South Florida Retail Market Report

Palm Beach

Market Overview

Palm Beach retail leasing activity has experienced a slowdown driven by lack of available space. Over 1.6 million SF has been leased in 2024, down from recent peak levels of over 2.6 million SF leased over Q3 2021. Total leased SF makes up over 13% of available space in Pam Beach, an increase from the 11% average from 2015 through 2019. Regardless, net absorption has remained positive over the majority of the last three years, with exception of the minor move-outs from Q1 2021. Recent tenant churn has moved annual net absorption into negative territory, contracting by -270,000 SF. With tenant move-outs remaining below the five-year average, as well as the limited supply, available space is expected to remain tight and well below the U.S. average for the next few years.

Palm Beach By the Numbers

• Vacancy Rate: 3.6%
• Rent Growth: 5.7%
• Absorption in SF: (269K)
• Deliveries in SF: 242K
• Sales Volume: $521M | Last 12 Months | Source: CoStar Group

Market Performance

The Palm Beach submarket continues to command the highest rents in the market having the second-highest retail rents across all Florida markets, after Miami, at around $36 per SF as of 2024. All submarkets within Palm Beach continue to achieve year-over-year rent growth of over 5% in 2024. Transaction volume has decreased, with $513 million in trades over the past 12 months. This is well below the five-year average of $917 million. Higher interest rates, which are in turn increasing cap rates, are resulting in a price drop.

Over the past 12 months, weighted average transaction pricing has contracted over 4% relative to peak levels in 2023. With the slowing of immigration and job growth, coming off elevated levels, Palm Beach is experiencing a normalization in annual demand after net absorption peaked at 1.5 million in Q1 2022. Moving forward, a slowing economy and rising interest rates, resulting in a near-term pricing correction, are projected to cause weaker transaction activity than the boom in 2021 and 2022. Higher cap rates, combined with declining fundamentals, will continue to stifle market activity until financial circumstances improve, at which point it will likely resume.

Fort Lauderdale

Market Overview

Similarly to Palm Beach, Fort Lauderdale has also experienced a slowdown in retail leasing activity over the past 12 months. Over 2.5 million SF has been leased, down from peak levels of over 3.3 million. Demographic increase, combined with the return of tourists, continues to boost Fort Lauderdale residents and tourism expenditure. This has resulted in significant rent increases for retail space in the area, with annual growth of 2.5%, although this has decreased from a peak of 10.9% at the end of 2022.

Despite some deliveries from 2020 to 2023, which brought around 1 million SF to the market in those years combined, 2024 shows a quiet building pipeline, with only a little over 190,000 SF scheduled to be completed. A solid job market continues to boost consumer spending, which is now higher than before the pandemic. These dynamics will result in slower but healthy absorption rates relative to the available market space.

Fort Lauderdale By the Numbers

• Vacancy Rate: 3.7%
• Rent Growth: 2.5%
• Absorption in SF: (333K)
• Deliveries in SF: 206K
• Sales Volume: $1B | Last 12 Months | Source: CoStar Group

Market Performance

Vacancies are likely to remain tight, with slight growth in submarkets through the end of 2025. The Southwest Broward and Hallandale submarkets, that make up more than half of all under-construction activity, are likely to have vacancy rates grow modestly by less than 1% overall through 2025. International tourists spend nearly twice as much on shopping as domestic and Florida residents, with total international visitor expenditure averaging $1,100 between 2019 and 2023, 26% greater than local spending. The restoration of this demand tailwind, as international arrivals at South Florida airports have returned to pre-pandemic levels, along with a strengthening consumer outlook through 2025, may bode well for Fort Lauderdale fundamentals in the future.

The three largest developments now ongoing are over 310,000 SF at 3363 N Federal Highway, over 140,000 SF of retail space at 777 Isle of Capri Blvd. in Pompano, and 130,000 SF Seneca Town Center in the Hallandale Submarket. All three developments are forecasted to be delivered in 2025 and have experienced strong pre-leasing.

Miami

Market Overview

Real retail sales growth in Miami has slowed down due to the high inflation in South Florida. Regardless, spending continues to remain elevated compared to pre pandemic levels. Spending is also forecasted to increase moving forward due to the return of international tourism. The lack of available space has been weighing on leasing activity. Miami leasing activity slowed over the past 12 months with over 2.5 million SF, a decrease from the 2021 peak of 3.5 million SF. Market participants continue to indicate tenant interest in new space from global and locally owned brands.

Miami By the Numbers

• Vacancy Rate: 2.7%
• Rent Growth: 3.7%
• Absorption in SF: 827K
• Deliveries in SF: 688K
• Sales Volume: $1B | Last 12 Months | Source: CoStar Group

Market Performance

Limited supply relief is anticipated as higher interest rates and elevated land values weigh on developer activity, as construction has started significantly slowing down over the last year. 1.2 million SF is currently underway across Miami with only 278,000 SF available. Elevated retail sales and limited space availability have contributed to substantial rent growth in the neighborhood, with asking rents climbing by over 17% in the last three years, outpacing national gains of roughly 10% during the same period. With tenant turnover being below the f ive-year historical norm and limited supply additions, constrained space availability is projected to generate solid rent increases that remain above the US average. Rent growth will stall as demand softens due to slowing consumption growth and insufficient inventory. Despite this, the market’s growing desirability and limited amount of accessible space should result in prices above the national average.