Retail Markets in Focus: South Florida

Total retail sales in the South Florida metroplex (Miami, Fort Lauderdale and West Palm Beach) grew by 7% year-over-year in 2021 to a record $9.0 billion. The market’s strong performance has attracted more investors, who last year completed $3.4 billion of retail property acquisitions—the highest annual volume since 2015.

With an overall retail availability rate of 4.3%, retailers that wish to enter the South Florida market or expand their current footprint face a challenge. South Florida’s three primary markets recorded a combined 4.6 million sq. ft. of net retail absorption last year, almost 66% more than in pre-pandemic 2019, according to CBRE Econometric Advisors. Demand far exceeded the 1.7 million sq. ft. of new supply delivered in 2021, the lowest amount since 2012. As a result, South Florida likely will sustain outsized rent growth through 2024.

Figure 1: Retail Rent Growth, South Florida Markets vs. U.S. Average

Source: CBRE Econometric Advisors, Q1 2022.

South Florida’s strong tourism industry is a primary driver of this performance. A recent study by CBRE Econometric Advisors found that retail rent growth in major tourist hubs like Miami is less affected by e-commerce penetration growth than in non-tourist markets like Baltimore. 

South Florida’s tourism industry has been resilient throughout the pandemic. All three of the region’s primary markets have maintained higher hotel occupancy rates than the top 10 U.S. hotel market average (Figure 2). Fort Lauderdale has performed best, finishing 2021 with a 70% occupancy rate—15 percentage points above the top 10 average.

Figure 2: South Florida Hotel Occupancy Rates vs. Top 10 U.S. Market Average

Note: Top 10 markets are Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Manhattan, Philadelphia, Phoenix and Washington, D.C.
Source: CBRE Econometric Advisors, Q1 2022.

Investors have taken note of the South Florida retail market’s strong performance. Retail real estate investment sales increased by 31% to $3.4 billion last year from $2.6 billion in 2019. Since 2012, South Florida has recorded the most growth of the top-five U.S. markets for retail real estate investment (Figure 3). With retail investment totaling $1.9 billion in the first half of 2022. South Florida is on pace to exceed 2021’s annual volume this year.

Figure 3: Retail Investment Volume Growth Index

Note: Top five markets for retail investment sales volume in 2021.
Source: Real Capital Analytics, June 2022.

Submarket Spotlight

South Florida is home to several well-known high street shopping districts, such as the Design District and Brickell City Center in Miami. However, two of the most popular retail centers are in predominantly residential areas.

Bal Harbour Shops just north of Miami has one of the highest sales per sq. ft. of any mall in the country, according to retail industry association ICSC. It attracts fewer tourists than most metro area retail centers but is popular among local residents. Anchor tenants include Saks Fifth Avenue and Neiman Marcus, with in-line shops made up of top U.S. and international luxury brands. The mall is currently undergoing a $400 million expansion that will add more than 340,000 sq. ft. for 40 new shops.

Further north, Palm Beach’s Worth Avenue is anchored by five-star boutique hotels and celebrity-chef restaurants. This has attracted many luxury brands to the district, including Gucci, Louis Vuitton, Max Mara and Salvatore Ferragamo.

Looking Ahead

South Florida’s retail real estate fundamentals should continue to improve in coming years as tourism returns to normal levels and developers build a significant amount of new housing. This will continue to draw both national and international retail brands to the market. Demand for retail space in an already tight market will significantly drive rent growth, paced by a more than 5.5% increase in both Fort Lauderdale and West Palm Beach. This strong performance should continue to attract retail real estate investors to South Florida.