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Sales of shopping centers surge on improving economy

The market for large shopping centers in the Sunshine State sat dormant last year, a victim of the shaky economy and weary investors.

That changed in 2010.

Investors have gobbled up large shopping centers across Florida. Sales more than doubled, climbing from just 16 in 2009 to at least 40 this year.

Commercial real estate experts say several factors are driving the increase in sales: better rates of return for investors, an improving economy and more lenders willing to loan money. Investors are also scouring the market for foreclosed and financially troubled centers, which are often priced to sell quickly.

Twenty-eight of the 40 centers — all with a minimum of 60,000 square feet — sold this year had grocery stores as the main occupant. And that's not a coincidence.

The large centers are safe investments and draw more consumers than strip centers or stand-alone buildings, experts said. Food remains a more consistent market than electronics, clothes or home-improvement goods in an economic downturn, said Jim Michalak, co-managing partner of Plaza Advisors in Tampa.

"In recessionary times, people have to eat," he said. "Grocery stores tend to hold up better than most retailers. The trend should increase."

In the Tampa Bay area this year, several large centers changed hands. An Illinois investment firm paid $23.5 million in March for the Gateway Market Center, a 231,106-square-foot center anchored by Target and Publix, on Dr. Martin Luther King Jr. Street in St. Petersburg.

And Tampa-based Hachem Investments bought Columbus Plaza in Tampa for $2.8 million in January. Sweetbay anchors the 119,000-square-foot center.

Larry Richey, senior managing director of Cushman & Wakefield in Tampa, said sales of big-box stores froze last year because of the troubled financial markets. Another factor: Buyers expected rock-bottom prices and sellers wouldn't budge, Richey said.

The sector, he said, should improve in 2011. "It will remain one of the most highly sought assets," Richey said. "It is a very active market. There is no lack of demand."

Institutional investors have returned to the market flush with cash after sitting on the sidelines as speculation swirled around commercial real estate. Many experts predicted the sector to be the next big crash in the Great Recession. It didn't happen.

Inland Real Estate Acquisitions Inc., based in Oak Brook, Ill., has been on a buying spree. The company spent $3.4 billion on commercial real estate in the past two years across the country. In Florida, the company paid more than $112 million for the Gateway Center and four other centers in Fort Myers and Port St. Lucie.

Mark Cosenza, vice president, said the commercial real estate market has bottomed out as new leasing increases and fewer tenants seek rent reductions. The company, he said, held onto its money during the economic crisis and is now looking to buy.

He expects Florida's market to gradually improve in the next five years. "I have a positive outlook on the state, in general, making a comeback," Cosenza said. "I think it will bode well for investors. "

Meanwhile, vacancy rates have fallen slightly in the bay area.

The vacancy rate in the overall retail market dropped from 7.8 percent to 7.6 percent in the third quarter, according to CoStar Group. After a slight uptick in the first half of the year, the vacancy rate for shopping centers is 11.2 percent. With few centers being built, investors jump when properties are listed for sale.

Leon Brockmeier, a sales associate at Marcus & Millichap, a real estate investment services firm in Tampa, said shopping centers in prime locations typically receive multiple offers within days of entering the market.

He doesn't expect sales to reach levels from five years ago, but he said investors will continue to buy next year. "A lot of people are chasing distressed properties," he said. "There is definitely cash on the sidelines."

Mark Puente can be reached at mpuente@sptimes.com or (727) 893-8459.

Sales of shopping centers surge on improving economy 12/23/10 [Last modified: Thursday, December 23, 2010 8:47pm]
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