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. More than two years removed from the onset of the COVID-19 pandemic, sources say the state has fully rebounded and is even somewhat insulated from the worst effects of the public health crisis.
Part of that insulation stems from a strong surge in employment as the state proved an attractive destination for corporate expansions, particularly in South Florida. 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. Microsoft and international law firm Sidley Austin are combining to occupy 110,000 square feet at 830 Brickell as well.
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 adage of “retail follows rooftops” is also proving true as the Sunshine State continues to be a landing spot for residents. Florida has exploded in recent years in terms of population growth. 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 had 10 of the top 25 markets in the 2021 index, including the No. 1 overall market (Kissimmee-St. Cloud, a Central Florida metro situated less than 30 miles south of Orlando). The state had three of the top five destinations in the report, with Palm Bay-Melbourne and North Port coming in 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,” says 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. Approximately 1.7 million square feet of new retail space was delivered in South Florida last year, which CBRE reports is the lowest amount since 2012.
With demand exceeding supply, South Florida has sustained high levels of rent growth. 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. Orlando saw a whopping 23.9 percent rise in rental rates, according to the latest Colliers data, while Jacksonville and Tampa Bay reported 9 percent and 4.7 percent increases, respectively.
“We are at the highest rents I’ve ever seen in my career,” says Carrie Smith, senior vice president of retail at Franklin Street. “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.”
So much so that new retail brokerages are expanding in the state. Metro Commercial Real Estate Inc. recently opened a new office in Miami, its third office overall and first outside of the 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 strong rent growth performance across the state is even more impressive considering the headwinds the retail real estate sector is facing nationally. Inflation has run rampant in recent months, with the Consumer Price Index in June increasing 9.1 percent over the past 12 months and Producer Price Index rising 11.3 percent in that same time frame.
Michael McNaughton, chief operating officer of Sleiman Enterprises, a shopping center developer and investor based in Jacksonville, says inflation is somewhat kept at bay with landlords able to push rents.
“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,” says McNaughton.
As a direct effect of rampant inflation, debt has gotten more expensive for lenders to finance. The two 0.75-percent hikes to the federal funds rate by the Federal Reserve this summer, coupled with spikes in the 10-year Treasury yield and Secured Overnight Financing Rate (SOFR) have made both long- and short-term financing more tenuous.
This is all occurring as the retail sector is contending in a yearslong battle with e-commerce competitors such as Amazon and Wayfair, among others. Additionally, the U.S. economy may have already entered into a recession as the U.S. gross domestic product recorded two consecutive quarters of negative growth this year, which is an unofficial indicator of a recession.
Beth Azor, CEO of shopping center owner Azor Advisory Services, says that even if a recession is imminent, Florida, and in particular South Florida, has 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, retailers and investors alike are not shying away from being 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 popping up all around the state, as well as second and third phases of existing 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.
The developer, Strategic Property Partners (SPP), has signed more than 30 retailers to join the $3 billion development. Recent examples include Sip & Dry, a blow dry bar and makeup salon concept that is making its entry to Tampa. Other retailers include GreenWise Market, Starbucks Coffee, Jeni’s Splendid Ice Creams and several chef-driven restaurant concepts.
Other uses at Water Steet Tampa include the EDITION Hotel, J.W. Marriott, ROOST Tampa and Tampa Marriott hotels, as well as The Morsani College of Medicine at the University of South Florida, offices and four residential developments.
Another development that is redefining the waterfront is River Landing Shops & Residences, a 2 million-square-foot mixed-use development set along the Miami River. Already substantially complete by Urban-X, the development includes 528 apartments, 118,000 square feet of office space and 850 feet of riverfront space.
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 says that Urban-X and owner H&R REIT are currently planning for a few restaurant concepts to join River Landing, a process that was delayed by complications from the COVID-19 pandemic.
“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.
Another high-profile development underway in Miami is Miami Worldcenter, the $4 billion mixed-use campus by Miami Worldcenter Associates. The project includes two skyscraper hotels, several high-rise apartment and condominium towers, an office tower and more than 300,000 square feet of retail space across more than 40 separate 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 by a Whole Foods and REI. Brett Hutchens, president of Casto Southeast, says that the developer is sprinkling in some restaurants to round out 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.”
In Gainesville fronting Interstate 75 several miles west of the University of Florida, locally owned Celebration Pointe Holdings and Atlanta-based RaCo Real Estate Advisors are preparing to complete the build out of Promenade Phase II of Celebration Pointe, a mixed-use development spanning more than 1.5 million square feet. 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. In addition, Ralph Conti, principal of RaCo, says the crown jewel of Phase II is a 142,000-square-foot sports events center that is scheduled to open in January 2023. The multi-functional event center is sanctioned by the NCAA and will host athletic and scholastic competitions as well other events throughout the calendar 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,” says 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.”
Outside the events center, CPH and RaCo are finalizing permit plans for mixed-use buildings forming Promenade Phase II. Conti says the second-phase retail component is roughly 25 percent preleased and plans are to break ground later this year, as well as luxury apartments and a possible third hotel all above the 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,” says 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.”
Across I-75 from Celebration Pointe, Butler Enterprises is filling its Butler retail campus with brand new concepts. 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 seeing development and leasing activity as a little more than 20 percent of all retail space under construction in Florida is in metro Orlando, according to CoStar Group data. Additionally, Peterson says that the Orlando market is experiencing 10-year peaks in both occupancy and rental rate growth.
Despite the concentration of new development in the greater Orlando area, Peterson says that the pipeline is pretty low 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,” says 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 seeing a similar story as a little over 1 million square feet of retail space is under construction, a small percentage of its overall inventory and slightly less than the amount of space absorbed in the past 12 months (1.1 million square feet), according to Colliers.
One development underway in the market is Beachwalk St. Johns, a master-planned project under construction in the northern region 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 the most prolific shopping center owner in the Jacksonville market. The developer is underway on Crossings at Wildlight, a 90,000-square-foot center that will anchor a master-planned community in Yulee called Wildlight. Rayonier is developing 1,000 homes at Wildlight in a setting called Raydient Places. Crossings at Wildlight features a Publix, the first grocery store 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,” says McNaughton. “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 opened 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, an Atlanta-based mixed-use and shopping center developer, is underway on five retail projects in the Sunshine State alone. 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,” says 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.
Additionally, SJC Ventures is under construction on the first Whole Foods in St. Petersburg, which will be a standalone store when it opens next year.
“St. Petersburg Station is a deal that I have been on for eight years,” says 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 of Sutton Properties, says that population density is a critical site selection metric for grocers and other large-scale retailers. Luckily, Sutton is enjoying a critical mass of residential real estate near Latitude Landings, an open-air shopping center anchored by Publix and Margaritaville.
“It is surrounded by probably 20,000 residential units that are going in around us,” says Sutton. The west side of Interstate 95 is just exploding with new residential and multifamily development.”
Sutton Properties is finalizing outparcels in Phase I of Latitude Landing and preleasing Phase II, which is entitled for 200,000 square feet of retail space. The firm also welcomed a Hobby Lobby store at Posner Park in the Central Florida city of Davenport and is currently building outparcels at the center for Panera Bread and First Watch.
The Villages in Central Florida is one of the premier active adult destinations in the country. The Villages had more than 4,000 home sales in 2021, the most among all master-planned communities in the country. No other master-planned community cracked 3,000 home sales and only one other surpassed 2,000 home sales, according to data firm RCLCO.
Scott Renick, vice president of commercial development for The Villages, says that the community is completely singular in terms of its demand drivers and activity.
“It’s a different environment — there isn’t another Villages somewhere else,” says 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, an 18-hole golf course at The Villages, recently opened, along with the Southern Oaks Golf Shop, which sells equipment and attire. 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.
Additionally, The Villages is adding new retail concepts at Magnolia Shopping Plaza, a Publix- and CVS-anchored center located at the corner of Warm Springs Boulevard and Marsh Bend Trail. 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 say that all categories of the retail spectrum are actively leasing new and second-generation space across Florida, whether it be on the ground floor of an apartment building or in a traditional community shopping center. Azor says that all categories are showing interest but the activity from food-and-beverage (F&B) concepts is far and away the most bullish.
“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,” says Winkler.
The look and feel of restaurants has shifted somewhat to focus more on the back-of-house operations, with more emphasis designated spots for takeout and curbside delivery options. Azor says one of her tenants, Phat Boy Sushi at the Shoppes of Arrowhead in Davie, got creative with its space in order to keep to-go orders separate from the dining room 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, senior director of Franklin Street, says that kitchens are becoming larger to accommodate third-party delivery, as well as 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 waves last month when it purchased One Medical, a national chain of primary care clinics, for $3.9 billion. The San Francisco-based “medtail” concept operates more than 180 locations across the country, many of which are situated in retail spaces in shopping centers and mixed-use developments. The acquisition was a statement in the viability of medtailers, which has been one of the more active categories on the leasing side in Florida.
John Crossman, president of Crossmarc Services, says that dental concepts, urgent cares and other medtailers establishing a presence in shopping centers is the future of the sector, but also the past.
“The reality is that we are coming back uses being closer together,” says 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.”
In addition to One Medical, other prominent medtailers expanding in the state include Restore Hyper Wellness, The Joint Chiropractic and MD Now Urgent Care, among others.
Chris Capellini, principal and regional manager of Bohler, says bringing health clinics to shopping centers drives convenience to the consumer and future-proofs the asset because of the repeat traffic 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. Boot camps, barre studios, yoga and Pilates concepts, martial arts studios and general weightlifting and calisthenics gyms are popping up around the state.
Smith of Franklin Street says the growth of the fitness category has been a “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,” says 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.