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 [email protected] or (727) 893-8252.