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Up 6 Places

2012 Rank: 31

2011 Rank: 37

Fort Lauderdale

Low Construction Persists as Owners Await Surge of New Tenants


s fewer stores close, conditions in the Broward County retail market will strengthen notably in 2012. Minimal construction and modestly improving space demand will reduce countywide vacancy to less than 10 percent in 2012 for the first time in more than three years. Completions averaged 1.4 million square feet annually in the five years preceding the recession, but will fall short of that level in 2012 as national retailers and anchors maintain a cautious stance on expansion. Overall, well-managed shopping centers may be able to raise rents as the year progresses, with more widespread and substantial gains most likely to occur in 2013. Newer properties in the western portion of the county, though, remain vulnerable to further rent erosion as older leases roll over. Ongoing improvements in property performance are lifting investors confidence, but impediments to achieving a more fluid and active investment market remain. Acquisition financing for stabilized multi-tenant assets is available at loan-to-value ratios of up to 65 percent, but lenders hesitate to underwrite properties with significant vacancy or impending lease expirations. While Publix-anchored shopping centers remain the target for large investors and institutions, properties with mostly local merchants must be offered at cap rates starting at about 9 percent to generate bids. In the single-tenant segment, any solid asset occupied by a tenant with decent credit standing will draw interest. For investors contemplating purchases in the months ahead, the challenge not only remains outbidding other investors, but also broadening their consideration of other single-tenant brands to fulfill investment objectives. 2012 Market Outlook

Year-over-Year Change

Employment vs. Retail Sales


10% 5% 0% -5% -10%
Employment Retail Sales

08

09

10

11*

12**

Retail Completions
2.0
Square Feet (millions)

1.5 1.0 0.5 0.0

08

09

10

11

12**

Asking Rent and Vacancy Trends


Asking Rent Vacancy

$20
Asking Rent per Square Foot

12% 11%
Vacancy Rate

$19 $18 $17 $16

2012 NRI Rank: 31, Up 6 Places. Across-the-board improvements in Broward County facilitated a six-spot jump in this years ranking. Employment Forecast: Approximately 2,800 positions were added last year, but steady improvement in the local economy will spark the hiring of 13,700 workers in 2012, a 1.9 percent gain. Construction Forecast: Developers will complete 200,000 square feet of space this year. Last year, only 84,300 square feet was added.

10% 9% 8%

08

09

10

11

12**

Sales Trends
Single-Tenant Median Price per Square Foot Multi-Tenant

Vacancy Forecast: Countywide vacancy will decline 60 basis points this year to 9.7 percent, following a 110-basis-point drop in 2011. Rent Forecast: In 2012, asking rents will inch up 0.7 percent to $18.16 per square foot, erasing the 0.2 percent drop recorded last year. Effective rents will advance 0.9 percent to $15.26 per square foot, an improvement from a 0.1 percent decline posted in 2011. Investment Forecast: Sluggish homebuilding in the county will restrain construction of new drugstores, forcing investors who favor this property type to focus on other single-tenant concepts and franchisee credits. Greater interest in fast-food restaurants may materialize as a result.
Employment: 1.9% s Construction: 200K s

$300 $225 $150 $75 $0

07

08

09

10

11*
** Forecast

* Estimate

Sources: Marcus & Millichap Research Services, CoStar Group, Inc., RCA

Market Forecast
2012 Annual Report

Vacancy: 60 bps t

Effective Rents: 0.9% s


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