COVER STORY, AUGUST 2008

FLORIDA RETAIL MARKET SLOW BUT STEADY
A slumping economy has the retail industry refocusing, with success, on established areas.
Jaime Lackey

Retail development in Florida has slowed with the economic downturn, but there are developers bringing together the right elements for a successful project even in a slow market.

The Florida retail market is location-driven, says Jerry Anderson, executive managing director with Sperry Van Ness Florida. “If you have a strong site and can get an anchor, the other players will come along. If the site isn’t an A site, you better wait to develop.”

He adds, “The regional players — and their lenders — are not going to take any risks based on the foreseeable future of the residential sales market. Well-capitalized developers and companies are still moving forward with projects, but highly leveraged and smaller projects are on hold — or they should be.”

According to Bob Sherman, senior vice president and director of leasing with Davie, Fla.-based Ross Realty Investments, the majority of South Florida retail deals in recent years have been in growth areas. “Today, we’re finding deals in South Florida focus more on smaller, tenant-driven development deals in established areas. Developers are reluctant to build large or spec developments where they will have a lot of space to lease,” he says.

Anderson predicts, “In a few years, we should be back to a stronger growth market, but the gas price issue will not go away. Look for a move to more urban development. The major cities and developments that create a retail nucleus will be the winners. Steady growth will be the key over the next 5 years. For the next 2 years, we will be going back to revisit existing sites and cannibalize shadow anchors and fill in. Only national developers with lots of cash and a really long view will move forward.”

He notes that Orlando seems to be the strongest market in Florida. “Everything else seems sluggish. It was just announced that the number of millionaires in Orlando is up 15 percent, and the city ranks 20th in the country for high-tech industry growth. Add the weak dollar and visits by foreign tourists, and you have to love the retail potential of central Florida. Because of the population concentration and the influx of rich tourists, the Miami-Dade and Broward areas will also hold up better than some of the smaller markets.”

 In terms of retail investments, Florida continues to fare better than many markets “because we are a growing state and have things that bring people here and a growing business infrastructure,” Anderson says. “Investors — especially those with cash — are getting more bang for their buck now than they were 24 months ago for the same performing retail asset. Foreign capital continues to chase deals. Our last three deals were foreign money: Korean, Irish and Indian.”

However, Anderson notes, some prospective retail and even office tenants are trying to clip rental rates between $2 and $4 per square foot. “Tenants are not bashful; they read the economic news daily,” he says.

In particular, he notes, tenants in North Central Florida are finding they have significantly more power when it comes time to negotiate lease renewals, and they are taking advantage of it.

Sherman adds that many shopping centers were developed at the highest point of land and construction costs, so there is not much room to lower rents. Instead, he says, owners are more willing to structure concession-driven deals, some of which include discounted or free rent for a certain period of the lease.

Anderson continues, “We’ve been through sluggish markets before. We are a more sophisticated market than we were in the 1980s. We have more people with diverse income; we are not just retirees and their keepers. Personally — though I know it is cliché — I am cautious but still very optimistic. I have one eye on inflation, gas prices, job growth and home value slide — who doesn’t? In spite of all that, there will only be a 9 percent decrease in project construction starts overall, according to McGraw Hill Construction Research and Analytics. The second-best year in the last 5 years.”

Fishkind & Associates predict 200,000 “move-ins” to the state per year for a while, Anderson says. “While not the 400,000 new residents we’ve become accustomed to, this is still pretty significant growth in terms of disposable income moving into our state.”

On the other hand, Sherman says that land prices, though declining, are not coming down enough to stimulate activity. “They need to come down to a point where it makes sense to do deals at rents that make sense to retailers,” he says.

But, Sherman stresses, the Florida market is not at a standstill: “Well-located real estate is seeing activity. Discount-oriented retailers like Kohl’s and Marshalls are in expansion mode. They are aggressive and looking for solid, established locations.”

Southeast Real Estate Business talked with developers across the state to find out more about the projects that are underway and in the pipeline.

Central West Florida

Southfield, Mich.-based The Forbes Company, Bloomfield Hills, Mich.-based Taubman Centers and Sarasota, Fla.-based Benderson Development are developing the 920,000-square-foot University Town Center, a regional mall in Sarasota that will open in late 2010. (Taubman and Forbes previously partnered to develop The Mall at Millenia in Orlando, Fla., and Waterside Shops in Naples, Fla.)

Neiman Marcus, Nordstrom and Macy’s will anchor the center, which is part of a 140-acre mixed-use development that will include hotels, office space and residential space.

“University Town Center will complement Florida’s cultural coast and offer the Sarasota area’s residents and visitors an unparalleled combination of department stores, including the area’s first Neiman Marcus and Nordstrom stores, enticing restaurants and best-in-class retailers, all in an architecturally stunning, contemporary yet timeless design,” says Nathan Forbes, managing partner of The Forbes Company.

Tampa, Fla.-based RMC Property Group and an affiliate of Kearney Construction are developing 120,000 square feet of retail space in the second phase of Summerfield Crossings in Riverview, Fla. The development, which is located at the busy intersection of U.S. Highway 301 and Big Bend, will total 190,000 square feet when the second phase opens in early 2009. Bealls Department Store, which is leasing 80,000 square feet in the second phase, will open in the spring of 2009. RMC is looking to sign a junior anchor for a 20,000- to 25,000-square-foot space and will lease or sell five outparcel sites. Tenants in the first phase include Publix Super Markets, Hollywood Video, Subway, The UPS Store, McDonald’s, Bank of America, Regions Bank, SunTrust and Wachovia.

Southwest Florida

The 53-acre Mercato, located in Naples, is one of the state’s largest mixed-use projects.

Naples-based The Lutgert Companies and Naples-based Barron Collier Companies are developing The Mercato, one of the largest mixed-use projects in Florida. The 53-acre project in Naples includes 340,000 square feet of retail, 140,000 square feet of Class A office space and 175 residences. The retail portion includes a Main Street component that is anchored by Whole Foods, an 11-screen movie theater, a two-story Books-A-Million, seven major restaurants and 50 additional shops. Restaurants include Capital Grille, Bravo!, McCormick & Schmick’s, Blue Martini, AZN, Piola, The Pub and Stage Deli. Signed retailers include Coldwater Creek, Sur La Table, Z Gallerie, Femme Fatale, GiGi’s Children’s Boutique, Jos. A. Bank, Solstice Sunglass Boutique and Swim ’n Sport.

According to Dougall McCorkle, Lutgert’s senior vice president of commercial real estate, “The project is well under construction. Whole Foods and others will open this fall, with the bulk of the Main Street to be completed in February 2009.”

The city of Fort Myers, Fla., is looking to develop its waterfront, which currently consists of 8 acres of vacant land and parking lots, largely owned by the city.

According to Don Paight, executive director of the Fort Myers Redevelopment Agency, the city council recently began interviewing development firms to choose a firm that will help the city to master-plan the mixed-use project, which is expected to include retail, restaurant and entertainment venues. Paight says the project may also include a hotel and an expansion of the convention center.

“We want to have this project tie into the historic downtown and have the area become a shopping and entertainment destination,” Paight says.

The city has focused on redeveloping its historic district for the past 20 years. The waterfront development “is another step in the evolution of downtown,” Paight says. “We have 1,400 newly constructed condo units on the downtown waterfront. We need more retail and restaurants to attract more residents.”

The city is just completing a $70 million streetscape and utility improvement project and has added cultural attractions including a professional theater company and art galleries. “The timing is perfect to start developing the waterfront,” Paight says. “We anticipate this project will come online as the economy picks up.”

In Naples, the 370,000-square-foot Waterside Shops is welcoming new tenants. The Forbes Company and Taubman began renovating the project in 2006; it originally opened in 1992. Saks Fifth Avenue is expanding from 44,311 square feet to 64,311 square feet. An 80,000-square-foot Nordstrom is slated to open in November. Additional retailers that will open in the next 6 months include Basler, De Beers, Juicy Couture, kate spade, Salvatore Ferragamo, St. John Knits and Van Cleef & Arpels. Tenants that have opened in the last few months include AG Adriano Goldschmied and Papyrus.

Miami-based Courtelis Company recently developed the 80,000-square-foot Brooks Town Center in Estero, Fla. The project is anchored by Sweetbay Supermarket and FineMark National Bank & Trust, which opened in July.

According to Rod Castan, vice president of Courtelis Company, the company is developing Lely Resort Village, an upscale 86,900-square-foot mixed-use village on 9 acres located at Tamiami Trail and Triangle Boulevard in Collier County. It will open in 2010.

Courtelis is also leasing Ave Maria Town Center on 25 acres in Ave Maria, a new 5,000-acre town in eastern Collier County. “We are excited to announce the ground-breaking of a Publix supermarket, which is planning to be a part of the town center in late 2009,” Castan says. Tenants scheduled to open in 2008 include Florida Community Bank, Tropical Smoothie, Dental Health Group and DaVita Medical. Recent openings include The Bean and The Secret Ingredient. The town’s master-planned communities are expected to have almost 11,000 homes at full buildout.

St. Louis-based The DESCO Group recently opened The Plaza at Island Pass, a $55 million, 252,620-square-foot center in Fort Myers. SuperTarget anchors the 34-acre project, which is located at San Carlos Boulevard and Kelly Road. The Plaza at Island Pass is expected to serve local residents as well as tourists vacationing at Sanibel or Captiva islands.

Ross Realty Investments is developing Shoppes at Merchants Crossing, a 12,000-square-foot strip center on Pine Island Road in Cape Coral, Fla. Essentially an outparcel development to an established and easily accessible shopping center, Shoppes at Merchants Crossing is slated to open in early 2009. Alltel Wireless has signed on as a tenant.

Boca Raton, Fla.-based Woolbright Development is developing The Collection at Vanderbilt, a 225,000-square-foot project at the northwest corner of Vanderbilt Beach Road and Airport Pulling Road, across from The Ritz-Carlton Golf Resort in Naples. Tenants opening in the second phase include European Wax Center, Juiceblendz, FedEx Kinko’s, Omaha Steaks and MetroPCS. Anchors are Ada’s Natural Foods Supermarket and Lifestyle Family Fitness. Retailers that have already opened include Starbucks Coffee, Fashion Nails, Emack & Bolio’s, Absinthe, Bump Maternity and More, Let’s Eat, Zazou, Pei Wei Asian Diner, Merle Norman Cosmetics Studio, Persona Boutique, Naples Trust Realty Company, The Good Life, Maximum Tan, Puddy ‘N Pearl Boutique, Lifestyle Family Fitness, Salad Creations, HairDesign by Avantgarde, AmTrust Bank and Diva Dog House.

“Collection at Vanderbilt has become a shopping destination in the north Naples community,” says Erica Haas, leasing agent with Woolbright Development. “Our aggressive leasing strategy and the vibrant Mediterranean-style architecture has attracted many tenants and shoppers to the center.”

South Florida

Woolbright also opened London Square in April. “The center has already proven to be a huge success among area residents,” says Hue Chen, leasing manager with Woolbright Development. “The spacious center will offer shoppers a wide assortment of tenants that cater to their everyday needs and has already proven to be a hit among residents with the openings of T.J. Maxx and Costco.”

T.J. Maxx/Homegoods and Ross Dress For Less anchor the project, which is located at S.W. 137th Ave. and S.W. 120th St., near Kendall Drive in Miami. Costco, which opened in May, and an office building are adjacent to the project.

Retailers that have opened at London Square include Famous Footwear, Payless Shoe Source, London Drycleaners and Sol y Mar Boutique. Stores will continue to open each month through the balance of 2008, and approximately 27,000 square feet of retail space is available for lease.

Coconut Grove, Fla.-based developer The FIRC Group is negotiating with a 100,000-square-foot user to anchor Shoppes of Homestead, which will contain approximately 157,500 square feet of retail space. The company also has a commitment from an electronics store for 17,000 square feet. The 17-acre site is in Homestead, near Miami-Dade Community College and adjacent to Harris Field Sports Complex.

Connie Hull, leasing agent with FIRC Group, expects the project to open approximately 9 months after groundbreaking. Groundbreaking will take place as soon as an anchor is signed and the site plan is approved. (The company has two alternate site plans, one featuring a single anchor and the other featuring two 30,000-square-foot anchors.) Hull is also looking to sign apparel retailers, a beauty salon, a cell phone retailer, restaurants, an environmentally safe dry cleaner and possibly a bookstore.

Miami’s Shops at Three Lakes will house a daycare, restaurants and banks.

In the Kendall area of Miami, FIRC Group is leasing Shops at Three Lakes at S.W. 132nd Ave. and S.W. 136th St. A daycare has committed to lease space at the 36,750-square-foot center. FIRC is also negotiating with two restaurants and two banks. “Kendall is densely populated and growing,” Hull says. She notes that the office space in the area provides fantastic daytime traffic, and tremendous residential density to the south provides night traffic. In addition, she adds, Miami-Dade County is planning a ramp from the Don Shula Expressway (SR 874) that will make 136th Street a main east-west thoroughfare and ease congestion on the Florida Turnpike.

In West Miami, FIRC is leasing the last available spaces in Shoppes at Tamiami, a 91,750-square-foot center that anchored by LA Fitness. Available spaces range from 1,162 to 1,540 square feet. Hull is looking to sign national retailers, but she says most cuisines are already represented at the center so there is limited opportunity for restaurants.

Hull is marketing a 4,000-square-foot outparcel in Tamarac. The pad is located at a Winn-Dixie shopping center with a Wendy’s and a Wachovia. She is looking to sign a cell phone retailer, a clothing store, a gift shop or similar retailer.

FIRC Group is also handling the leasing for a newly constructed 13,000-square-foot building in the city of Doral, Fla. The project, developed by a local family with several golf shops, is located on 87th Avenue and 29th Street, and it is considered part of the local Restaurant Row. Hull says FIRC has been inundated with restaurant interest but is also interested in service retailers, like dry cleaners, office supply or pack-and-ship stores, to meet the needs of the local office population.

In June, Courtelis Company opened the new 68,000-square-foot Red Palmetto Shops in Miami Lakes, which is anchored by Office Depot and Commerce Bank.

Ross Realty Investments is developing The Shoppes at Vero Beach, a 150,000-square-foot, Kohl’s-anchored project in Vero Beach, Fla. The company is looking to sign a 20,000-square-foot anchor and has space for in-line tenants as well as outparcels for banks and restaurants. The project is slated to open in late 2009.

Ross Realty Investments is also planning a 40,000-square-foot project in Miramar, Fla., and a 50,000-square-foot mixed-use town center project in Parkland, Fla. Both will open in late 2009.

Central Florida

RMC Property Group, Redstone Development and Publix are expanding and redeveloping the Dupont Lakes shopping center, located at the intersection of Howland and Elkcam boulevards in Deltona, Fla.

A newly constructed 45,000-square-foot Publix has opened at the center. The 40,000-square-foot store that Publix previously occupied is being torn down to make room for a 133,000-square-foot Lowe’s Home Improvement Center, which will open in 2009. Small shop bays start at 1,000 square feet, and there is a 1.08-acre outparcel available, as well.

In downtown Orlando, RMC Property Group co-developed The Paramount on Lake Eola with ZOM Development. RMC Property Group is handling the leasing of retail and office space. The 16-story mixed-use project, which opened in early July, is located on Lake Eola in downtown Orlando and includes 306 residences and seven villas, 35,000 square feet of retail space and 10,000 square feet of office space. Retailers include Publix and a Washington Mutual branch bank.

Northwest Florida

Miramar Beach, Fla.-based Howard Group’s 465,200-square-foot Silver Sands Factory Stores in Destin, Fla., is attracting new tenants, including Levi’s and Crew Cuts, J. Crew’s line of children's apparel. Other fairly new tenants include Under Armour, Michael Kors and Florida’s first Sony Factory Outlet, as well as Carrabba’s Italian Grill, Panera Bread and the region’s first Cheeseburger in Paradise.

“We are thrilled to be located at Silver Sands and have been extremely pleased with our success in less than a year's time,” says Scott Raven, managing partner for Cheeseburger in Paradise at Silver Sands. “The Gulf Coast area is a natural fit for our island-inspired restaurant, and it’s been extremely well-received by the community.”

Silver Sands, which is the nation’s largest designer outlet center, has the capability to expand to 700,000 square feet with additional expansion projects on the horizon.

Grand Boulevard at Sandestin’s second phase was recently completed.

Howard Group is also leasing the second phase of Grand Boulevard at Sandestin, a 52-acre, $250 million town center project located at the entrance to Sandestin Golf and Beach Resort. Retailers taking space in the second phase include Sunglass Hut, Johnny Rockets, Pretty Please, Chico’s and The Walking Company. The first phase includes The Orvis Company, P. F. Chang’s China Bistro and Tommy Bahama’s Tropical Café & Emporium — all of which are new to the market.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.