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Florida retail real estate braced for extended slump

Five Guys Burgers and Fries, new to the bay area, expects to double its presence here in 2009.

MIKE PEASE | Times (2007)

Five Guys Burgers and Fries, new to the bay area, expects to double its presence here in 2009.

KISSIMMEE — Retail real estate follows residential trends, so Florida shopping center developers fear a spreading credit crunch will turn their current headache into a hangover.

"It's going to get worse before it gets better," said Robert Smith, senior vice president of Weingarten Realty Trust, a Houston developer planning to rebuild the old Crossroads Mall in Largo as a mixed-use project. "The days of just building a center and waiting for the market to catch up to fill it up are gone."

With more store closings and retail bankruptcies forecast for 2009, a glum group gathered here Monday for the annual International Council of Shopping Centers Florida dealmaking session. One speaker even suggested the savvy should work on their golf game until the market gets healthy in 18 months.

This isn't prime time for building more centers except in old neighborhoods poised for a comeback or spots with government incentives.

Most national retailers are scaling back growth plans again for 2009. The retail vacancy rate in the Tampa Bay area is expected to inch up a few more percentage points to as high as 8 or 9 percent, approaching the worst of the overbuilt early 1990s. Rents are declining — in some cases 5 to 10 percent — as landlords struggle to keep storefronts from going dark.

Developers love to sell their projects to investors so they can move on. But that's not happening in Florida, where a witch's brew of a slumping economy, rising ranks of jobless and escalating retail vacancies have caused sales of shopping centers to plunge 90 percent this year, far worse than a 62 percent drop nationwide.

Against that backdrop comes tighter lending terms while the government bails the banks out of the subprime loan mess.

"There is money to borrow if you are willing pay the price and put up 10 to 35 percent," said Raul Valdez-Fauli, chief executive of CNL Bank in Coral Gables. "This credit crunch is for real."

Stanley Tate, a Miami developer who left the board of Fannie Mae two years ago and chaired the advisory board of the Resolution Trust Corp. cleaning up the excesses of real estate lending in the 1990s, added ominously that developers face an easy-money, subprime loan crisis of their own:

"The residential market has not bottomed out yet, but $1.4-trillion in distressed loans will start to hit the commercial real estate market next year," he said.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

For a few, growth ahead

Some retailers, like fast-growing grocers Aldi and Publix Super Markets, are spotting opportunity in others' troubles.

Discount cosmetics superstore Ulta, which has a store in the works for Wesley Chapel, plans to add 75 stores to its 283 in 2009. Rue 21, a teen fashion chain, plans to add 100 stores to its 300. Startup Winter Garden wine-tasting shop Put a Cork in It plans six to 10 new locations, including one in the Shops at Wiregrass in Pasco County.

Fast-casual dining chains are also on the move for 2009. Fort Pierce-based Hurricane Grill and Wings, which offers wings in 37 marinades, plans 30 Florida stores to its current 8. And Five Guys Burgers and Fries expects to more than double its Tampa Bay presence of six, while adding 175 stores to reach 315 nationally.

"For a family of four that doesn't want to spend $40 at a casual-dining chain, we'll feed them for less than $20," said Greg deCelle, chief development officer.

Mark Albright, Times staff writer

Florida retail real estate braced for extended slump 08/18/08 [Last modified: Thursday, August 21, 2008 9:13am]
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