The retail vacancy rate in Tampa Bay shopping centers has grown to 10.5 percent or enough empty space to fill International Plaza about 10 times.
Yet while retail rents continue declining to an average of about $15 a square foot, down from $16.53 last summer, industry experts think Florida's retail space glut has peaked, consumer spending is beginning to come back and rents are stabilizing.
"Last year's volatility has settled out, and we're seeing recovery in some places," said Justin Greider, an executive with Crossman & Co. who compiled the report for the local International Council of Shopping Centers annual conference on Friday. "We measure 'asking rents,' and landlords are now being more realistic than they had been."
Few of the 700 landlords, shopping center developers and store leasing executives gathered at the conference expected their industry's overbuilding to be cured simply by consumers getting more confident about discretionary spending.
That's because the hotel and shopping center industries are the biggest parts of the commercial real estate industry that dramatically built far ahead of demand during the boom years of easy credit and soaring land prices. Now they are plagued by slack demand, no population growth, fewer tenants, reduced rent and shrinking property values at a time when many of their debts are coming due.
No one knows yet how much of the $3.5 trillion commercial mortgage debt bubble nationally that comes due for refinancing over the next three years is backed by distressed property. That's because the banks have not foreclosed or declared many real estate loans as non-performing even though owners aren't making payments. Meantime, pressure is mounting on owners to act quickly, because the refinancing window closes when interest rates start rising.
Shopping center financing now requires about 30 percent down, up from 20 percent a year ago. So while the best properties will remain full and healthy, pressure for short sales to unload distressed properties is building.
"There is going to be a lot of pain. It is going to start soon and last well into 2012," said K.C. Conway, senior real estate analyst with the Federal Reserve Bank of Atlanta. "The blood has to be let."
Mark Albright can be reached at firstname.lastname@example.org or (727) 893-8252.