Retail Research

Market Report Second Quarter 2018

South Florida Metros

Highly Competitive Market Still Has

Opportunistic Finds Across the Region Retail 2018 Outlook
Destination shopping remains solid driver. The world-class
shopping reputation that South Florida has worked to build Y-O-Y
Asking Y-O-Y
Metro Vacancy Basis Point
continues to draw a high ratio of visitors to locals to area retail, Rent Change
Change
strengthening the market through strong demand. Robust retail
spending among travelers and residents has globally recognized
brands seeking space across the region’s numerous luxury
shopping corridors, with minimal concern over rising e-commerce Miami 4.2% 40 $37.40 4.9%
popularity, as South Florida offers shoppers a unique experience.
Grocery stores, necessity-based retailers and gyms remain in
expansion mode as well, meeting the needs of a region that has Fort Lauderdale 3.4% -30 $22.50 2.8%
roughly 275 people moving to the area every day.

Construction picks back up in 2018. Across South Florida, West Palm Beach 3.8% -50 $24.65 6.5%
more than 2.8 million square feet are forecast to be delivered this
year, nearing the cycle high set in 2014. The majority of new space
has been rising in Miami-Dade County, where approximately 1.8
million square feet will open by year’s end, headlined by several
shopping centers above 100,000 square feet. Supply growth in
Broward County hits a new high-water mark for the current cycle, Investment Trends
with 750,000 square feet forecast to finish in 2018, including a new
Lowe’s, a new Publix and multiple CVS pharmacies, as household Miami
growth has been strong here. Palm Beach County experiences • A shortage of listings is straining activity, while cap rates remain
minimal deliveries this year, contributing to some of the strongest in the mid-5 percent range countywide. Higher yields are
rent growth in the region. available in Broward and Palm Beach counties.
• Several years of robust asset appreciation, along with rising
financing costs, could bring more properties to market as
owners seek new assets in which to invest.

Local Retail Yield Trends Fort Lauderdale

Retail Cap Rate 10-Year Treasury Rate
• Properties sold last year that were occupied with national credit
12% tenants such as CVS, Wendy’s and Burger King recorded cap
rates in the mid-4 to mid-6 percent territory.
Average Rate

9%
• Investor activity will remain elevated in Coral Springs, Plantation
6% and Pompano Beach, where properties trade at a discount to
the countywide average.
3%

0%
West Palm Beach
00 02 04 06 08 10 12 14 16 18*
• Slowing asset appreciation and minimal construction motivates
buyers to seek out value-add opportunities, though these can
face stiff competition and are harder to find.
• Proximity to the new Brightline train station will be in high
demand among tenants and investors.
* Cap rates trailing 12 months through 1Q18; 10-Year Treasury up to March 29, 2018
Sources: CoStar Group, Inc.; Real Capital Analytics
Miami

1Q18 - 12-MONTH TREND

Employment vs. Retail Sales Trends EMPLOYMENT:
Employment Growth Retail Sales Growth
10%
0.9% increase in total employment Y-O-Y
Year-over-Year Change

5%
• Job losses from last year’s hurricane slowed year-over-
year employment growth to 10,400 in March, down by
0% more than half from one year earlier. In the first quarter,
2,600 jobs were created, led by the construction sector,
-5% which added 2,800 workers.

-10% • The unemployment rate fell 20 basis points in the first

quarter from one year earlier, reaching 4.8 percent.
08 09 10 11 12 13 14 15 16 17 18*

Retail Completions CONSTRUCTION:

Completions Absorption
4,000
1.1 million square feet completed Y-O-Y
Square Feet (thousands)

• In the first quarter, 404,000 square feet were completed,

3,000
led by the 315,000-square-foot expansion of the
2,000
Aventura Mall. Annualized completions fell in March,
though, from the nearly 1.6 million square feet opened
1,000 during the prior yearlong stretch.
• Gardens Promenade in Miami Gardens will be this year’s
0
largest delivery at 300,000 square feet.
08 09 10 11 12 13 14 15 16 17 18*

Vacancy Rate Trends VACANCY:

Metro United States 20 basis point increase in vacancy Y-O-Y
12%
• Net absorption of 736,000 square feet fell behind
9% completions to lift the vacancy rate to 4 percent in March,
Vacancy Rate

adding to a 30-basis-point rise registered one year earlier.

6%
• Tenant demand was greatest over the past year in the
3% Miami Airport submarket, where net absorption totaled
491,000 square feet, followed by Aventura with net
0% absorption of 317,000 square feet.
08 09 10 11 12 13 14 15 16 17 18*

RENTS:
Asking Rent Trends
Metro United States 8.4% increase in the average asking rent Y-O-Y
Year-over-Year Change

16%
• The greatest annualized rent increase since mid-2012
8%
was posted in the first quarter, lifting the average asking
rent to $36.23 per square foot.
0%
• Single-tenant properties increased the average rent 9.9
percent in March from one year earlier to $37.03 per
-8%
square foot, while multi-tenant space recorded a 5.2
-16%
percent rise to average $34.56 per square foot.
08 09 10 11 12 13 14 15 16 17 18*

* Forecast
 Retail Research | Market Report

DEMOGRAPHIC HIGHLIGHTS

2018 JOB GROWTH* FIVE-YEAR POPULATION GROWTH** FIVE-YEAR HOUSEHOLD GROWTH**

Metro 1.5% 186,100 or 1.3% Annual Growth 86,000 or 1.7% Annual Growth
U.S. Average 1.2% U.S. 0.7% Annual Growth U.S. 1.1% Annual Growth

1Q18 RETAIL SALES PER MONTH

$4,806 Per Household

U.S. $3,922
1Q18 MEDIAN HOUSEHOLD INCOME RETAIL SALES FORECAST**

Metro $48,710 $1,678 Per Person Metro 22.3%

U.S. Median $60,686 U.S. $1,506 U.S. 19.7%

* FORECAST **2017-2022

Lowest Vacancy Rates 1Q18 Investors Extend Search Parameters For

Remaining Upside
Y-O-Y
Vacancy Asking Y-O-Y %
Submarket Basis Point • Multi-Tenant: Deal flow declined 20 percent during
Rate Rent Change
Change
the year ended in March from the prior yearlong stretch,
while prices climbed 2 percent to average $400 per
Aventura 1.1% 40 $37.62 -6.1% square foot.
• Single-Tenant: Prices remained relatively unchanged
SUBMARKET TRENDS

Coral Way 1.4% -80 $28.94 2.9%

at $487 per square foot, though transaction volume
marked a 22 percent decline from the prior period.
SALES TRENDS

Medley-Hialeah 1.9% -30 $30.46 10.1%

Outlook: High prices and strong competition keep
Miami Airport 2.0% -200 $28.25 0.3%
investors active outside of the urban core, looking to areas
West Miami 2.6% 0 $24.49 -11.5%
like Medley/Hialeah or Northeast Dade, where single-
tenant assets often trade below the market average.
Coral Gables 2.9% 90 $41.69 11.8%

Price Per Square Foot Trends

Hialeah Gardens 3.0% -20 $19.37 6.4%
Single-Tenant Multi-Tenant
Kendall 3.0% -20 $34.41 4.1%
Year-over-Year Appreciation

20%

Northeast Dade 3.0% 20 $29.35 -3.1% 10%

Miami Beach 4.5% 40 $89.50 33.3% 0%

Coconut Grove 4.8% -40 $56.20 12.5% -10%

Overall Metro 4.0% 20 $36.23 8.4%

-20%
08 09 10 11 12 13 14 15 16 17 18*

Sources: CoStar Group, Inc.; Real Capital Analytics

Fort Lauderdale

1Q18 - 12-MONTH TREND

Employment vs. Retail Sales Trends
EMPLOYMENT:
Employment Growth Retail Sales Growth
10% 1.3% increase in total employment Y-O-Y
Year-over-Year Change

5% • During the year ended in the first quarter, 10,600 jobs

were created, down by nearly half from one year earlier
0% as a result of the hurricane. Job growth in the first quarter
totaled 4,600, led by the creation of 3,000 jobs in the trade,
-5% transportation and utilities sector.
-10% • The unemployment rate declined 90 basis points from
08 09 10 11 12 13 14 15 16 17 18* the first quarter of 2017, ending March at 3.6 percent.

Retail Completions CONSTRUCTION:

Completions Absorption
4,500 467,000 square feet completed Y-O-Y
Square Feet (thousands)

• Led by the opening of the 52,000-square-foot Riverbend

3,000
Marketplace in Fort Lauderdale, deliveries in the first
1,500
quarter totaled 148,000 square feet. Year-over-year
completions were down by roughly 225,000 square feet.
0 • The largest project set to finish this year will be a
125,342-square-foot Lowe’s in Davie, followed by
-1,500
Seneca Town Center at 64,240 square feet.
08 09 10 11 12 13 14 15 16 17 18*

Vacancy Rate Trends VACANCY:

Metro United States
40 basis point decrease in vacancy Y-O-Y
12%
• Net absorption took a dive in the first quarter to negative
9% 22,000 square feet, slowing annualized vacancy
Vacancy Rate

compression to bring the rate to 3.9 percent in March. A

6% 150-basis-point drop occurred one year earlier.

3% • Tenant demand was highest in Plantation over the past

year, with net absorption reaching 263,000 square feet,
0% followed by Southwest Broward at 225,000 square feet.
08 09 10 11 12 13 14 15 16 17 18*

Asking Rent Trends RENTS:

Metro United States 4.9% increase in the average asking rent Y-O-Y
Year-over-Year Change

10%
• The average asking rent climbed at a greater pace over
5% the past year than the 2.4 percent rise posted one year
ago, climbing to $21.98 per square foot.
0%
• Single-tenant space recorded a 6.6 percent increase
-5% to the average asking rent, rising to $23.31 per square
foot. A 1.3 percent increase occurred in the multi-tenant
-10% segment, ending the first quarter at $19.56 per square foot.
08 09 10 11 12 13 14 15 16 17 18*

* Forecast
 Retail Research | Market Report

DEMOGRAPHIC HIGHLIGHTS

2018 JOB GROWTH* FIVE-YEAR POPULATION GROWTH** FIVE-YEAR HOUSEHOLD GROWTH**

Metro 1.8% 168,600 or 1.7% Annual Growth 87,000 or 2.2% Annual Growth
U.S. Average 1.2% U.S. 0.7% Annual Growth U.S. 1.1% Annual Growth

1Q18 RETAIL SALES PER MONTH

$5,123 Per Household

U.S. $3,922
1Q18 MEDIAN HOUSEHOLD INCOME RETAIL SALES FORECAST**

Metro $57,244 $2,002 Per Person Metro 23.8%

U.S. Median $60,686 U.S. $1,506 U.S. 19.7%

* FORECAST **2017-2022

Lowest Vacancy Rates 1Q18 Job Growth, Demographic Trends Aid in

Region’s Best Asset Appreciation
Y-O-Y
Vacancy Asking Y-O-Y %
Submarket Basis Point • Multi-Tenant: Properties sold during the past 12
Rate Rent Change
Change
months recorded an average price per square foot of
$247, a 9 percent rise from the prior yearlong stretch,
Sawgrass Park 0.7% 0 $23.00 -9.8% while deal flow remained stable.

Southwest Broward 2.4% -60 $25.62 13.0%

• Single-Tenant: A 14 percent increase to the average
SUBMARKET TRENDS

price per foot was recorded, climbing to $442 a square

foot, though deal flow fell by 30 percent. Going-in cap
SALES TRENDS

Hallandale 2.6% -30 $21.31 0.6%

rates were in the lower-6 percent area.
Downtown Fort Lauderdale 3.1% -20 $35.01 14.0%
Outlook: Capital appreciation that has outperformed
Plantation 3.6% -220 $19.65 -1.0% Miami-Dade and Palm Beach counties recently will grow
investor interest across Broward County this year.
Hollywood 4.1% -140 $22.11 6.6%

Commercial Blvd 4.3% 80 $15.36 -6.2% Price Per Square Foot Trends
Single-Tenant Multi-Tenant
Pompano Beach 4.6% 40 $19.99 8.2%
Year-over-Year Appreciation

24%

NW Broward-Coral Springs 4.7% -40 $18.81 0.9%

12%

Fort Lauderdale (City) 5.2% 70 $22.34 4.7%

0%

Cypress Creek 5.3% -10 $17.53 -9.6%

-12%

Overall Metro 3.9% -40 $21.98 4.9%

-24%
08 09 10 11 12 13 14 15 16 17 18*

Sources: CoStar Group, Inc.; Real Capital Analytics

West Palm Beach

1Q18 - 12-MONTH TREND

Employment vs. Retail Sales Trends
EMPLOYMENT:
Employment Growth Retail Sales Growth
12% 1.3% increase in total employment Y-O-Y
Year-over-Year Change

6% • Down from the 2.9 percent pace registered one year

earlier as a result of job losses following the hurricane,
0% 8,300 jobs were created over the past year. In the first
quarter, job growth totaled 7,600, led by the professional
-6% and business services sector, which created 2,300 jobs.
-12% • The unemployment rate fell 110 basis points over the
08 09 10 11 12 13 14 15 16 17 18* past year, ending the first quarter at 3.8 percent.

Retail Completions CONSTRUCTION:

Completions Absorption
3000 227,000 square feet completed Y-O-Y
Square Feet (thousands)

2000 • Deliveries slowed substantially over the past year ended

in March from the more than 413,000 square feet added
1000 to the market during the prior period. In the first quarter,
deliveries totaled 29,500 square feet.
0
• Supply growth over the past year was greatest in
-1000
West Palm Beach, where 97,000 square feet opened,
08 09 10 11 12 13 14 15 16 17 18* followed by Boca Raton with 80,000 square feet.

Vacancy Rate Trends VACANCY:

Metro United States
20 basis point decline in vacancy Y-O-Y
12%
• Net absorption of 386,000 square feet over the past 12
9%
Vacancy Rate

months cut the vacancy rate to 4.4 percent in the first

quarter. One year earlier, vacancy fell 90 basis points.
6%
• Demand was highest in the Boynton Beach-Lantana area
3% over the past year, with 167,000 square feet absorbed.
The largest tenant move was a 55,000-square-foot Hobby
0% Lobby now in North Palm Beach.
08 09 10 11 12 13 14 15 16 17 18*

Asking Rent Trends RENTS:

Metro United States 9.5% increase in the average asking rent Y-O-Y
Year-over-Year Change

14%
• Following a 4.7 percent rise one year ago, the average
7% asking rent rose to $23.60 per square foot in the first
quarter of 2018. Five of the nine submarkets tracked
0% recorded double-digit rent growth.

-7% • The single-tenant segment led rent growth, climbing 15.1

percent to $24.52 per square foot. Multi-tenant space
-14% was up 0.6 percent to $22.09 per square foot.
08 09 10 11 12 13 14 15 16 17 18*

* Forecast
 Retail Research | Market Report

DEMOGRAPHIC HIGHLIGHTS

2018 JOB GROWTH* FIVE-YEAR POPULATION GROWTH** FIVE-YEAR HOUSEHOLD GROWTH**

Metro 2.1% 201,300 or 2.6% Annual Growth 105,000 or 3.2% Annual Growth
U.S. Average 1.2% U.S. 0.7% Annual Growth U.S. 1.1% Annual Growth

1Q18 RETAIL SALES PER MONTH

$3,986 Per Household

U.S. $3,922
1Q18 MEDIAN HOUSEHOLD INCOME RETAIL SALES FORECAST**

Metro $61,479 $1,636 Per Person Metro 37.2%

U.S. Median $60,686 U.S. $1,506 U.S. 19.7%

* FORECAST **2017-2022

Lowest Vacancy Rates 1Q18 Investors Look North for High Yields, Are
Met With Minimal Listings
Y-O-Y
Vacancy Asking Y-O-Y %
Submarket
Rate
Basis Point
Rent Change • Multi-Tenant: Prices marked a 1 percent rise to
Change
average $289 per square foot over the past year,
while deal flow held relatively stable and cap rates on
Boca Raton 2.0% -70 $32.02 6.4%
average were in the mid-6 percent area.
• Single-Tenant: Transaction velocity fell by roughly
SUBMARKET TRENDS

Palm Springs-Lake Worth 2.6% -40 $19.82 10.4% one-third, though prices remained relatively unchanged
at $400 per square foot. The average first-year yield
SALES TRENDS

North Palm Beach 3.0% -130 $28.64 5.1%

was in the upper-5 percent area.
Outlook: Rent growth above the rest of South Florida will
Jupiter 3.1% 30 $24.58 19.7% increase investor interest this year, potentially growing
competition and placing upward pressure on pricing.
Royal Palm Beach-
4.1% -20 $23.32 26.5%
Wellington
Price Per Square Foot Trends
Boynton Beach-Lantana 4.3% -160 $18.15 4.1% Single-Tenant Multi-Tenant
Year-over-Year Appreciation

24%
West Palm Beach (City) 5.8% 80 $17.08 5.2%
12%

Delray Beach 6.4% 10 $29.61 13.6% 0%

Palm Beach 6.8% 160 $23.19 12.5% -12%

-24%
Overall Metro 4.4% -20 $23.60 9.5% 08 09 10 11 12 13 14 15 16 17 18*

Sources: CoStar Group, Inc.; Real Capital Analytics

Retail Research | Market Report

10-Year Treasury vs. 2-Year Treasury By WILLIAM E. HUGHES, Senior Vice President,
Yield Spread Tightens
Marcus & Millichap Capital Corporation
10-Year Treasury 2-Year Treasury
8% Fed raises benchmark interest rate, plans additional increases.
230 bps

The Federal Reserve increased the federal funds rate by 25 basis points

280 bps
6% in late March, raising the overnight lending rate to 1.5 percent. While

260 bps
Rate

50 bps
the Fed noted the inflation outlook moderated recently, an upgraded
4% economic forecast including tax cuts and a regulation rollback strength-
ened growth projections through 2020. As a result, the Fed has guided
2%
toward at least two more rate hikes this year, while setting the stage for
up to four increases in 2019.

CAPITAL MARKETS
0%
04 06 08 10 12 14 16 18*
Lending costs rise alongside Fed rate increase. As the Feder-
al Reserve lifts interest rates, lenders will face a rising cost of capital,
which may lead to higher lending rates for investors. However, greater
Retail Mortgage Originations by Lender
competition for loan demand has prompted some lenders to absorb
100% some cost increases. While higher borrowing costs may prompt buyers
to seek higher cap rates, the positive economic outlook should boost
75% rent growth above inflation over the coming year.
National Bank
Percent of Total

International Bank The capital markets environment remains highly competitive.

50% Regional/Local Bank
CMBS While the Federal Reserve has committed to tightening policy, other
Insurance major central banks have maintained easing policies. The downward
25% Financial pressure on rates from foreign central banks is counteracting greater
Private/Other
economic growth and wider government deficits, keeping demand for
0% fixed-income investments stable. Loan pricing resides in the mid-4 per-
13 14 15 16 17 cent range with maximum leverage of 70 percent. Portfolio lenders will
require loan-to-value ratios closer to 65 percent with interest rates, de-
* Through May 1st
Sources: CoStar Group, Inc.; Real Capital Analytics pending on term, in the high-3 to mid-4 percent range. The passage of
tax reform and rising fiscal stimulus will keep the U.S. economy growing
strongly this year, while limited new construction and steady absorption
will contain retail vacancy near 5 percent.
National Retail Group
Visit www.NationalRetailGroup.com Miami Office:
Scott M. Holmes Scott Lunine
Regional Manager
Senior Vice President, National Director | National Retail Group Tel: (786) 522-7000
Tel: (602) 687-6689 | scott.holmes@marcusmillichap.com scott.lunine@marcusmillichap.com

Prepared and edited by 5201 Blue Lagoon Drive, Suite 100

Mike Murphy Miami, FL 33126
Research Analyst | Research Services

Fort Lauderdale and West Palm Beach:

For information on national retail trends, contact:
Ryan Nee
John Chang Vice President/Regional Manager
First Vice President, National Director | Research Services
Tel: (954) 245-3400
Tel: (602) 707-9700 | john.chang@marcusmillichap.com ryan.nee@marcusmillichap.com

Price: $750
5900 North Andrews Avenue. Suite 100
Fort Lauderdale, FL 33309
© Marcus & Millichap 2018 | www.MarcusMillichap.com

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no
representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment
growth is calculated based on the last month of the quarter/year. Sales data includes transactions valued at $1,000,000 and greater unless otherwise noted. This is not intend-
ed to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered
as investment advice.
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Experian; Moody’s Analytics; Real Capital Analytics; TWR/Dodge Pipeline;
U.S. Census Bureau