SOUTHEAST SNAPSHOT, JANUARY 2006

Orlando Retail Market

Central Florida remains one of the best performing markets in the nation. The region has added 41,200 jobs year to date, while employment has dipped to a record low 3.2 percent. There are no signs of a slowdown in the foreseeable future, with Economy.com ranking Orlando, Florida, seventh in the nation in employment growth. This job creation is fueling the residential boom that continues throughout the market in every direction. Single-family and multifamily development is pushing ahead at a staggering pace, with housing appreciation approaching a second year of record-breaking levels. Tourism for Orlando, the world's most popular tourist destination, is up for the year as well, with a 13 percent increase in visitor traffic to 47.7 million visitors. Increased foreign visitor traffic and spending is boosting the tourism sector and residential markets near the attractions. Overall, the three economic engines driving the local economy are in high gear.

Central Florida has been on the forefront of the trend toward master-planned communities, and we are seeing enhanced designs for the newer projects on the drawing boards. Communities such as Avalon Park, Baldwin Park, Celebration, MetroWest and Lake Nona are going to great lengths in “place-making” and in many cases they are paying off with high absorption, occupancy rates and housing appreciation. Accordingly, the retail developed in conjunction with these master-planned communities is seen as some of the most highly coveted, having high occupancy and absorption, and commanding some of the highest lease rates on the market.

Similarly, mixed-use properties and town centers continue to gain popularity as more successful projects open across the nation. At this point, nearly every sizeable municipality within Central Florida has some variation of a town center or mixed-use project in the planning or development stages. Each community wants one. The concept is accepted by consumers and retailers, and there are enough examples regionally and nationally to cite positives and negatives to replicate or improve.

Unanchored retail centers are also on the rise, showing up on outparcels to existing shopping centers, or at well-positioned intersections within commercial corridors. With cap rates for these types of properties as low as 6 percent, depending on tenants and lease rates at the top end of the range, the upside for developing these properties is quite attractive.

Probably no other development in Orlando history will do more to change the complexion of downtown like Premiere Trade Plaza, as it is the only mixed-use property of its kind in a central business district (CBD) along the East Coast. As this $140 million development rises from the epicenter of the city, it becomes more evident how the retailers, movie theaters, restaurants, offices and condominiums will forever change the CBD. The vision of Cameron Kuhn, a Chicago native and active Orlando developer, Premiere Trade Plaza will be Orlando's own version of the Hancock Building.

Just south of downtown, North American Properties is developing a large mixed-use project at Orange Avenue and Grant Street near the Delaney Park neighborhood. It will feature a big box retailer, several specialty retailers and restaurants, and around 300 condominium units. This development should really change the complexion of South Orange Avenue, giving area residents retail options that are found only in Winter Park or the Millenia submarket.

At the Lumberyard on the northern edge of Uptown at Mills Avenue and Nebraska Street, a mixed-use project under development by Pelloni Development is gathering momentum. This project will also feature retail, restaurant, office and residential uses, but because it is close to Winter Park it will draw customers from neighboring College Park, Thornton Park and Colonialtown. It will no doubt spur development along Mills Avenue, an area that has remained relatively dormant for many years.

The Loop has opened in northern Osceola County after much anticipation. Developed by Wilder Company, the project has brought several new category killers to the area as well as a movie theater, but it has also pulled some retailers from nearby U.S. Highway 192, the established retail strip in Kissimmee, Florida. New projects are under development including Phase II to The Loop, Pelloni Development's Village at Hunters Creek, the northeast and southwest corners of John Young Parkway and Osceola Parkway, as well as the northwest corner of U.S. 17-92 and Osceola Parkway.

Winter Park is seeing some new development with the addition of Park Place and the Bank of America Building on Park Avenue. Dan Bellows continues to redevelop New England Avenue and the surrounding areas including Hannibal Square into an upscale destination with the anticipation of new chic retailers and posh restaurants to join the existing local establishments that have taken root there. A number of properties along the main commercial corridors of Orlando and Fairbanks avenues as well as Lee Road are prime targets for new mixed-use developments to serve the affluent residents and Rollins College students.

The University of Central Florida (UCF) is building a new stadium as well as a main street complete with Barnes & Noble, Starbucks Coffee and McDonald's on campus. These projects, along with several new buildings and dormitories, are being built as part of a massive expansion project that will bring more activity to the UCF submarket.

Some of the new retailers to the market include Fifth Third Bank, Bank Atlantic, RBC Bank, Amscot, Homegoods, Panda Express, Famous Famiglia, Salsaritas, Cheddars, Rising Roll, Gander Mountain, HuHot Mongolian Grill, Eggspectations, Doc Greens, Childrens Orchard, Dick's Sporting Goods, Dream Dinners, BW3 and Qdoba. The most significant new retailer to enter the market is Kohl's, which opened several locations throughout Central Florida on a single day in October 2005. As a junior anchor to many shopping centers, the retailer was a catalyst in getting several projects off the ground.

The majority of development within the region is taking place in: Kissimmee/Hunters Creek as mentioned earlier; Clermont, with several projects underway along U.S. 27; and Doctor Phillips, with its affluent population and close proximity to the tourist corridor and Interstate 4. Keep an eye on West Volusia County, as thousands of residents are flocking to its reasonably priced bedroom communities; Apopka/ Winter Garden, with the expansion of the State Route 429, Western Beltway, linking the west side of town; Lake Nona, the Isleworth of southeastern Orlando, with the possibility of landing the new UCF medical school; and St. Cloud, the sleepy town on the outskirts of Central Florida, which is absolutely booming with new residential development.

As we enter 2006, Central Florida is poised to remain within the top echelon of growth markets in the country and is one to keep an eye on for a multitude of opportunities.

— Bobby Palta is a sales associate with CB Richard Ellis' retail services division in Orlando, Florida

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