SOUTHEAST SNAPSHOT, APRIL 2007

Orlando, Florida Retail Market

The Central Florida commercial real estate market continues to rank among the highest in the nation, as does the retail segment. As in other parts of the country, there is an increased number of mixed use or town center developments as many of these projects are proving to outperform traditional retail developments. However some of these newer projects have faced some vacancy challenges while others suffer from poor design or access and still others will not leave the drawing board for months or years. Traditional grocery anchored neighborhood centers are still the mainstay of new retail development. As some national retailers rethink their growth strategies, the tenant mix in these developments is shifting with an emphasis towards less small shop space. Some retailers that typically located in neighborhood and community centers are opting for a more regional presence, so how that will play out in the long term is yet to be seen.

Throughout the market, several new developments are underway. An area that has grown into the dominant submarket in northern Kissimmee centered around The Loop town center development by Wilder Company at John Young Parkway and Osceola Parkway. Nearly all retailers and restaurants in this submarket have outperformed their sales projections, so much so that Loop West filling up in the pre-leasing stage for the parcel just west along Osceola Parkway and Dyer Boulevard. Other national retailers such as Best Buy, JC Penney, Belk, Publix, Circuit City, Office Max and many smaller retailers are locating in neighboring developments by Wilder Company, Greenfield Development, Monroe’s Prestige Group, Real Property Specialists and others. As this submarket gains momentum, it will continue to siphon many tenants from the US 192 corridor to the south and will also pull in several upscale specialty retailers that are new to the submarket.

The Downtown area is seeing a lot of development activity as well. The Paramount by RMC Development in Thornton Park is under construction and will be home to a Publix supermarket – just blocks away from where the very first Publix got its start many years ago. Interior buildout is underway for stores, restaurants and the movie theater at the highly anticipated Plaza development by Cameron Kuhn at Church Street and Orange Avenue in the heart of the CBD. Church Street Market will most likely change hands in the coming months as the current owner faces a slew of legal troubles. Once the main attraction for nightlife in Central Florida, this downtown landmark has and will now remain dormant for years. As developments go up on neighboring parcels, it will be interesting to see how this choice piece of real estate takes shape. South of Downtown, construction is starting on SoDo – a mixed-use project from North American Properties featuring retail, office, condominiums by Wood Partners anchored by the only Target Supercenter in the country with a  parking deck on the roof. It is anticipated to be a catalyst for new development near the Orlando Regional Medical Center and surrounding neighborhoods just south of Downtown. To the north, halfway in between Downtown and Winter Park construction is beginning on Mills Park by Pelloni Development – a redevelopment of the Mills/Nebraska lumberyard that was several years in the making. This mixed use development will feature an urban park surrounded by retail and restaurants below residential and office. As these developments will bookend the Downtown, it should continue to add to Downtown Orlando’s destiny to someday look like a true urban center.

It is tough to specify where the majority of development is taking place in Central Florida, as the market continues to enjoy 360 degrees of growth in every direction. The Lake Mary/Sanford area continues to strengthen as vacancy there is very low, and new development in the West Volusia cities of Deltona and Orange City continues. In the northeast suburb of Oviedo, a master-planned development featuring the town center Oviedo on the Park was just approved by the city and should start construction this year. The Waterford Lakes area is highly sought after by retailers and will soon have a couple of new developments and redevelopments taking shape. In the southeast, the Lake Nona master-planned community is gaining national attention with the announcement of Burnham Institute and the University of Central Florida’s medical school. In addition to the million-plus-square-foot town center being planned, several other developers are pre-leasing in their own projects that surround the submarket. St. Cloud, Kissimmee and Poinciana all have many projects underway as Osceola County is projected to have the largest population increase in the state during the next few years. The southwest is seeing a number of new sizeable projects such as Posner Center at Interstate 4 and US 27 as well as two projects near Reunion. The Clermont/Winter Garden submarket to the west is booming, with four major projects underway from Weingarten, Commonwealth Development, Goodman Company and Sembler’s Fowler Grove project which will be completed by fall. In the northwest, the Tavares/Mount Dora submarket is gaining momentum with the addition of several big box retailers in the last few years with more on the way.

Some of the more active retail developers with multiple projects in the works are Weingarten, Premiere Properties, Greenfield Development, North American Properties, Pelloni Development and Wilder Company. Retailers that are new to the market include Aldi, HH Gregg, AC Moore, Anna’s Linens, Gander Mountain, Total Wine, Maggiano’s, Capitol Grille, BJ’s Brewhouse, Buffalo Wild Wings, Massage Envy, Shane’s Rib Shack, Five Guys Burgers & Fries, Pei Wei, Monkey Joes, Northern Tool, IKEA, West Elm.

There are many areas to watch in the future. The Apopka submarket has been a long neglected corner of Orange County, but with the addition of the SR 429 beltway there has been tremendous residential growth. So look for several new retailers descending on the area in coming months. In Casselberry, the intersection of SR 436 and US 17-92 continues to suffer from an image problem but with the addition of Lowes, Kohl’s and a couple of other category killers as well as a planned interchange, this area could turn around in the next few years. The International Drive/Universal Boulevard area is also seeing a lot of activity from the redevelopment of the Prime Outlets on the north end to Unicorp’s planned redevelopment of the Mercado at Sand Lake Road to the ongoing redevelopment of New Plan’s Pointe Orlando to some interesting new developments along Universal Boulevard to the east.

In the outlying communities, the Villages continues to grow at a blistering pace. A new Wal-Mart has opened at Buffalo Ridge at CR 466 and US 301 and a new Publix center is under construction at CR 46a and Morse Boulevard. Retailers here are starting to get the message that retirees do spend money, in some categories much more than younger consumers do. Some retailers are capitalizing on this such as Beall’s, which now has three outlet stores open, a recently expanded Beall’s department store and a proposed new Beall’s department store – all within a 10-mile area within The Villages. Sam’s Club has purchased a parcel on US 27 near Target and Home Depot and will soon be joined by Benchmark Group’s Village Crossroads power center across the street. On the growing northern end of this submarket, Butters Development is pre-leasing its Stonecrest development on the last large tract of land for a large scale development along US 27 within the retail corridor. Since this area has grown from grove land seemingly overnight, there are no existing spaces for retailers to backfill, so they are having to step up in terms of lease rates in order to break into this exciting growth market.

In Central Florida, as the residential market is stabilizing after a blistering expansion period, employment is growing at a steady pace with an increasing trend towards software development, biotech and other high skill jobs. As the economy strengthens and diversifies the future for the region’s retail segment looks favorable in both the short and long term.

— Bobby Palta is an associate with CB Richard Ellis in Orlando, Florida.


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