Elevated retail sales following a surge in wealth since 2019 are driving rental prices for retail real estate in South Florida.

Retail sales in Miami-Dade, Broward and Palm Beach counties remain above 2019 levels despite lagging behind statewide growth in inflation-adjusted retail sales — around 15% — for the rolling 12-month period ending in April relative to 2019.

Across the tri-county area, sales growth has been strong for wholesale stores, general merchandise stores, grocery stores, motor vehicle dealers and restaurants, with all seeing nominal sales growth of over 8% annually as of April. Unsurprisingly, some of the largest retail leases over the last two years have been signed by home goods and home improvement stores, department stores, gyms, entertainment tenants and grocery stores.

The return of international travelers and migration is also providing a boost to the area’s retail tenants, resulting in healthy demand for retail properties across South Florida. Asking rent growth for retail space continues to climb across Fort Lauderdale, Palm Beach and Miami at rates well above the national average.

Fort Lauderdale and Palm Beach rank second and fourth, respectively, in terms of annual retail rent growth across the largest U.S. markets. Fort Lauderdale, Palm Beach and Miami also have some of the tightest vacancy rates in the U.S. at 3.2%, 3.3%, and 2.9%, respectively, well below the U.S. vacancy rate of 4.1%.

Going forward, limited supply additions, both historically and in the near-term forecast, coupled with record-low unemployment and a recovering tourism economy bode well for retail space across the South Florida region. Retail employment in the region stood around 1% higher in May than levels seen in May of 2019, a further indication of a healthy retail market.

That said, the area’s low unemployment rate and the rising cost of living also make labor increasingly expensive. Nominal wages for retail workers have increased significantly in South Florida, rising over 35% relative to a rise of 24% for the U.S. since December 2019, according to Oxford Economics.

Retailers are now faced with rising rents as well as higher labor costs, which is making it hard for some businesses to remain in their current space. But despite some near-term churn in underperforming tenants, the limited supply of well-located retail space, both a national and market-level trend, should continue to bolster retail fundamentals.