Shopping centers’ concepts continue to evolve as developers of massive mixed-use regional projects lean heavily on entertainment features and more sophisticated dining options to entice shoppers. Although several megamalls are on the drawing boards in Florida, development in the near term is lagging behind demand, keeping occupancies and rents high.
JLL’s 2018 Fall Florida Retail Report breaks down the big-picture trends that are changing the face of retail as well as the latest activity in the state’s major retail markets:
While food halls are now de rigueur in shopping centers of all sizes, the concept seems to be heading in several directions at once as owners experiment with strategies. These vary from mini halls that may include incubator opportunities to immersive markets in regional centers that offer a wide variety of options. Associations with celebrity chefs are also becoming common.
New shopping destinations are now generally conceived as elements of larger mixed-use projects, with entertainment taking over from retail as the main draw. Triple Five Group is about to begin construction on its 6 million-square-foot American Dream Mall-Miami, which will house more than 1,200 stores. But attention-grabbers ranging from theaters to water sports to an artificial ski slope are expected to be the project’s main attractions.
Similarly, the Orlando Magic is a development partner on a proposed project in Orlando’s Sports & Entertainment District that’s billed as a mixed-use entertainment destination that will also include 100,000 square feet of retail and restaurant space.
To date, however, new retail deliveries in Florida have been scarce. While rental rates in some markets saw a slight correction over the first two quarters of the year, in the most desirable locations competition from tenants looking to enter the market is pushing rental rates significantly higher.
Though cap rates in Florida are relatively low, capital market activity in retail continues to decline, in line with national trends.
Miami-Dade’s 96.6 percent average occupancy rate is the highest among South Florida’s major metropolitan areas. However, asking rental rates and sales of retail are beginning to decline as the market reaches equilibrium.
Broward and Palm Beach on the other hand, are still peaking. Both registered a slight -0.03 percent change in average occupancy. Asking rental rates rose 7.1 percent in Broward and a staggering 12.6 percent in Palm Beach, due to high demand for premium space.
A burst of new retail product entering the Orlando market has pushed the asking rental rate to $16.23 a square foot, a 9.0 percent climb that has priced some retailers out of the market, causing a -0.07 percent drop in average occupancy.
Both Jacksonville and the Tampa/St. Petersburg markets registered steady growth in average occupancies, with corresponding increases in asking price. As of mid-year, Jacksonville has recorded six consecutive quarters of growth in rental rates and occupancy.