Orlando is known for its gleaming theme parks and vibrant tourist industry — a record 50 million visitors are expected to pass through the city this year. As such, the area's retail is geared towards capturing some of the tourist dollars, so it doesn't all end up in Mickey Mouse's pockets.
But Orlando isn't just about people passing through.
The city has grown around the tourist industry, but now has a booming residential base as well and is becoming a more mature market. As a result, developers have two different potential audiences to serve when building new projects. They have the choice between projects geared towards the tourist market or else construct centers aimed at the growing permanent resident base in and around the city.
Overall, Orlando stands as one of the healthiest markets in the country. The city's unemployment figure was a miniscule 2.8 percent in May, down from 3.2 percent in 2005 and far below the national average of 4.6 percent. What makes the figure even more impressive is that Orlando has kept unemployment low despite a flood of residents moving to the area. Last year alone, Orlando's population grew by 60,000 people while the region added 41,200 jobs.
And the expansion is accelerating. Last year's figure was up from 50,000 in 2004 and 36,000 in 2003.
“That makes a huge difference, when you think about all those new people in the market,” says Gina Martin, an economist at Wachovia. She calls Orlando “one of the bright spots in the national economy.”
That strength is evident in the region's real estate market as well.
Bobby Palta, a retail associate at CB Richard Ellis, says the retail market is “very active and very busy.”
He notes that rents have crept up and at new high-end developments, landlords are asking about $40 per square foot. Overall, the average asking lease rate on retail projects is $16 per square foot, according to CB Richard Ellis' research.
Retail vacancies stand at just 7.9 percent. And there is 2.6 million square feet of new product under construction.
Tourist troubles?
Orlando remains a popular tourist destination, but it looks different today than it did before September 11.
International tourism, for example, still has not recovered. This year, the Orlando/Orange County Convention and Visitors Bureau expects 2.9 million international visits. That's up from 2.8 million visits in 2005, but still below the 3.7 million visits the city received in 2000. Overall, Orlando received 47.7 million visitors in 2005.
For retailers that's an important metric. Even though foreign visits are only a fraction of the tourist market, international visitors tend to stay longer and spend more than their domestic counterparts.
In 2004, visitors from overseas stayed an average of 11.7 nights and spent an average of $898. The domestic visitor, on the other hand, stayed just 4.3 nights and spent an average $241, according to the Visitors Bureau.
In fact, most international tourists — a whopping 95 percent — rank shopping as their top activity in the region, according to the Visitors Bureau.
Part of the problem is it is harder now for people from some countries to get the necessary visas to come to the United States. In Mexico, people can wait 100 days just to get an appointment to apply for a visa to come here, says Danielle Courtenay, spokeswoman at the Convention and Visitors Bureau.
Meanwhile, Orlando is spending big bucks marketing in the United Kingdom, its number-one international market, and other places. However, competition is tough. Destinations from across the globe also promote their tourist attractions.
Visitors vs. locals
Jeff Streep, a retail investment specialist with Carter, an Atlanta-based commercial real estate brokerage, thinks the residential population is what's driving the retail market in Orlando, though he acknowledges that locals and tourists are inextricably linked.
“Tourism is growing and it is having a direct impact on the residential population,” he says.
“It is all connected. I don't know that you could really break those two apart,” says Lynette Lauria, regional director of mall marketing for Simon Property Group.
On the tourism side, Orlando has added many retail offerings in the past five years that appeal to visitors, according to Courtenay at the Convention and Visitors Bureau.
She points to the Mall at Millenia, which opened in 2002 and is home to high-end retailers including Jimmy Choo, Neiman Marcus and Tiffany & Co. Stores like Jimmy Choo are crucial because there aren't that many in the country, Courtenay says.
She also mentions Orlando Premium Outlets, where shoppers can find discounts on high-end retail such as Coach, Barney's, Burberry, Giorgio Armani and Fendi.
Tourism is impacting not just new retail developments but also established players. At Florida Mall, which has been open for two decades, stores are opening that appeal to tourists, as well as locals, says Simon's Lauria, whose office is at the mall.
She points to recent additions that combine entertainment and shopping. M&M World opened with costumed M&M characters greeting customers and a wall displaying 72 tubes filled with 21 colors of M&Ms. Both candy and licensed M&M items are for sale. This is the second M&M store; the first is in Las Vegas.
And coming soon to Florida Mall: Andrenalina. The store will sell extreme sports gear and will feature a pool, called a “flowrider,” that pumps 20,000 gallons of water a minute, where surfers can show off their skills.
“It is about taking the entertainment that Orlando is so well known for and melding it with retail,” Lauria says.
Market maturation
In spite of the the international challenge, Orlando's economy, tourism and retail are performing well. And that's in large part thanks to the market's maturation.
“We typically require 2 million people to support a new store,” says Ikea spokesman Joseph Roth. “Orlando has close to 2 million people and fast growth.”
Ikea will open here in fall 2007. The 310,000-square-foot store is being built on the southeast side of the Mall at Millenia, an upscale regional mall that opened several years ago.
Ikea's coming in as part of an expansion. But there are also plenty of new projects under construction.
Premiere Trade Plaza, a $140 million development, is under construction downtown and is expected to open later this year. The brainchild of developer Cameron Kuhn, it will include a condominium tower, two office condominium buildings and 105,000 square feet of retail space with a 12-screen movie theater.
“Probably no other development in Orlando history will do more to change the complexion of downtown,” Palta says. The project “will be Orlando's own version of the Hancock Building.”
On the west side of town, the Sembler Co. is developing a 1.15-million-square foot open-air shopping center called Winter Garden Village at Fowler Groves. Tenants at the project, set to open in October 2007, include Super Target, Lowe's, Bealls Department Store, Marshalls and Best Buy.
“The leasing activity has been very strong for this project and West Orange [County] is such a dynamic and growing area with a need for quality tenants,” says Amber Overby, Sembler spokesperson.
Retail everywhere
Streeps says retail is popping up everywhere. He pointed to the area around Waterford Lakes Town Center, an open-air shopping center on the eastern side of town.
Waterford Lakes features stores such as T.J. Maxx, SuperTarget, Best Buy and Old Navy. Not only is the shopping center doing well, but plenty of other retail has been developed across the street and in the general area, Streep says.
“For every new housing development, there are consumers who are going to need places to get groceries, a cup of coffee, a sandwich and clothing,” Streep says.
That also makes for a investment climate is also strong, with money pouring into Orlando from all over the country. In all, Orlando is poised to continue its strong run, even if tourism hits another bump.
| Submarket | Retail Base (sq. ft.) | Vacancy Rate | Asking Lease Rates Weighted Avg. | High |
|---|---|---|---|---|
| Northeast Orange Co. | 6,576,097 | 6.16% | $19.08 | $40.00 |
| Northwest Orange Co. | 7,979,727 | 11.55 | 15.24 | 60.00 |
| Southeast Orange Co. | 5,569,964 | 4.74 | 12.15 | 25.50 |
| Southwest Orange Co. | 15,721,246 | 6.40 | 18.27 | 60.00 |
| Osceola Co. | 5,019,436 | 13.62 | 15.96 | 30.00 |
| Seminole Co. | 15,126,961 | 7.51 | 13.46 | 45.00 |
| Total | 55,993,431 | 7.89 | 15.61 | 60.00 |
| Source: CB Richard Ellis Co. | ||||
| Retail Base Center Type | Vacancy (sq. ft.) | Under Rate | Asking Lease Rates Construction | Weighted Avg. | High |
|---|---|---|---|---|---|
| Neighborhood | 14,556,051 | 11.74% | 1,324,225 | $13.00 | $35.00 |
| Community | 18,188,554 | 8.47 | 550,200 | 17.00 | 60.00 |
| Power centers | 6,570,509 | 3.16 | 620,000 | 19.00 | 32.00 |
| Specialty centers | 2,809,340 | 16.38 | 0 | 28.00 | 40.00 |
| Regional malls | 8,489,372 | 0.95 | 0 | 30.00 | 60.00 |
| Other | 5,379,605 | 7.80 | 100,000 | 16.00 | 33.00 |
| Total | 55,993,431 | 7.89 | 2,594,425 | 16.00 | 60.00 |
| Source: CB Richard Ellis Co. | |||||