Optimism Abounds: Florida’s Top Markets See Robust Demand for Retail Space

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Florida-Retail

Participants across Florida’s retail scene are bullish on the growth prospects in the state’s top markets as tenant demand remains robust for new and second-generation space. Sources say that the state has fully recovered since the COVID-19 epidemic and is even partially protected from the worst of the public health crisis.

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The state’s strong employment growth is a key factor in this insulation. South Florida has been a popular destination for corporate expansions. Recent examples include Citadel, a $51 billion hedge fund founded by Ken Griffin, moving its global headquarters from Chicago to Miami; Amazon leasing office space in Coral Gables; and Thoma Bravo, a private equity firm focused on the software industry, taking the top two floors of the upcoming 830 Brickell office tower in Miami’s Brickell district. Sidley Austin and Microsoft are also combining their 110,000 square foot offices at 830 Brickell.

According to the U.S. Bureau of Labor Statistics (BLS), Florida’s unemployment rate was at 2.8 percent in June, a 70-basis-point improvement from January. The state’s total nonfarm employment rose 5.1 percent year-over-year in June as well, with strong gains in the leisure and hospitality, manufacturing and professional and business services sectors.

The age-old wisdom of “retail follows rooftops”This is also true, as the Sunshine State continues its status as a popular destination for residents. In terms of population growth, Florida has seen a rapid increase in recent years. The U.S. Census Bureau tracks that the state’s population is up 15.9 percent from April 2020 to June 2021, and is one of four states to exceed the 20 million residents marker.

U-Haul reported that Florida dominated its most recent U-Haul Growth Index, which tracks one-way moving data from more than 2 million customer transactions across the Phoenix-based moving giant’s network. Florida was among the top 25 markets in U-Haul’s 2021 index. It also had the No. 1 overall market (Kissimmee/St. Cloud, a Central Florida metropolitan located less than 30 miles from Orlando. The report listed three of the state’s top five destinations, with Palm Bay Melbourne and North Port at No. 3, and 4, respectively.

Brad Peterson, senior managing director of JLL, says that metro Orlando’s rate of population growth (25.8 percent) has basically tripled the rate of new inventory growth of retail space added since the 2010 Census (8.8 percent).

“Orlando is the second-fastest growing large metro area in the country,”Peterson. “Population growth and a modest amount of new development over the past 10-plus years has really created some disequilibrium in the market in favor of owners.”

South Florida’s three primary markets (Miami-Dade, Broward and Palm Beach counties) recorded a combined 4.6 million square feet of net retail absorption last year, almost 66 percent more than in pre-pandemic 2019, according to CBRE Econometric Advisors. CBRE reports that South Florida received approximately 1.7 million square footage of new retail space last year. This is the lowest number since 2012. 

South Florida has seen high levels of rent growth because demand is outpacing supply. According to second-quarter Colliers data, Miami-Dade County’s triple-net asking rental rates rose more than 15 percent year-over-year. Similarly, Palm Beach County’s rents are up 16.1 percent year-over-year and Broward County is up 13.5 percent in that same time frame. According to Colliers’ latest data, Orlando saw a 23.9 percent increase in rental prices, while Jacksonville and Tampa Bay saw increases of 9 percent and 4.7 respectively.

“We are at the highest rents I’ve ever seen in my career,”Carrie Smith, Franklin Street’s senior vice president for retail, said: “And the demand from tenants is still insatiable. So clearly retailers are seeing an uptick in their revenue and their sales, otherwise we wouldn’t be doing deals with the rents that we’re currently seeing.”

“There is not enough product being built right now to service the amount of demand that we’re seeing on the retail side,”She adds. “It’s the story of Florida right now.”

New retail brokerages are opening all over the state. Metro Commercial Real Estate Inc. opened a Miami office recently. This is its third overall office and the first outside of Northeast. Led by South Florida retail veteran Rod Castan and CEO and principal Tom Londres, Metro’s Miami office will initially launch with tenant rep, leasing and development services and then add property management services to its business offerings.

“Metro is currently the exclusive leasing agent for six development projects in Florida,” says Castan. “These include the Grove Central in Coconut Grove; Centro City in Little Havana; Doral Atrium and Doral Square in Doral; 16000 Pines, a Publix- and Burlington-anchored center under development in Pembroke Pines; and Sarasota Square, a planned redevelopment of the former Westfield Mall, which includes Costco and AMC Theatres.”

 Obstacles to overcome

The state’s strong rent growth performance is remarkable considering the challenges facing the retail real estate industry nationally. Inflation has been rampant in recent months. The Consumer Price Index rose 9.1 percent in June over the past twelve months, while the Producer Price Index rose 11.3 percent.

Michael McNaughton is chief operating officer at Sleiman Enterprises, an investor and shopping center developer based in Jacksonville. He says that landlords are able to push rents to keep inflation down.

“In this inflationary environment as cost escalations are running high — in conjunction with quality and scarcity of retail product — rental increases are inevitable to keep pace and to ensure that we can continue to operate our centers in the manner that we believe is in their best interest for their value,”McNaughton agrees.

Lenders have become more difficult to finance debt as a result of rampant inflation. Both short- and long-term financing has become more difficult due to the Federal Reserve’s recent 0.75 percent hikes to the federal funds rates.

This is happening while the retail sector is engaged in a long-running battle with ecommerce competitors like Wayfair and Amazon. The U.S. economy may be already in recession due to the fact that the gross domestic product of the United States recorded two consecutive quarters this year of negative growth, which is an unofficial indicator for a recession. 

Azor Advisory Services CEO Beth Azor says that even if there is a recession, Florida and South Florida have enough tenant demand to overcome any foreseeable obstacles.

“I think we are going to be insulated; I see my tenant sales, I see the huge demand, I see the lack of supply because nobody is developing,” says Azor. “And my tenant sales are through the roof — they’re exceeding 2019 by 25 to 30 percent. I understand interest rates are going up, I understand inflation and I get why the economy is saying this is going to happen. But I believe that South Florida is going to be insulated from any type of recession that’s coming, or that’s here.”

“I can speak very confidently for myself and the majority of brokers that over the past year we have been the busiest we’ve ever been in South Florida,” adds Zach Winkler, a managing director in JLL’s Miami Office. “There’s a very large amount of demand for new projects coming on line. I’d say it has already surpassed pre-pandemic levels here in South Florida.”

Despite these and other headwinds developers, investors, and retailers alike are continuing to be active in Florida. The following sections highlight some of the premier developments in the state, as well as leasing activity that is occurring as participants help write Florida’s growth story.

New developments break ground

New retail developments are being built all across the state. There are also second and third phase projects. One of the more high-profile projects in Florida’s history is underway at Water Street Tampa, a 56-acre live-work-play destination that is connecting the city’s downtown to its waterfront. 

Strategic Property Partners (SPP), a developer, has signed over 30 retailers to the development worth $3 billion. Sip & Dry, a salon and blow dry bar that recently opened in Tampa, is one of the latest examples. Other retailers include GreenWise Market, Starbucks Coffee, Jeni’s Splendid Ice Creams and several chef-driven restaurant concepts.

Water Steet Tampa also houses the EDITION hotel, J.W. Marriott, ROOST Tampa, and Tampa Marriott hotels are also available.

River Landing Shops & Residences is another development that is redefining waterfront. It is a 2,000,000-square-foot mixed use development located along the Miami River. Urban-X is nearly done with the development. It includes 528 apartments and 118,000 square feet office space. There’s also 850 feet of riverfront area. 

River Landing’s unique differentiator is its retail component, which is oriented vertically across four stories and spans 370,000 square feet. The tenant roster is a who’s who of national retailers, headlined by Publix, Hobby Lobby, Burlington, Old Navy, Five Below, Ross Dress for Less, DSW, Ulta Beauty, Chick-fil-A and T.J. Maxx.

Andrew Hellinger, principal of Urban-X, says that the philosophy behind the tenant mix is for each floor to have its own theme.

“The ground floor is service-oriented — dry cleaner, massage, waxing and medical — and food with the Publix grocery store and restaurants,” says Hellinger. “The second floor is anchored by Hobby Lobby and there’s a Five Below, which is the Number 1 retailer in the teenage world. Then we have Ulta Beauty focusing on health and beauty, and we have a nail salon and Claire’s Boutique coming onto that floor as well. Then we have two floors of soft goods — Ross, Burlington, Old Navy, T.J. Maxx — and we round that out with a couple of gym concepts that just bring traffic to the third and fourth floors.”

Hellinger states that Urban-X, owner H&R REIT, are currently planning for a few new restaurant concepts to join River Landing. However, this was impeded by complications from COVID-19. 

“Right now we only have one of our white tablecloth restaurants in construction, and the other three are in design,”He adds. “River Landing has about 37,000 square feet of restaurants.”

30Sinco, Pet Supermarket and Miami Optical Boutique recently opened at River Landing, bringing the project’s retail base to 97 percent occupancy.

Miami Worldcenter is a $4 billion mixed-use development by Miami Worldcenter Associates. The project includes two skyscraper-hotels, several high rise condominium and apartment towers as well as an office tower. It also includes more than 300,000 square feet retail space with more than 40 tenants.

On the other side of the state, Casto Southeast, together with Jefferey Anderson Real Estate, is putting the finishing touches on Midtown Tampa, a 1.8 million-square-foot development spanning 20 acres. The development is anchored at Whole Foods Market and REI. Casto Southeast president Brett Hutchens said that the developer is adding some restaurants to the campus.

“Walk-On’s Sports Bistreaux is open, and we have several more coming,” says Hutchens. “Cafe Ponte Tampa will probably open in late September. Colony Grill, a pizza place, will open soon. And then Sunda New Asian, which is a seafood restaurant from Chicago, will open later this year.”

Casto also wrapped up its $50 million redevelopment of Winter Park Village, but has a couple new tenants coming on line at the development that can’t be shared yet. Additionally, the company is building Center Point at Waterside, a 50-acre mixed-use project in Sarasota’s Lakewood Ranch district.

“Center Point will have medical office, corporate offices, some residences and several restaurants, including Ruth’s Chris Steak House and Owen’s Fish Camp, which is an iconic local restaurant here in Sarasota, and Lake Park diner,” says Hutchens. “There will be about 78,000 square feet of in-line retail space, and an organic and natural grocer called Chamberlin’s Natural Foods. Construction is underway in phases, and it will be completed in the third quarter of 2023.”

Celebration Pointe Holdings, a local company, and RaCo Real Estate Advisors, an Atlanta-based firm, are working together to complete Phase II of Celebration Pointe. This mixed-use development covers more than 1.5 million square foot. The development’s anchors include Regal Cinema, Bass Pro Shops, a 140-room Hotel Indigo, two Class A office buildings and a bevy of retailers such as Nike Factory, Dave & Busters, Tommy Hilfiger, Palmetto Moon, Miller’s Ale House, Spurrier’s Gridiron Grille, Texas Roadhouse, Escapology, Kilwins, Tioga Dental and Starbucks. 

Opening this month is fitness concept F45, and recently leases have been executed with Chuck Lager American Tavern and celebrity-chef-driven Taverna Costale. Ralph Conti, principal at RaCo, said that the crown jewel in Phase II is a 142,000-square foot sports events center, which is expected to open in January 2023. The NCAA has sanctioned the multi-functional center, which will host athletic and other events throughout the year.

“Celebration Pointe is truly a unique development in many ways; however, the addition of the sports event center perhaps distinguishes us from pretty much anything else that I have seen in my 40-plus years in the business,”Conti. “To be able to effectively place a 142,000-square-foot box in a pedestrian-oriented Main Street concept and deal with the issues associated with an urban-style footprint, there simply aren’t too many projects that I know of that have something of this magnitude. All I can say is kudos to our design and development team for accomplishing a very challenging feat.”

CPH and RaCo are completing permit plans for mixed use buildings that will form Promenade Phase 2. Conti said that approximately 25 percent of the second-phase retail is preleased. Plans are being made to break ground later this yea, along with luxury apartments and a third hotel above street-level retail.

 “Overall, when this entire development is fully built out, we will end up with close to 500,000 square feet of retail, approximately 600 apartment units, some 250,000 square feet of Class A office buildings and 300-plus hotel rooms,”Conti. “We’ve already built out half the more than half of the retail space, hotel rooms and office buildings, as well as 220 apartments. We’re about to break ground on another 200 or so apartment units by the end of this year. Lastly, we have our for-sale luxury townhomes that are literally flying off the shelf.”

Butler Enterprises is bringing new concepts to its Butler retail campus, which is located across I-75 at Celebration Pointe. This year, concepts that have joined the tenant roster (or will soon) include T-Yummi, Nothing Bundt Cakes, Foxtail Coffee Co., Ford’s Garage, Buff City Soap, Burlington, 511 Tactical, Allie Allure, GLDN and Kendra Scott.

Nearby Orlando is also witnessing development and leasing activity. In fact, 20 percent of all Florida retail spaces under construction are located in metro Orlando according to CoStar Group data. Peterson claims that the Orlando market has seen 10-year peak growth in both rental rate and occupancy over the past 10 years.

Peterson claims that even though there is a lot of development in Orlando, the pipeline is still quite small relative to its overall inventory.

“In Orlando right now there’s about a 2.1 million-square-foot pipeline on a total inventory base of about 150 million, so it’s a very low amount of new inventory, and a lot of that inventory is outparcel development and small, unanchored strip centers,”Peterson. “There are also a few new grocery anchored developments, but there is not a tremendous amount of larger format retail under development.”

Jacksonville is experiencing a similar story. Just over 1,000,000 square footage of retail space is currently under construction. This is a small percentage its overall inventory, and slightly less than what was absorbed in 12 months (1.1million square feet), Colliers says.

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Beachwalk St. Johns is a master-planned development in the market. It is currently under construction in the northern part of St. Johns County. Concepts announced at PEBB Enterprises and Falcone Group’s development include F45, Union 76 Daybreak Market, Noire Nail Bar, Whiskey Joe’s Bar & Grill and Fysh Bar & Grill, according to local media outlets.

Sleiman Enterprises is Jacksonville’s most prolific shopping center owner. Crossings at Wildlight is the latest project by the developer. This 90,000-square foot center will anchor a master-planned community called Wildlight in Yulee. Rayonier will be developing 1,000 homes at Wildlight within a setting called Raydient Places. Crossings at Wildlight boasts a Publix which is the first grocery shop in Wildlight.

“Our relationship with Rayonier allowed us the opportunity to acquire the land to develop this grocery-anchored shopping center to support the rapid home growth in their community while also being proximate to I-95,”McNaughton agrees. “We really love that market, it’s one we’ve enjoyed for many years. It’s continually growing so we’re excited to be a part of that area for many years to come.”

The Publix was open to the public in June. Other tenants at the center include Grumpy’s Restaurant, The UPS Store, Rita’s Italian Ice & Custard, Iron Valley Real Estate and Bloon Salon.

SJC Ventures, a mixed-use and shopping centre developer based in Atlanta, is currently working on five retail projects in Florida. Jeff Garrison, principal of SJC Ventures, says that Florida remains the firm’s preferred choice for upcoming developments, which is notable given the company’s current pipeline traverses the East Coast. 

“Florida is our No. 1 market. We have a number of new projects there that we’re working on that could be announced in three months or in six years from now,”Garrison. “We are always spending quality time in the great markets of Florida, and the demographic profile is the perfect profile for our anchor tenants.”

SJC Ventures’ developments in the pipeline include the 161,618-square-foot Viera Station in Viera that will break ground later this year; the Whole Foods Market-anchored Boynton Beach Marketplace, which will begin construction in the third quarter in South Florida; the 81,265-square-foot Orange Blossom Plaza that will break ground in Kissimmee this month; and Phase II of Varsity Plaza, a Target-anchored property near the Florida State University campus in Tallahassee.

SJC Ventures is also working on the first Whole Foods store in St. Petersburg. It will be a standalone store when it opens in next year. 

“St. Petersburg Station is a deal that I have been on for eight years,”Garrison. “There were some issues with legacy leases on the property, and over those years we worked with the landowner to get rid of those last remaining issues. When dealing with specialty grocers like Whole Foods, you’re really just looking for one or two sites that really fit all the criteria.”

Sam Sutton, president at Sutton Properties, said that population density is a crucial site selection metric. Sutton is fortunate to have a critical mass for residential real property near Latitude Landings which is an open-air shopping mall anchored by Publix.

“It is surrounded by probably 20,000 residential units that are going in around us,”Sutton. The west side of Interstate 95 is just exploding with new residential and multifamily development.”

Sutton Properties is closing out parcels in Phase I and Phase II of Latitude Landing. Phase II is entitled for 200,000 square foot of retail space. The firm has also welcomed a Hobby Lobby Store at Posner Park, Central Florida’s City of Davenport. They are currently building outparcels in the center for Panera Bread or First Watch.

One of the top active adult destinations in the nation is The Villages, Central Florida. The Villages had more homes sold than any other master-planned community in 2021. RCLCO data shows that no other master-planned community reached 3,000 sales, and only one other exceeded 2,000 sales.

Scott Renick is vice president of commercial developments for The Villages. He says that The Villages is unique in terms demand drivers and activity.

“It’s a different environment — there isn’t another Villages somewhere else,”Renick. “We’re a little insulated because it’s a unique place. We break a lot of rules with design, and if concepts aren’t skewing toward the higher-age demographic then they won’t be successful here.”

Southern Oaks Championship Golf Course is an 18-hole course located in The Villages. It was recently opened along with the Southern Oaks Golf Shop which sells equipment. McGrady’s Pub also opened a sit-down restaurant and bar at Sawgrass Grove, and The Back Porch opened on the north end of The Villages at Mulberry Grove Plaza.

The Villages is also adding new retail concepts to Magnolia Shopping Plaza. This Publix- and CVS anchored center is located at the corner Marsh Bend Trail & Warm Springs Boulevard. McDonald’s recently opened an outparcel restaurant at the center, and Reveille Café opened an eatery. Coming soon to Magnolia Shopping Plaza are 7-Eleven, EasyVet, Edward Jones, KB Home & Garden, EyeSite, Marco’s Pizza and Foxtail Coffee.

Active categories

Sources claim that all retail categories are actively leasing second-generation space in Florida, whether it is on the ground floor or in traditional community shopping centers. Azor states that all types are interested, but that the most bullish activity comes from food-and beverage (F&B) concepts.

“A year ago I was getting three to five incoming leasing calls a week, but now I’m getting five to seven incoming leasing calls a day, and 80 percent of those are from restaurateurs,” says Azor. “There is not enough restaurant space in South Florida to house all of the restaurants looking for space, and they’re looking for spaces with hoods, walk-in coolers and grease traps.”

Winkler of JLL’s Miami office says South Florida is especially attractive for F&B concepts from out of the state, or sometimes from other countries.

“Restaurant and food concepts that see the benefits of doing business here in South Florida are ready to grow their operations here,”Winkler.

The restaurant’s look and feel has changed to be more focused on the back-of house operations. There are now designated areas for takeout and curbside delivery. Azor said that one of her tenants, Phat Boy Sushi in the Shoppes of Arrowhead, Davie, was creative with the space to keep to-go orders separated from the dining area.

“Phat Boy Sushi created a pickup window in the back,” says Azor. “I gave them a drive-up space but they have a space in the back where they put a bench in with a pick-up window. So people from Uber Eats and others are not going through the restaurant, they’re going to the back pickup area.”

Len Erickson is the Franklin Street senior director. He says that kitchens are getting larger to allow for third-party delivery and in-store pickup. 

“Restaurants are also adding interior second lines to accommodate additional business,” says Erickson. “And I’ve heard clients say that they’ve had as much as 25 percent growth for their top line just with the pickup and third-party delivery business, which predominantly occurred during COVID-19. But it’s here to stay, consumer behavior has changed.”

Joseph Gallaher, principal of NAI Miami, says that as Florida’s top markets can command top-level rents, national brands are the ones most actively leasing because they are more suited to absorb rent escalations than local or regional concepts.

“Value-oriented national concepts are more aggressive than others because people are going to be a little bit more selective with their disposable income when faced with economic issues down the road,” says Gallaher. “Local folks are not really expanding on the retail side as much, but the national ones still are.”

Amazon made headlines last month when it bought One Medical, the national chain of primary-care clinics, for $3.9billion. The San Francisco-based “medtail”Concept operates over 180 locations in the United States, many of them in retail spaces in shopping centers or mixed-use developments. The acquisition was a statement of faith in the viability medtailers, who have been one of the most active leasing categories in Florida.

John Crossman, president at Crossmarc Services, said that while dental concepts, urgent and other medtailers are the future of the sector, they are also the past.

“The reality is that we are coming back uses being closer together,”Crossman. “The future of retail is going to look like the 80s, but not the 1980s, the 1880s. We are returning to having more uses closer together and having things that work off of each other.”

Restore Hyper Wellness is another prominent medtailer expanding in the state, along with One Medical. MD Now Urgent Care and The Joint Chiropractic are also among them.

Chris Capellini, principal of Bohler and regional manager, said that bringing health centers to shopping centers makes it convenient for consumers and future-proofs the asset due to the repeat business they generate.

“Whether directly attached or part of the center as an outparcel, these facilities provide the true health services that you need to be in-person for. You can’t buy this care on your phone ,” says Capellini.

Capellini is helping oversee Walmart’s initiative to add 6,500-square-foot health centers to existing stores in its vast portfolio. He says Walmart is currently concentrating on the program in Florida and looking to either expand their stores or build the clinics within the existing store’s footprint.

“What’s unique about what Walmart is doing is that they’ve identified a process to reduce the time and cost associated with medical-grade construction, which is extremely expensive, and it’s difficult to find the highly specialized labor that’s needed,” says Capellini. “So Walmart partnered with a manufacturer called BLOX to build completely modular healthcare facilities. Not only does this approach control costs and help them scale the program, it reduces disruption to the center. Walmart and BLOX can construct these clinics and have them in the store within three days.”

In a similar vein to medtail, there’s a strong demand for fitness concepts from consumers who are looking to improve and maintain their physical health. There are many new fitness studios in the state, including barre studios, yoga and Pilates concepts as well as martial arts studios.

Smith of Franklin Street claims that the growth in the fitness category is a result of Smith of Franklin Street. “pleasant surprise”Coming out of the COVID-19 Pandemic.

“When the pandemic hit, there was much talk around our industry that the gyms were going away for good,”Smith. “But between the boutique fitness guys like CYCLEBAR, Pure Barre and Stretchlab, those concepts are aggressively expanding across the state, especially in North Florida and in parts of Central and South Florida.”

John Nelson

This article was originally published in the August 2022 issue of Shopping Center Business magazine.

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