MIAMI—Improving economic trends are supporting a strong retail property sector in Miami-Dade County. So says Marcus & Millichap‘s Third Quarter 2013 RetailResearch Market Overview.
Demand from foreign buyers is driving housing starts to pre-recession levels while travel and tourism add to the local economy’s growth. According to M&M, hotel occupancy is up nearly 80% in 2013 and visitor spending is firming up retail operations. At the same time, local employers are still creating jobs.
Overall, M&M reports average vacancy will push up 20 basis points this year to 4.6%. Additional supply will contribute the increase, the firm said, though operations should improve metrowide. Rent-wise, asking rates at offered retail space will finish the year at $32.30 per square foot, a 0.5 increase from the end of last year. In 2012, the firm said, average asking rents jumped 5.9%.
“Investment activity in Miami-Dade County is accelerating as buyers target multi-tenant assets in greater numbers, reflecting a growing risk tolerance as economic conditions stabilize,” M&M reports. “Rising prices of single-tenant drugstores and corporate-backed fast-food chains is prompting investors to trade properties backed by smaller retailers and strong franchisees.”
M&M also pointed to compressed cap rates for quality single-tenant assets, combined with a lack of net leased asset listings as factors causing investors to turn toward in-line strip centers. That, the firm reports, is elevating trades in the sector over the past 12 months.
“Multi-tenant asset prices are creeping up, however, first-year yields have yet to fully reflect this, as cap rates were steady over the past year, with the average in the high-6 to low-7% range,” M&M reports. “Although buyer financing is plentiful with increased lender willingness, particularly in the single-tenant market, the increasing cost of debt will continue to put downward pressure on high-cost transactions in this arena over the near term.”