The bursting of the housing bubble has hit Florida hard, but that has not slowed one of the fastest-growing sections of one of the fastest-growing states in the nation. Thus Tampa — along with its surrounding suburbs — remains one of the best bets for retail real estate development.
Rapid growth throughout the region has translated into existing retail projects bursting at the seams; region-wide vacancy rates are between 4 and 5 percent, according to CB Richard Ellis Inc. “Anyone who brings new product to market will lease it up,” says David Conn, CB Richard Ellis senior vice president for retail services in the Tampa area. And even with the local economy taking a hit as a result from the slowdown in housing — expectations are that GNP growth will slow from 3.3 percent in 2006 to 2.3 percent this year — retail demand remains strong.
As a whole, the Tampa-St. Petersburg-Clearwater area grew by 10.5 percent between 2000 and 2005, adding about 252,000 people, according to the U.S. Census Bureau. That pace is expected to continue despite an increase in hurricanes and resulting escalating home insurance premiums. By 2050, the metropolitan area, which includes Hillsborough, Pinellas, Pasco and Hernando counties, is expected to add 1.2 million people, taking the population from 2.8 million to 4 million.
The region remains a draw for relocation because of the rapid job growth, according to a report from Wachovia senior economist Steve Vitner. Last year, the region added 44,700 new jobs, leaving unemployment at 3.3 percent — about 100 basis points below the national average. Consequently, Vitner predicts that despite continued troubles in the residential real estate sector — median home prices have dropped $26,500 from a year ago down to $203,000 today according to the National Association of Realtors — job growth will help counteract that trend.
That doesn't mean the forecast has no clouds. The pace of new development worries Conn, who sees a potential correction looming on the horizon.
“At the end of the day, high land values, high impact fees, high construction costs translate to very expensive deals, so the frenzy over land has started to curtail,” Conn says. Already, there is some trepidation on the investment sales side, where Conn says there is a growing disconnect between what sellers are demanding and what buyers are willing to pay. With more product coming on line in the next 12 to 24 months, that picture is not expected to change.
Downtown developments
As is the trend elsewhere, the cities of Tampa and St. Petersburg are experiencing a renaissance in their central business districts (CBDs). Tampa officials have identified 12 separate redevelopment districts within the city's CBD to promote a mix of residential, commercial and civic development, including a concentration of retail in the Franklin Street District and the Riverfront District with a proposed 2.2-mile riverwalk.
A total of 1,061 new residential units have been completed or are under construction in downtown Tampa and another 4,993 are approved. The promise of a neighborhood — though slow to get going — is beginning to take shape too, with a number of retail services recently opened or in the works, including coffee shops, cafes, restaurants, boutiques, and neighborhood services. Additional retailers are expected to open their doors with the completion of 110,000 square feet of ground-floor retail at local developer Mercury Advisors' new $145-million Channelside District project, Grand Central at Kennedy, which includes a 372-unit residential tower and 90,000 square feet of office condominiums.
Meanwhile, with 4,500 existing residential units, downtown St. Petersburg is well on its way to reaching the city's goal of 12,000 new units by 2020. Additionally, a variety of necessity retail establishments have opened to serve the growing downtown community, including a Publix Super Market, Eckerd drugstore and other neighborhood services. A tourist destination in its own right, downtown St. Petersburg, however, has an established core of upscale restaurants, art galleries, shops and entertainment, including the 150,000-square-foot BayWalk entertainment complex, a hot spot for shopping and nightlife, and a mile-long pier with a five-story inverted-pyramid-shaped retail complex, featuring shops, restaurants, an aquarium, live music and boat docks.
Mixing it up in the suburbs
Denser, mixed-use development is catching on in suburban communities as well. Equity, a Columbus, Ohio-based full-service real estate firm, will break ground next spring on Southshore Commons, a mixed-use project in southeast Hillsborough County near Apollo Beach with one million square feet of specialty box and upscale retail, 500,000 square feet of office space and 250 hotel rooms. “There's lots of new schools, population growth all around, but no retail,” says John Brooks, Equity executive vice president of real estate services, noting that 115,000 people, primarily professional couples with children, live within a seven-mile radius of the project site.
Meanwhile, Largo, a Pinellas County community without an identifiable CBD, is getting a new town center. Largo Towne Center is a joint project of Houston-based Weingarten Realty Investors and the Colorado-based venture capital group Boulder Ventures Ltd. The $150-million Main Street project is anchored by several department stores, including a major two-story discount retailer, according to Lynn Delinger, Weingarten regional director for new development. Weingarten leasing executive Karl Brinkman says, “This is truly a town center for the city of Largo, and we plan to have entertainment like a jazz concert about every two weeks and community events throughout the year.”
Another strong trend is a shift of development to outlying counties, Conn says, pointing out that expansion in Pasco County is very active and several new regional open-air malls and power centers are underway.
This fall Kite Realty Group Trust, an Indianapolis-based REIT, will open Bayport Commons, a Super Target-anchored community shopping center, in the rapidly growing Oldsmar area in southwestern Pasco County, where there is a severe lack of quality retail services, according to Marty Arriva, Kite leasing representative for the Florida region. “We're somewhat blazing a new trail,” he says. “There's no mall or quality retailer like a SuperTarget close by.”
The Oldsmar area's population has exploded because it is extremely attractive to young couples with children, Arriva suggests, noting it is just a 20-minute drive to downtown Tampa, and near the Gulf with plenty of room to grow.
The eastern portion of Pasco County was swampland until the late 1980s when two master-planned communities — Tampa Palms and Hunters Glen — initiated development and infrastructure improvements that attracted an affluent demographic, says Jim Roberts, a broker at Tampa-based Colliers Arnold Real Estate Services. Roberts is marketing The Grove at Wesley Chapel, a mixed-use project being developed by Pittsburgh-based ECHO Real Estate Services that will open in November. He notes that the area's wetlands provide lots of open space and natural environment attractive to affluent buyers.
The $100-million development, which includes 300 residential units and about 800,000 square feet of big-box and specialty retail, restaurants and entertainment, is poised to capture consumers from the fast-growing communities of Wesley Chapel, Land O'Lakes and New Tampa.
A little further south, Cleveland-based developer the Richard E. Jacobs Group is underway on Cypress Creek Town Center, a 1.5-million-square-foot regional shopping district that is part of local developer Sierra Properties' 400-acre mixed-use project, with 300 residential units and 420,000 square feet of office space.
Scheduled to open in fall 2008, the 100-acre project is designed as a traditional Main Street commercial district with sidewalks, on-street parking and a village green surrounded by a cluster of restaurants and cinema. The project includes big-box retail, a supermarket, a movie complex, and a specialty retail component anchored on each end by major department stores.
Southeast of that, Forest City Enterprises and partner the Goodman Co. of West Palm Beach are preparing for an October grand opening of the Shops at Wiregrass, a 750,000-square-foot open-air shopping center with specialty shops, restaurants and entertainment, anchored by three department stores, including JCPenney and Dillard's.
This Main Street-style project will serve as a town center for Wiregrass Ranch, a 5,000-acre master-planned community that ultimately will include 16,000 homes, 4.4 million square feet of commercial development, 3.9 million square feet of office space, an educational campus, and a 100-bed hospital. Pasco County is primarily a bedroom community for Tampa commuters. But Wiregrass Ranch could become an employment center as businesses relocate to offices at the project, says Jim Richardson, Forest City vice president of development.
“That's why we look at the future of this center as in the right place at the right time,” he says. The area's median annual income is about $60,000 and the population of 290,000 is expected to escalate to 390,000 over the next five years. “People in this area spend a lot of money. There's a lot of $100,000-plus incomes, which is good for retailers.”
In all, developers remain bullish about the Tampa region and expect the market to continue to thrive as the next wave of projects open in the coming weeks and months.
FLORIDA DEMOGRAPHICS
Population: 2.8 million
Per capita income: $25,572
Median household income: $44,318
Average household income: $60,064 Unemployment: 3.2%
Sources: U.S. Census Bureau, Claritas & the Bureau of Labor Statistics
RETAIL MARKET ? HILLSBOROUGH AND PINELLAS COUNTIES
Retail vacancy: 4%
Average Rent: $14.11 per sq. ft.
Total Inventory: 55 million sq. ft.
Net Absorption: 119,519 sq. ft.
Under Construction: 876,087 sq. ft.
Source: CB Richard Ellis