With attractive rental rates and improving economy, retail newcomers are finding a home in South Florida.
Teriyaki Experience, a Canadian fast-foot chain, has begun an invasion of South Florida, one mall at a time.The company’s first franchised restaurant in South Florida, a 900-square-footunit at the Palm Beach Gardens Mall, opened in a year and a half ago, and more are coming.
Troy Sheller is a Boynton Beach-based area franchise developer for the Toronto-based company. He said the company — a “Benihana-style restaurant, but in five minutes or less” — expects 10 more Teriyaki Experience locations to open in South Florida by the end of 2012. The arrival of Teriyaki Experience is helping change the face of retailing in South Florida as low lease rates and a gradually improving economy lure newcomers to the area.
The Aldi supermarket chain is another recent arrival, opening its first stores in Broward County, sidestepping the competitive fray in Miami-Dade and Palm Beach counties for now. Aldi opened supermarkets in Pembroke Pines in January and in Deerfield Beach and Lauderdale Lakes in November. An Aldi spokeswoman declined to discuss whether Aldi planned to open more locations in South Florida.
Several real estate professionals suspect Trader Joe’s, a food retailer that is part of the company that owns Aldi, will follow Aldi into South Florida. “Trader Joe’s was looking at Florida in 2007 and had some sites and when the world fell apart they pulled the plug on South Florida,” said Brian Kosoy, president and chief executive officer of the Sterling Organization, an owner and operator of retail centers that is based on the Island of Palm Beach. “It wouldn’t surprise me if at some point they came back. To me, this is a market that makes a lot of sense for them.”
“Low lease rates also are encouraging retailers who already have a presence elsewhere in the state to occupy additional stores in the tri-county SouthFlorida market. Pittsburgh-based Dick’s Sporting Goods, for example, entered the South Florida market seeking bargain store space after setting up shop in more than a dozen other locations statewide. From August through October last year, Dick’s opened its first three stores in South Florida, one each in Boynton Beach, Pembroke Pines and Plantation, increasing the company’s total number of stores throughout Florida to 17.
In March, the company said it planned to open 34 new stores nationwide this year.”During the past year, we actively leveraged the difficult economic conditions to both find prime locations for new stores and to secure more favorable lease terms and conditions,” said Edward W. Stack, chairman and CEO of Dick’s Sporting Goods, on the company’s quarterly conference call with stock analysts on March 8.
“I think you’re seeing a number of retailers, for the first time in several years actually in expansion mode, like Dick’s, which has had some presence but not a significant one,” said Barry Wolfe, vice president of investments in the Fort Lauderdale office real estate brokerage Marcus & Millichap. “For the last to two to three years, nobody has been adding stores” in South Florida in significant numbers “except maybe Dollar General and Dollar Tree.”
Wolfe said affordable lease rates have been a catalyst in generating renewed interest in South Florida from retailers that have considered entering the market before: “You see tenants who were priced out of premium space, and now they are taking advantage of the market.
If they were in Class B space, they are now acquiring or seeking Class A, and trying to tie that up for a period of time.”Empty, or “dark,” stores continue to come onto the market. Paco Diaz, an executive with CBRE, said these are well located properties that probably will attract new tenants, possibly some from abroad.
“You have not only U.S. retailers but you alsohave retailers from South America and Europe wanting to come here,” Diaz said. However, Diaz also said the cheap rental rates will become more scarce, especially in the Miami area, where store construction has slowed dramatically and where many of the large stores, or “big boxes,” abandoned by Circuit City and other failed retailers have attracted new tenants.
For example, he said, “in the case of Circuit City and Linens ‘N’ Things, I would say 95 percent of those stores have been absorbed. “One new arrival is appliance and electronics retailer hhgregg. Publicly traded, Indianapolis-based hhgregg reported last January that it planned to open 35 to 45 new stores in the fiscal year ending in March 2012, the majority of them in metropolitan Chicago, the Pittsburgh area and South Florida.
As of early April, hhgregg had stores in 17 Florida locations, including such major markets as Jacksonville, Orlando and Tampa, and none in tri-county South Florida. Since then, hhgregg has opened nine South Florida locations, including stores in Aventura, Boca Raton, Fort Lauderdale, Hialeah, Miami, Pembroke Pines, Plantation, Wellington and West Palm Beach.
While South Florida attracts attention from plenty of domestic retailers, foreigncompanies also are interested in establishing footholds in the area, especiallyin Miami-Dade County.
“South Florida, and Miami in particular, is really a target market for the international retailer looking to get access to the United States market,whether that’s a Spanish company, a Brazilian company, a French company,” said Greg Masin, senior director of retail at real estate brokerage firmCushman & Wakefield. Retailers overseas “don’t always understand the market here and the depth of it,” Masin said. “Somebody who’s a successful operator in Spain, they don’t know that Boca Raton exists. They know Miami. But then they get here and they realize there are other relevant markets for them to be in.
“Sweden-based fashion apparel retailer H&M will establish a foothold in South Florida at the longtime home of the Lincoln Theater in Miami Beach. A renovation and retrofit project will turn the theater into an H&M store that will open in 2012. The acquisition and renovation of the property is a venture led by Miami Beach-based real estate firm Koniver Stern Group. According to the company’s website, H&M currently has another South Florida store in Palm Beach Gardens and two other locations within the state, in Orlando and Sanford.
Lyle B. Stern, a partner of Koniver Stern Group, said many retailers are launching stores only in high-end locations like Palm Beach Gardens, Lincoln Road and Aventura Mall because they are opening fewer stores than they were five years ago.”Retailers that might have gone from 20 openings per year and are now doing five to 10 openings a year are looking for the cream,” Stern said, “and these[South Florida] markets are the cream in the United States along with others.”Restaurant chains may account for the bulk of retail newcomers in South Florida. One of them is the Corner Bakery Cafe, which started in Chicago about 20 years ago. All of the locations were owned by the parent company until it began selling franchises within the last two years. “They compete withPanera,” said Jason Press, a sales associate of brokerage firm Continenta lReal Estate, who is helping Corner Bakery’s area franchisee identify possible locations in South Florida . “They don’t have anything open yet. They’re negotiating a handful of deals right now.”