SOUTHEAST SNAPSHOT, APRIL 2009

Orlando Retail Market

The Orlando market is on the cusp of a retail flood. Before the recession, developers pumped the market with rampant plans for centers anchored by big-box tenants and grocery stores and un-anchored strip malls. When the credit markets froze, construction stopped. When lenders start handing out money to eager developers, the market will be inundated with retail space.

“Now that the faucet has been turned off for financing, so many developments are in the half-built stage with no more money to complete,” says Kane Morris-Webster of Orlando-based Colliers Arnold. “Once these projects do get completed, then we will have to absorb the supply to get new projects in the pipeline.”

Those new projects will enter into a market that’s seen its fair share of retail closures. The bankruptcies and resulting closures of Linens ‘n Things and Circuit City stores have been widely reported, but in Orlando, furniture and home-supply stores are closing, as well.  Sears and Kmart’s partnership has resulted in the shuttering of stores and the shrinking of existing spaces, while Publix’s purchase of a handful of Albertson’s stores is resulting in more vacant space. In the midst of all this, tenants are being extremely cautious. “Most deals are on a short-term basis with many incentives,” says Susan Webster of Colliers Arnold. “Landlords are starting to see that they need to be really aggressive to get tenants to make a move. There are deals being done, which is a good sign.”

The era of building speculative retail space hinging on future residential development is over. Lenders are no longer willing to let go of money on projected residential density. “Tenants have forever changed their method of understanding good sites,” Morris-Webster says. “They have to have the residents and traffic already established versus going on permitted houses in an area.”

 But supermarket-anchored centers are doing well. “Also, the neighborhood grocery centers are doing great,” she says. “Publix and Wal-Mart Neighborhood Market are still expanding in dense infill locations where they have holes in the market.”

As for how long retailers have until the flood of new space, it’s anybody’s guess. The consensus at Colliers Arnold, however, is that new development in 2009 will be difficult to justify. Colliers’ Jill Rose puts it simply: “There will be little or no new development projects coming out of the ground that were not started by the fourth quarter of 2008.” 

— Jon Ross

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