Population Growth Fuels Swift Retail Recovery in Miami
A flat vacancy rate and increasing rents in the first quarter indicate a bubbling retail recovery.
The Miami/Dade County retail market is already showing positive signs of recovery. Strong population growth and the return of tourism indicate a bubbling retail recovery, and according to the first quarter market report from Colliers, the metrics support the theory. The vacancy rate remained flat in the first months of the year, while rents actually increased.
The market vacancy rate landed at 4.6% at the end of the first quarter. This is flat from the previous quarter and only 30 basis points below the pre-pandemic vacancy rate. Rental rates increased an impressive 1.9% quarter-over-quarter to $36.99. While an improvement, rates have not returned to the pre-pandemic rate of $38.35. Rental rates increased in spite of new construction deliveries totaling 91,916 square feet—a total of three buildings all under 40,000 square feet and a construction pipeline totaling 2 million square feet.
Miami has been a hotspot for new retail development—largely due to the population growth, tourism and stable metrics. According to a report from Marcus & Millichap, Miami is set to deliver 1.5 million square feet of new retail space, the highest in the market since 2017. Mall redevelopment and mixed-use projects are driving the development activity, and much of it wrapped up in three projects. One of the largest projects in the market is the Miami Worldcenter, a mixed-use development with residential hospitality and 300,000 square feet of retail space.
On the leasing side, transaction activity was down with total absorption at 45,000 square feet. This was on trend with the previous three quarters, which have seen low new construction deliveries and little new absorption.
While it is mostly good news coming out of the Miami retail market, and new retail suit has the potential to change contract agreements related to the pandemic. The tenant of a popular retail store on Lincoln Road in Miami Beach has been required to pay rent despite hardships caused by the COVID-19 pandemic. The ruling determines officially that a force majeure clause—which is common in leases and can sometimes allow a party to not fulfill their contract when there is a circumstance beyond their control or an act of God—is not grounds for non-payment of rent. This could change some retail tenant lease negotiations in the future.