Supply & Demand
New supply ticked vacancy slightly higher from the previous quarter to 3.7%, up 20 basis points (bps) but still down 30 bps year-over-year (YOY). Palm Beach County’s Central Business District (CBD) recorded the largest annual drop, with vacancy falling 170 bps to 4.1%. Palm Beach Island, the county’s premium corridor, remained the tightest submarket, with vacancy down 150 bps YOY to 1.0%. Power Centers moved in the opposite direction, as net occupancy losses lifted vacancy 430 bps YOY to a market high of 6.6%. An additional 87,000 square feet (sf) delivered in the third quarter, bringing year-to-date (YTD) construction completions to almost 300,000 sf, already surpassing last year’s total. With limited construction starts, the development pipeline fell to a three-year low of 269,000 sf. Almost 60.0% of the space under construction was already preleased, with the modest volume unlikely to impact the overall vacancy rate going into next year.
Leasing activity slowed in the third quarter, with YTD deal volume reaching almost 1.1 million square feet (msf). After four consecutive quarters of net occupancy gains, absorption turned negative, falling by more than 64,000 sf in Q3. Despite the loss, 2026 absorption remained positive at almost 222,000 sf YTD, as strong gains in H1 helped offset the third-quarter decline. While occupancy losses of more than 158,000 sf in Power Centers helped fuel the vacancy increase, strong gains in General Retail (160,000 sf) and Neighborhood Centers (120,000 sf) kept overall absorption positive. Competition among tenants for a shrinking pool of quality space is likely to support stronger leasing momentum and a return to positive absorption in the coming quarters.
Pricing
Overall asking rents continued to climb closer to the $40.00 per square foot (psf) threshold in Q3. The 7.7% YOY increase was the largest 12-month gain over the past ten years, surpassing the record growth in 2022 and 2023. Rents rose across the board, with annual increases in all submarkets and across all product types. Boca Raton West led all submarkets with a 9.5% annual increase to $51.56 psf, while Power Centers led all product types, up 10.3% to $44.83 psf. Palm Beach remained the key corridor for asking rents, rising 8.5% YOY to a market-leading $96.87 psf. Heading into 2027, the combination of a muted development pipeline, historically limited availability and sustained leasing demand should continue to exert upward pressure on asking rents, positioning the market for another year of healthy growth.
Investment Sales
Palm Beach retail investment sales totaled $234.1 million in the third quarter, bringing YTD sales to more than $930.0 million. Although sales were down slightly YOY against last year’s record activity, 2026 still marked the third-highest total through three quarters in the past ten years. Average sale prices continued to climb as demand increased and high-quality, well-located buildings traded on the island and in the urban core. Palm Beach Island continued to lead the market in both volume and price, with $243.0 million in YTD sales averaging $1,734 psf. The Q3 average asking price was $382 psf, up 8.8% YOY and well above the national average of $246 psf.
Cap rates in Palm Beach County ranged from 5.6% to 6.8%, averaging 6.1% at quarter-end, well below the national average of 7.4%. Economic headwinds and slowing net migration have not dampened demand in the county, with $1.8 billion in sales over the past 12 months. Consumer spending and rents continue to climb, supported by constrained available space and a limited development pipeline. With those fundamentals intact, investor demand is expected to remain strong going into next year.
