Florida retail is quickly recovering from recession, conference attendees say
Publish Date: August 19, 2013
All of the major metro areas in Florida are in a growth mode, though some stronger than others. This is significant because at the height of the recession Florida was one of the hardest-hit states in the nation, due to extreme fallout during the housing crash.
“All in all, we think retail is well positioned in Florida to benefit from the recovery,” said San Francisco-based Brook Scott, head of Americas occupier research at CBRE, who is presenting the 2013 Florida Retail Research Report at the ICSC Florida Conference taking place in Kissimmee, Fla., this week.
Despite the economic woes Florida suffered during the recession, the state still has stronger population growth than most other parts of the country. That, coupled with one of the healthiest tourism markets in the nation, makes for a strong retail environment, Scott said.
The state’s unemployment came in at seven percent during the second quarter, according to a CBRE report, slightly better than the national average of 7.4 percent. Additionally, Q2 vacancy rates improved year over year in nearly every major market – statewide vacancy dropped to 7.6 from eight percent, and Miami’s vacancy plunged to 4.1 percent from 5.3 percent.
Florida is mirroring the rest of the country in the recovery, Scott said, with households deleveraging their debt, increased consumer confidence and more wealth due to an improved stock market. All of this factors in to more discretionary spending at shopping centers.
The Miami and Dade County area is the star of the state. Its upscale “High Streets” rank sixth-best in the nation, with rents per square foot of $300, according to CBRE. Along with the general tourism and population growth enjoyed by the rest of Florida, the area boasts a strong connection to Latin American tourism and trade, which gives it an extra boost.
But all over the state there is pent-up demand by a growing number of consumers and retailers who want to enter the area due to very little shopping-center construction since the beginning of the recession, Scott pointed out.
That situation could change though, according to Dale Scott, a director in the Boca Raton, Fla., office of Hawkins Construction, and a past ICSC state director, who is speaking on a Special Industry Group (SIG) panel about design and construction at the conference.
“Every contractor you talk to right now in retail – they are very busy. We have a steady stream of opportunities coming in,” he said. Scott expects new retail development to sprout up by next year’s fourth quarter into 2015.
And he is not just forecasting new development in the Miami area. Scott has seen a desire for development in Orlando because of its major tourist attractions, a renewed interest in the Jacksonville market which waned after a boom in the early part of the century, growth in Tampa, and activity in the state’s Gulf Coast Panhandle, especially Gainesville. The southwest part of Florida, which includes Ft. Myers, is slower to come back, but Scott is even sees some movement there.
Retailer interest is driving this development, and Scott said a number of grocery, restaurant and entertainment concepts are trying to push their way into Florida’s major markets.
“Now we’re seeing a feeding frenzy of movie theaters back in the marketplace,” Scott said. “But for the most part there is a lot of pent-up demand. There are retailers wanting to go to Florida, but there is no place to go.”
In the aforementioned primary regions, it is a definitely a landlord’s market because of this retailer demand, insisted David Rattner, president of Blue Sky Holdings, a Ft. Myers-based development, acquisition and consultancy firm, who is speaking on a SIG about private developers.
Grocers are especially making a push. Rattner mentioned Walmart’s Neighborhood Market concept, Whole Foods, The Fresh Market, Aldi and Trader Joe’s as chains that would like more of a presence in the state. Restaurants are aggressive right now, too. Chipotle, McDonald’s and Pollo Tropical are all looking for space. A newer concept that Rattner said landlords should keep their eyes on is World of Beer, a rapidly expanding restaurant-bar-entertainment chain that is growing nationally.
And big boxes left behind by Borders, Circuit City and Linens ‘n Things are getting filled up by concepts like the TJX Cos. chains, Ross Dress For Less and Bed Bath & Beyond.
“Clearly, we’re moving in the right direction,” Rattner remarked.
All of this leads to a healthy retail real estate transaction market, said Brad Peterson, a senior managing director at HFF out of its Orlando office, who is speaking on a SIG panel about capital markets.
In the hottest markets with good real estate and strong tenants, especially around Miami, Peterson sees cap rates as low as five percent. Even in the northern part of the state, there is competition. Recent deals in excess of $100 million include a high five-percent cap-rate trade in Orlando and six-percent cap-rate acquisition in Jacksonville.
Buyers are a mix between foreign capital looking for a piece of the action, REITs, as well as other large institutional players, and private buyers. And they are looking at retail properties across the board, both the “A” trophy assets and “B” value-add centers.
“There aren’t a lot of subclasses of retail right now that are out of favor,” Peterson said.