Is Supply Constraining Retail Growth in Miami?

MIAMI—As a result of a strengthening South Florida commercial real estate economy over the last year, and in particular retail, vacancies within quality properties in prime areas are scarce and competition for space is steep. For national retailers with large footprints that are built upon consistent market penetration, the question at hand is this: Has their potential for successful expansion peaked due to low space supply?

GlobeSt.com caught up with Don DeWoody, a principal at Avison Young in West Palm Beach, to get his take on that question. DeWoody represents fast-expanding clients such as Starbucks, Panera Bread, Chase Bank, and AT&T.

GlobeSt.com: Vacancies are scarce in prime retail properties. Has potential for success peaked due to low space supply?

DeWoody: Good retail markets are typically well established so there isn't going to be a tremendous amount of vacancy or “for rent” signs in storefront windows.  As with all strong retail markets in any economic cycle, finding leasing opportunities typically means creating them, which requires a more creative and assertive approach to site selection.

Clients are seeking true strategic real estate advisors as opposed to "space and place" identifiers. Today, it's incumbent upon the real estate advisor to be aggressively proactive, identify potential leasing opportunities and create ways to make a deal work. It has become a cross between chess and a jigsaw puzzle: who can you downsize with, sublease from, who's lease is coming up, who can you buy out and how do I show the landlord that one and one now make three?

GlobeSt.com: Are you expecting to see new retail development to accommodate retail appetite for growth?

DeWoody: As the fundamentals of dirt and construction costs, debt availability versus rental rates come more in line, yes. The model today isn't financially feasible for most larger retail development yet, outside of some sizable projects in markets such as Miami–Dade, where we are seeing support for meaningful new development. There is still a residual caution in the market and as such much of the new development currently coming online is smaller, need-based, tenant-specific construction, with limited, if any, speculative space.

Be sure to come back for part two of this exclusive interview in our afternoon edition. DeWoody will discuss what areas are ripe for development, what retailers looking to grow in the meantime are doing, and more.