multifamily investment across the country, with conversion of apartments into condos accounting for more than half of the dollar volume in the Mid-Atlantic and Southeast, and more than 40 percent of volume in the Northeast and Midwest. In the last year, approximately 120,000 rental apartments have been removed from the inventory due to conversions.
Areas with the lowest apartment vacancies are Los Angeles; Orlando; Newark, N.J.; Ft. Lauderdale, Fla.; and West Palm Beach, all with vacancy rates of 2.2 percent or less.
Multifamily net absorption is forecast at 282,300 units in 57 metro areas tracked this year and 200,100 next year, compared with 264,300 in 2004 and only 159,400 units absorbed in 2003.
The flow of capital into commercial real estate continues unabated this year, with a record of $134 billion in investment grade transactions through July up more than 50 percent from the same period in 2004. Office buildings experienced the greatest surge in transactions, followed by industrial properties.
Office Sales Show Strength (2006)
Two Miami office buildings have sold, another indication that demand to own South Florida office space remains strong.
BY MATTHEW HAGGMAN
The biggest office building owner in the country has purchased two Miami office towers, underlining the ongoing desire to own commercial real estate in South Florida.
Equity Office Properties paid $194 million for half a stake in the Wachovia Financial Center, the second-tallest building in Florida. It also paid $55.8 million for a 50 percent interest in 1221 Brickell, a building housing law firm Greenberg Traurig that earned fame a year ago when hundreds of its windows were punched out by Hurricane Wilma.
The twin deals mark the first time the publicly owned Chicago company has purchased property in Miami, a market that Equity Office President and CEO Richard Kincaid said it has sought to enter.
''The area's economy continues to be among the strongest performers in the country, and we believe Miami will continue to generate strong job growth and steady demand for office space going forward,'' said Kincaid, whose company operates as a real estate investment trust.
While South Florida's once-booming housing market has deteriorated this year, the office market has gained strength.
During the residential building boom there was little new commercial construction, resulting in a tightened office market and rising office rental rates.
Now some office owners are cashing in on those gains, and buyers are seeking to get into a market expected to tighten further. While new, large office buildings are planned for construction, none will be completed for several years, and not all may be built.
As a result, this year a host of office buildings have sold for ever higher prices.
Equity Office bought its stake in downtown Miami's 55-story Wachovia Financial Center from KanAm, a German real estate fund. Macquarie Office Trust, an Australian company, owns the other half. The price per square foot -- the gauge generally used to compare office properties was high but not the biggest seen in recent months.
Wachovia Financial sold for $338 a square foot, according to Jay Caplin of Cushman & Wakefield, who brokered the deal. This summer The Lincoln, a six story office building near Lincoln Road in Miami Beach sold for $74 million, or more than $400 a square foot.
Equity Office bought 26-story 1221 Brickell with PRUPIM, a United Kingdom-based real estate investment company. The pair bought the building from a joint venture led by AFA Asset Services in New York.
Shobi Kahn, a senior vice president at Equity Office, said all the windows have been repaired.
''We did extensive due diligence to make sure we were comfortable with all issues,'' Kahn said.
Meanwhile, the rise in property insurance rates after last year's busy hurricane season has become a critical issue in South Florida. Some have predicted that higher rates and difficulty obtaining insurance could chill commercial real estate investment. But Kahn said it did not pose a problem, in part because of Equity Office's size, which allows it to spread risk more.
''It is a great sign for Miami,'' said Peter Harrison, a senior vice president at Transwestern Commercial Properties in Miami, who was not involved in the deal. ``Equity Office is the biggest office REIT in the country, and they really wanted to be in this market.''
10/8/2006