Net migration in Florida is still positive according to theCensus Bureau, which estimates that the statewide population hadincreased by an annual average of about 310,740 residents between2000 and mid-2007, to 18,251,243 residents. However, Florida hassuffered heavily from the housing bust, and Florida's populationgrowth was only slightly ahead of the national rate last year, atjust above 1%.

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Vacancy rates in Broward County have risen substantially overthe past year, ending 2007 just below 6%, and another slightincrease is forecast throughout 2008. But South Florida is lessproblematic than other parts of the country, where vacancy rates insecondary markets regularly exceed 10%.

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The occupancy trend will make it difficult for owners to pushrents higher and, more realistically, owners will have to work tosustain their current tenant mix. However according to Marcus &Millichap's 2008 Real Estate Investor Outlook, the asking rents inFort Lauderdale are forecasted to grow by 2.5% to $19.90 per sf,while effective rents advance 2.2% to $17.83 per sf.

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According to a recent Marcus & Millichap survey of lendersand in-house capital corporation representatives, commercial realestate lenders are closely scrutinizing underwriting assumptions,as well as borrowers' and tenant credit quality. Loan-to-valueratios have declined over the past year, and lender spreads reflectthe perception of greater risk in the marketplace. Yet the changein the financing climate represents a turn toward more normalizedstandards, ultimately benefiting the retail market by reducingspeculation and construction.

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Retail lending requirements, like other property sectors, arebecoming increasingly dependent on tenant credit and propertyquality, as well as location. Owners who need to refinancelower-quality assets this year may be required to contributeadditional equity to meet current LTVs. Many owners may choose tosell instead, creating strong buying opportunities for low-leverageinvestors. Properties with attractive and assumable financingalready in place will draw the greatest interest in the monthsahead, as buyers continue to encounter obstacles in obtainingattractive borrowing terms.

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All of these factors make for a very dynamic retail market inSouth Florida. Demand is still extremely strong and investors stillperceive South Florida as a viable place to put capital compared tomost other retail markets across the country. These investorsexpect to earn healthy returns over the long term regardless ofwhat short term challenges they may be facing, especially giventhat South Florida is largely "under retailed" in terms of supply,with square feet per capita far below the national average.

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The views expressed here are those of the author and not ofReal Estate Media or its publications.

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Richard Matricaria is associate vice president of investmentsfor Marcus & Millichap Real Estate Investment Services in FortLauderdale. He can be reached [email protected].

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