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Florida's shopping center industry starting to see turnaround in the market

KISSIMMEE— Rents continue to slip and the vacancy rate keeps rising, but the mood was nonetheless upbeat at the annual dealmaking conference of Florida's struggling shopping center industry.

Both the turnout and business conditions are better than a year ago, though attendance was still half of what it was in the go-go years before the recession.

With new retail construction at a standstill, investors are starting to snap up the best performing centers, a wide range of value-oriented retailers are trading up for better storefronts, and leasing agents are chipping away at an inventory of empty retail space big enough to fill West­Shore Plaza seven times.

"Last year we had people sitting around at this conference with nothing much to do," said Lee Arnold, chief executive of Colliers International in the bay area. "This year most of those people are gone and a lot of deals are being done by the survivors."

"We're back to where we were prebubble in 2003," said Dale Scott, chairman of the International Council of Shopping Centers' Florida unit.

"Leasing is better, but it's mostly retailers filling empty space we already have," said Greg Sembler, chief executive of Sembler Co., a St. Petersburg retail developer and property manager.

Indeed many experts see healthy signs in a slow recovery that has been hit with hiccups.

"The banks and credit markets are opening up again but remain pretty picky," said Brian Smith, president of Regency Centers Inc., a Jacksonville company that controls 190 centers, about half of them in Florida. "The point is there is a positive vibe out there."

Yet without more stability in the housing market and more jobs created, experts did not see a big enough consumer spending recovery to dramatically dent the bay area's 11.2 percent retail vacancy rate or $14.51-a-square-foot rental rate (which is second lowest only to Jacksonville among the state's six biggest metro markets).

There was no shortage of retailers among the 50 chains looking for deals here: TJMaxx, Ross, Aldi, drugstores and all three big dollar store chains, including a new concept from Dollar Tree. Called Dollar Style, it offers the chain a second storefront to penetrate higher-end neighborhoods with bargain priced party supplies, cards and gifts. A flock of franchised restaurants is scrambling for prominent space in centers that once spurned restaurants: Five Guys, Panera Bread, Buffalo Wild Wings, Pei Wei Asian Diner and Jimmy John's gourmet sandwiches.

Much of the activity is lease renegotiation. Consider McDonald's. It usually starts talking about adding extra years to Florida leases five years before expiration. This year McDonald's is asking store landlords whose sites it likes for reduced rent in return for a 20-year extension including a new store. Or the company offers to buy the location outright.

"We want to seize the opportunity in the market," said Robert Stamm, Florida real estate director for the chain with 800 restaurants here.

Not that it's risk-free.

"You can still buy for 30 cents on the dollar and end up with 10-cents-on-the-dollar deals," said Randy Anderson, a real estate professor at the University of Central Florida.

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

Florida's shopping center industry starting to see turnaround in the market 08/23/10 [Last modified: Monday, August 23, 2010 8:53pm]
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