Miami is one of the top markets in the country for retail development, according to a report from Marcus & Millichap. The firm’s second quarter 2021 outlook report forecasts nearly 1.5 million square feet of retail space will deliver into the market this year, the highest level since 2017.
Mall redevelopment and mixed-use projects are driving the development activity, and much of it wrapped up in three projects. One of the largest projects in the market is the Miami Worldcenter, a mixed-use development with residential hospitality and 300,000 square feet of retail space. In Miami Beach, Bal Harbour Shops is adding 350,000 square feet, which is scheduled for completion in 2023. Finally, the Aventura Mall is in the middle of a 215,000-square-foot expansion, which is expected to hit the market later this year.
Last year, the pandemic hampered retail development. According to the report, retail deliveries were half of what they were for the previous five-year average and the lowest level in a calendar year in more than a decade. Still, retail projects continued to come to market. Miami Beach added nearly 100,000 square feet of space, and South Dade added more than 71,000 square feet of space. This year, developers will make up for the lost time, delivering 1 million square feet more year-over-year.
Developers are clearly bullish on the Miami retail sector, but the market has certainly seen an impact from the pandemic. This year, the report expects vacancy rate to climb 80 basis points to 5.2%, the highest rate since 2010. The slowed leasing activity along with increased retail development will also drag asking rents down 1.3% this year to $31.83 per square foot. In 2020, the vacancy rate was unchanged, and asking rents fell 3.1%.
Miami’s downtown area is experiencing a renaissance that his helping to fuel development activity and growth. The market is attracting out-of-state investment. Earlier this year, New York-based developer Time Century Holdings entered the Miami market to transform the Metro Mall into a luxury jewelry center. The developer secured a $23.6 million construction loan for the $50 million project through City National Bank of Florida.