TAMPA — After slumping for three years, two vital signs of the Tampa Bay area's retail real estate industry have stabilized and are showing signs of improvement this year.
Average storefront rents are off 7 percent to $13.52 a square foot, but expected to hold firm this year. And the vacancy rate improved to 11.5 percent, according to CoStar Property Report.
"We may have hit bottom," said Justin Greider, vice president with Crossman & Co. which compiled the report. But there were no huzzahs at an International Council of Shopping Centers annual gathering in Tampa on Friday where many developers, landlords and lenders said they were just relieved to be survivors.
Indeed, much of the improvement in shopping center occupancy will be wiped out by the upcoming closing of four of five Borders book superstores in the market. Average rent remains at lows unseen in 20 years. While good retail space is as valuable as ever, distressed properties financed on unsustainable rents abound in overbuilt centers while tenants use their leverage to get rent relief.
"We are not in the same business we were in three years ago," said Seth Layton, vice president of asset management for St. Petersburg-based Sembler Company, one of the largest shopping center builders and managers in the Southeast. "If landlords today don't take care of their tenants, the tenants will be gone" to a rival center down the street, or they will go out of business.
Meantime, John Silvia, chief economist at Wells Fargo Securities, forecast continued economic growth of 3 to 3.5 percent nationally this year despite recent increases in gas prices, continued high unemployment and unresolved financial woes of state and local government.
"Florida markets like Tampa Bay will lag behind the rest of the country by a year to 18 months because the economy is not as diverse here," he said.
The vacancy rate and collapse of the financial services industry never did spread to the retail real estate sector as deeply as many experts once forecast or as seriously as it did in 1992 during the savings and loans crisis.
Banks have kept many long-troubled loans on their books rather than dump them at a huge loss. Now some investors are paying for debt-stressed grocery-anchored centers at up to 60 cents on the dollar in Florida, but the interest has been limited to top-tier chains.
"We think B properties are beginning to be more appealing for investors," said Jim Michalak, managing partner in Tampa-based Plaza Advisors, an investment advisory firm.
There has been no substantial new construction in the market. And lenders are not only tight, but they also insist on a 40 percent down payment. Only 450,000 square feet was added in 2010 and is coming online this year. That's one-ninth of what was built in 2008, the last of the go-go years. And most of the building is new Walmarts or Publix supermarkets for retailers that do not need developers to build shopping centers for them.