Investors are clamoring for neighborhood and non-grocery-anchored strip centers in a strong location. Community and power centers are on the sidelines, says a new report from the Tampa office of Colliers Arnold.

"Buyers are attracted to Florida because of the economic stability and steady population growth, which fuels demand for retail goods and services," Colliers Arnold research analyst Jeremy Kral tells GlobeSt.com.

Neighborhood-type centers are "perceived [by investors] to carry a lesser degree of risk during periodic downturns in the economy," Kral says. "Demand for well-positioned retail properties remains high while supply remains short."

The analyst says new retail development projects are occurring in several submarkets, "in every direction, in order to supply the growing residential sector. Retailers from the small local tenants to grocery stores and big-box retailers are capitalizing on this growth."

Rents have increased by an average 45 cents from Q2 of 2002. The average quoted rate is $13.07 per sf, up from $12.62. Curiously, Kral says, "the indicators [for Q1 and Q4 of 2002] show significant signs that the Tampa Bay retail sector remains healthy and has not been adversely affected by the weaker U.S. economy."

In the grocery sector, Publix Supermarkets of Lakeland Inc. is the dominant developer with new store construction under way throughout the area but largely in the emerging south Hillsborough County market, a residential development hotbed. Wal-Mart Stores Inc., Kash n' Karry and Winn Dixie Stores Inc. continue to vie for prime dirt not already taken by Publix.

Grocery-anchored centers are commanding the lowest cap rate or greatest value and return for the seller, Kral tells GlobeSt.com. "The ideal properties within this sector are those in which the grocery tenant has at least 10 years, preferably 15, remaining on the primary lease term, and the ratio of local space does not exceed 50-65% of the anchor square footage," he says.

Average cap rates for neighborhood properties meeting the ideal ranged from 8.15% to 9.10% in 2002, compared to 9.5% to 10.25% in 2001.

"Interestingly, grocery-anchored neighborhood centers that do not meet the ideal of shorter anchor lease terms and high percentage of local space, have traded at only slightly higher cap rates, ranging from 8.75% to 9.85%," Kral says.

But the sleeper in the Tampa Bay investment sales market is the non-grocery-anchored strip center in a good location, the analyst says. "These centers are achieving the highest price per square foot because the rental rate average is typically higher than the average of grocery-anchored centers," Kral says. The reason: "The lower anchor rate adjusts the overall average downward," the analyst says.

Cap rates for this type of property typically range from about 9.25% for those centers containing a ratio of at least 35% creditworthy tenants, to 10.5% for centers that contain mostly non-credit or local tenants, Kral says. "Another rising trend is the competition among banks to acquire outparcels at newly developed shopping centers," Kral says. "A number of banks are very active in the area and have aggressive expansion plans." Among them are Wachovia, Bank of America and Bay Cities Bank.

New development in the casual restaurant industry is also expanding. Striving for greater market share are national chains such as Chipolte, Moe's Southwest Grill, Boston Market and Zaxby's.

Experiencing the least number of sales are the community and power centers, largely because "most of the vacancy in the retail market has occurred in big-box departures such as Kmart, Service Merchancdise and HomePlace, to name a few," Kral says.

Owners of these properties "appear to be holding, rather than selling, in favor of re-leasing the anchor vacancies, and market demand for this sector to increase."

He says, "Using a representative sample of fully leased centers with a stable tenant mix, good location and minimal deferred maintenance, the average cap rate continues to trend downward and price per square foot continues to increase.