"While the local landscape is dominated by regional malls and neighborhood centers, the STNL sector has gradually begun to garner attention" in Tampa, FL, Steven M. Ekovich, vice president/regional manager, Marcus & Millichap, tells GlobeSt.com.

Orlando, like Tampa, has "historically preferred multi-tenant development to STNL product," Ekovich says. "As a result, few properties in the STNL sector are currently under construction."

Among the newest players locally are BJ's Wholesale Club Inc. of Natick, MA. The Massachusetts-based membership-by-annual fee retailer plans to open three outlets by the first quarter in south Orlando, east Orange County and Sanford, FL.

"The single tenant net lease retailers such as Walgreens, Eckerds, 7-11 and some of the fast-food chains have already established national interest" in metro Orlando, Bob Browning, senior retail division associate in the Orlando office of Trammell Crow Co., tells GlobeSt.com. "The big-box users, such as BJ's, are getting into position that is creating national attention."

Drug and grocery stores have been the strongest properties in the single-tenant, net lease sector from a development view. For example, Tampa Bay STNL property sales this year are averaging $101 per sf, "up considerably from what was a down year for values in 2000," Ekovich says.

Trammell Crow's Browning says drug stores generally sell at a cap rate of 8% to 9.75%.

This year, Ekovich of M&M projects the average sales price from all Central Florida markets is expected to be about $110 per sf (cap rate, 8%). In 2002, single-tenant properties are projected to sell for about $118 per sf (cap rate, 8.25%).

A 13,905-sf Walgreens unit at 3298 S. John Young Parkway, Kissimmee, FL, 20 miles south of Downtown Orlando, pulled in the highest per-sf price this year at $223 on a $3.1 million sale.

In Tampa, "(sales) velocity was up slightly compared to the past few years, reflecting a change in the retail market that may have caused some owners to sell slightly quicker and at lower prices" last year, Ekovich says.

"This risk/reward ratio has been shifted toward risk over the past 18 months, as STNL properties leased to non-credit tenants have become more worrisome assets for many investors," the Marcus & Millichap executive says.

David W. Marks, president, Marketplace Advisors Inc., Orlando, agrees.

"As the economy has started to soften, we have started to see more failing retailers, causing investors to take a closer look at a retailer's balance sheet," Marks tells GlobeSt.com. "If the real estate asset is backed by a solid company, owning a NNN (triple-net) single-tenant property is like owning a bond--all you have to do is wait for your check to arrive in the mail."

However, Marks cautions, "if your tenant defaults and you have to release your property, you will most likely have major re-tenanting expenses, such as down time, leasing commissions and potentially most costly, new tenant improvements required by the new tenant."

In Orlando, STNL sales prices are up by at least 3.5%, Marcus & Millichap reports.

"(The year) 2000 was a solid year for values and it appears that the next 12 months will be equally rewarding for sellers," Ekovich says. "Sales velocity has been down for the past two years, with tighter lending requirements allowing only the highest-quality properties the opportunity to trade, which has also helped pull prices higher over the same period."

In the Sarasota-Bradenton market on Florida's west coast, STNL activity is "exploding with strong demographics attracting retailers from all sectors," the M&M executive says.

Walgreens has hit this market hard with new stores under construction from Ellenton, FL to North Port, FL. Other aggressive players are Publix Supermarkets, Albertsons and Kash n'Karry.

However, in the Lakeland-Winter Haven market, 60 miles south of Downtown Orlando, single-tenant, net lease construction is light. Only a single Publix Supermarket has broken ground this year. Lowe's in Winter Haven and a Wal-Mart and Applebee's Restaurant in Lakeland are the only products in the last 18 months.

"Construction activity (on single-tenant net lease properties) should pick up in the long term as land availability spurs continued single-family and multi-family development," Ekovich says.

Instant Insights /

Growing Trend: Single-Tenant, Net Lease Retail Development Getting More National Attention

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