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Demand for retail space red hot

B.J.'s Warehouse, a New England membership warehouse club similar to Sam's, has been penciled in for a planned shopping center in Riverview. Kohl's Corp. is looking for Tampa Bay area sites, but has yet to make a deal for a store closer than Lakeland. Newcomer Firehouse Subs opened seven stores in the market last year.

"We would have twice that if we could have found the right sites," said Richard Taylor, the Lutz entrepreneur who holds the sandwich shop area franchise.

Despite a decadelong building spree, demand continues to outstrip supply for good retail space up and down Florida's west coast. That was the bottom line when more than 600 shopping center developers, retailers, analysts and investors gathered for the annual International Council of Shopping Centers regional idea exchange in St. Petersburg on Tuesday.

Long considered as big a Florida icon as the pelican, the strip shopping center will continue to become even more ubiquitous in 2005 despite soaring land prices, construction costs, tenants' insurance premiums and rising interest rates.

"The fundamentals are still there," said Mitchell Rice, a veteran Tampa shopping center developer with RMC Property. "The population continues to grow."

Not many parts of the country can say that. So investors led by real estate investment trusts, or REITs, are expected to continue to pour hundreds of millions of dollars into building or redeveloping Tampa Bay area shopping centers.

"When people ask me to identify hot markets on the west coast of Florida, I tell them, "It's hard to find one that isn't hot,' " said John Crossman, director of investment services for Trammel Crow in Orlando.

One of the hottest intersections, however, is U.S. 301 and Big Bend Road in Riverview. Three separate shopping centers are on the drawing board for that corner, including one with a Publix, one with a Sweetbay Supermarket and one with the first B.J.'s in the Tampa Bay area.

A Super Target is planned for the proposed Southbend Towne Center a mile away at Big Bend and Interstate 75.

Indeed, the dreaded word "overbuilt" never slipped onto the industry's radar screen during the most recent economic downturn. The Tampa Bay area retail real estate vacancy rate in the third quarter has held steady since the 1990s.

It was a robust 7 percent during the third quarter of 2004, according to www.REIS.com. That's less than half of what it was a decade ago when the market was glutted with empty storefronts left over from the easy money that caused the S&L and banking crises.

Today the vacancy rate ranges from a tight 4 percent in fast-growing northwest and eastern Hillsborough County to 9 percent in south Pinellas, which is built-out and redeveloping its hefty inventory of functionally obsolete shopping centers and abandoned Kmarts, grocery stores and Wards.

Crossroads Shopping Center and Gateway Mall have been rebuilt. Pinellas ParkSide is being rebuilt. Tyrone Square Mall today will outline plans to build an open-air addition for two new restaurants and more apparel stores. BayWalk in downtown St. Petersburg has been labeled a success. New luxury condos and the new corporate headquarters of Progress Energy will add ground-floor retail space.

Mayor Rick Baker, though, wants more retail development, since it is clear city residents have been flocking to shop in Tampa. While both counties have about the same population, Hillsborough has five regional malls while Pinellas has two.

The ratio of residents to retail space is 50 percent less in St. Petersburg than Tampa; for restaurants it's 40 percent less.

"Pinellas has become a tremendously underserved retail market," Baker told the developers. "Hillsborough collects twice the sales tax as Pinellas, so clearly we export a lot of sales across the bay."

Cautious developers do see gray clouds gathering. REIT stocks tumbled at year's end after a three-year runup. But analysts say REITs will continue to provide plenty of capital as long as investors consider real estate a safer investment than the rest of the stock market.

"It has been proven that REITs have legs," said Vivek Seth, managing director for real estate investment at Raymond James & Associates. "Prices hit an extreme, so we saw a bit of a reversal. But I don't think we have seen the peak."

Another potential sign for concern is that developers are building the old-style strip centers that have not been seen in two decades. They are little centers stuck out by the road in front of stores such as Wal-Mart, Publix and Target.

Amscot, Great Clips salons and banks such as Washington Mutual and BB&T are flooding into these new little strip centers that have no other big drawing card. Some are paying high rents for the exposure. Starbucks, which now offers drive-through service at 10 of its 43 area stores, likes the roadside centers because they provide room for the open window.

But what happens when a big store sharing the parking lot goes dark or the economy goes south? Developers remain skittish about Albertsons since the grocer stopped signing new leases in Florida a year ago. Winn-Dixie Stores Inc. is shrinking.

So Regency Centers Inc. reacted.

"We cut the number of Winn-Dixies in our portfolio from 21 to four," said Mary Lou Fiala, Regency president and chief operating officer.

"We made sure the four we kept would be great spots for a Publix."

Mark Albright can be reached at albrightsptimes.com or (727) 893-8252.

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