Florida Retail Trends Play Out In Changing Environment

Nick Banks

GAINESVILLE, FL—Florida's retail sector is in a state of change as new and ongoing trends converge to reshape the environment, according to a recent Avison Young report. Nick Banks, principal with the locally-based Avision Young discussed some of these trends with GlobeSt.com.

"A lot of retailers are in junior box and big box are trying to determine the right number of stores they need and the right square footage," Banks says. "We are seeing fewer stores and smaller stores. That's having ripple effects not just in Florida, but other places as well, as landlords are struggling to backfill spaces that were maybe designed for a larger user. Now, they are not only having to figure out how to backfill it, but how to accommodate other space needs from smaller stores."

Banks says on the positive side, there are some online retailers such as Untuckit.com and Warby Parker that started online, but are now opening brick-and-mortar stores.

"That's having a positive effect, creating some absorption," he says. "These online retailers are realizing it's hard to make money in an online only format and it's hard to build a customer base. Online retailers are finding online is maybe an easier path to grow revenue, but it's hard to grow profits online only."

Space formerly occupied by big box retailers is finding new uses such as medical offices. Banks cites as an example, University of Florida Health locating medical office in space vacated by Sears in The Oaks Mall in Gainesville.

"We took a former Sears box and leased it as medical space. They were attracted to it because the structure gave them the ability to put two different clinical groups in about 140,000 square feet. Also, they have a way for patients to access the mall's food court. They also have a massive amount of parking that is otherwise hard to come by in traditional medical offices."

Another trend involves the grocery sector. The Earth Fare and Lucky's chains, in rapid success announced they were closing earlier this year. That poses some potential challenges for other tenants in these shopping centers.

"It will be interesting to see what happens," Banks says. "The way these shopping center leases are typically worded, there are other tenants that have co-tenancy clauses that are tied to the anchor tenant. So the landlord ends up in a predicament. Not only do they lose the anchor, it gives the remaining tenants an amount of leverage."

The smaller tenants may ask for better lease terms or a tenant improvement allowance to improve their store. These are some unforeseen challenges that the market hasn't fully absorbed yet, Banks says.