Credit Tenants Lead Retail Recovery in Central Florida

Credit tenants are driving retail leasing activity in Central Florida. According to a new report from Colliers, major brands like Best Buy, Marshalls and JoAnn Fabric renewed leases or signed new leases, plus the market captured new-to-market brands as well. While Central Florida did record negative 190,000 square feet of retail absorption, the report says that it is not an accurate reflection of the leasing activity and renewed demand.

The reopening of the economy and vaccine distribution created a perfect storm for the retail market. As Colliers describes, the reopening “saturated the Orlando retail market with unbelievable activity.” Restaurant sales were particularly good, some up 100% from the same time last year when the pandemic first disrupted retail life.

In Kissimmee/St. Cloud and the Sand Lake/Tourist Corridor, there have been 350,000 square feet in new leases signed this year, and the majority are in the 2,000 to 4,000-square-foot range. Restaurants are leading leasing activity in the market, and top-end rents have increased. Rental rates also increased in the Lake Nona/Southeast Orange submarket up to $19.30, a 3% increase year-over-year. The vacancy rate in the submarket also fell to a pre-pandemic low of 3.8%.

The Downtown submarket was the only area that struggled during the pandemic, likely because offices have not yet opened, reducing retail foot traffic. As a result, the vacancy rate hit 8.1%, a 130 basis point increase year-over-year.

Overall, the Central Florida market has a vacancy rate of 6.3%, only nominally higher than the previous quarter rate of 6.2%, and asking rents increased to $18.84 from $18.63 in the previous quarter. Net absorption is in the black at 125,394 square feet.

The leasing activity has captured attention of out-of-state capital. In one such example, ExchangeRight purchased Tiger Point Pavilion for $19.9 million from a joint venture between MAB American and DRA Advisors. According to Brad Peterson, a senior managing director at JLL who brokered the deal, following the pandemic, “grocery-anchored investments in Florida are some of the most highly sought after real estate investments in the entire nation.” He has seen a trend of investors selling properties in other states and reinvesting the proceeds in Florida, a state that is experiencing population and job growth.