With inflation on the rise across the country, retail sales have slowed over the past month. What this means for the near future is to be determined as the end of the year approaches. What we do know is that in South Florida, there is a greater sense of optimism as tourists flock to area hotels and restaurants. The main drivers of this are the region’s economic and demographic fundamentals over the past 20 months, which have directly led to an improvement in the retail sector and the possibility of current and future growth prospects.
So how has South Florida managed to position itself solidly in the retail market? It all started with the pandemic reshaping the way consumers live, work and shop, resulting in significant change and innovation in the retail landscape. South Florida’s retail sector faced challenges like most retailers post-pandemic, but the region was able to rebound much sooner than many other parts of the United States thanks to the internal immigration and a rebound in tourism.
New residents emigrating to the area and favorable fiscal factors have contributed to the resurgence of retail in South Florida. Along with population growth, a new wave of new-to-market concepts have been established in the back of many financial services and technology companies relocating some operations from New York, California and elsewhere. The majority of these new transplants came with higher levels of income and wealth, contributing to increased purchasing power. This trend is expected to continue over the next few years, with South Florida’s population expected to exceed 6.4 million people by 2025.
Total retail sales in South Florida this year have rebounded even though retail employment is not expected to recover until late 2023. By the end of the year, retail sales are expected to reach more than 40 billion dollars, which represents an increase of 20% compared to the end of 2020. Priorities are expected to shift from strictly domestic consumer demand in 2021 to a more balanced approach from 2022 that depends on significant international travel. The combination of domestic and international travelers in the mix will help the retail market recover faster, attracted by South Florida’s alluring sandy beaches, eclectic arts scene, multiculturalism and vast array of shopping options. and restoration.
Like retail sales volume, investor demand for South Florida retail assets also rebounded in 2021 after experiencing a significant decline in 2020. Retail sales totaled $2.5 billion in the third quarter of 2021, exceeding the total sales volume for 2020. The average selling price per square foot also increased, jumping 12% year-to-date compared to the end of 2020 and 25% year-to-date compared to the end of 2020. the year 2019. Grocery-anchored retail centers were one of the hottest segments for investors in South Florida and one of the most resilient asset types nationally during the pandemic and continue to be post-pandemic.
South Florida retailers also regained confidence in 2021 as rental activity returned to pre-pandemic levels. There were 8.2 million square feet leased in the area year-to-date. Market areas such as Wynwood, the Miami Design District, FAT Village in Fort Lauderdale, Boca Raton and downtown West Palm Beach have all seen an increase in rental demand. Many of the users occupying the space were restaurant owners and fitness centers that opened their businesses to capitalize on South Florida’s booming economy with fewer restrictions compared to other major metropolitan areas.
As we look forward to 2022, South Florida should have long-term viability and will likely continue to experience consumer spending growth while also becoming an ideal hub for retailers to locate.
