Miami leads the country when it comes to retail real estate development. Close to 2.8 million square feet of new space, or 2% of the market's total inventory, is in the works.
Miami’s construction activity is about four times the national average. The seismic shift caused by the migration of many shoppers online has curtailed retail real estate development across the country to just half a percent.
Still, almost 90% of retail space currently under construction in the Miami market has already been leased, far surpassing pre-leasing activity in the other top cities for retail development this year. Robust pre-leasing activity in Miami signals that demand for space is rising to meet the upcoming supply.
Despite the significant development activity, Miami’s retail vacancy rate has remained relatively flat over the past five years and remained below the national average.
Retail construction in Miami runs the gamut, but local shopping centers in suburban apartment construction hotspots like South Dade County and North Miami Beach make up close to 65% of the current retail development pipeline. And close to one-fifth of the current construction activity involves extensions of some of Miami’s most significant and best-known shopping malls.
Bal Harbour, one of the few remaining family-owned malls in the United States and one of Miami’s oldest and most iconic shopping destinations, is being extended for a second time since it was built in 1966. This high-end mall, located by the city of Surfside near the northernmost point of Miami Beach, is undergoing an extension that will increase its size by close to 60% by 2024, when the Bal Harbour Shops is scheduled to deliver. Developers broke ground on the expansion at the end of 2019.
The 2.8-million-square-foot Aventura Mall, the largest mall in the Sunshine State, is getting a new sibling. Esplanade, an open-air retail, dining and entertainment space, is being developed at what used to be a Sears department store. Esplanade is not technically part of the Aventura Mall, but mall shoppers will have direct access to the property that is expected to deliver in mid-2020.
"Contrary to what is taking place across the majority of America as it relates to the negative impact that vacant big box retail space can have on a local economy, in Miami, owners of vacant big box spaces that sit on large land parcels with vast surface parking lots are salivating at the opportunity to develop vertical mixed use projects including entertainment, quality food and beverage, co-working, hospitality, health and wellness," Drew Schaul, a CBRE senior vice president specializing in retail leasing, said in a prepared statement to CoStar.
According to Schaul, what Seritage Growth Properties is doing with Esplanade at Aventura is the epitome of turning what is typically a big negative in most markets across the country into a monumental success that is getting recognition globally throughout the retail real estate industry.
Close to 15% of Miami’s current retail construction is part of large mixed-use projects in Miami’s urban core, where the number of apartments almost doubled over the most recent five-year period. The majority of the mixed-use retail space, such as that in the 27-acre Miami Worldcenter project in Downtown Miami, is geared towards enhancing the mixed-use development’s residential appeal, and often includes experience- and service-oriented offerings like fitness studios and restaurants.
Miami’s retail construction fever comes on the heels of the city’s apartment construction boom that crowned it as the nation’s largest for apartment development, relative to existing inventory, among large U.S. cities. Developers added close to 27,000 apartments across Miami over the past five years, increasing stock by one-fifth, a rate that is double the national average.
The new apartment additions are driving a lot of the new retail development. Miami retail space over the most recent five-year period increased by close to 5%, at twice the national average. Until 2012, Miami’s apartment and retail construction activity had closely mirrored the U.S. average.
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