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TAMPA, FL-Retail continues as Tampa Bay area’s strongest real estate category, according to a new market analysis by Marcus & Millichap. “Tampa will remain a strong sellers’ market in 2004 and cap rates will inch lower,” predicts Steven M. Ekovich, first vice president and regional manager of Marcus & Millichap’s Tampa office.

Strip centers once again dominate but they “will experience the least competitive relief,” says Ekovich. A total 55% of the 1.3 million sf of new retail construction coming online this year will be unanchored. Single-tenant construction makes up the next largest segment with CVS and Walgreens continuing to penetrate the market.

Even though the construction pipeline has thinned out due to past economic weakness, Tampa is “expected to register its best economic performance since 2000,” Ekovich says. Employment gains of 3% and personal income growth of 4.2% “will preserve consumer spending and strengthen local retailers,” he says.

Demand will far outpace new construction,” allowing a solid decrease in vacancy, to 9.8%,” the M&M executive predicts. Neighborhood centers, “especially those with co-tenancy clauses, may face the biggest hurdle, as the grocer competition heats up,” Ekovich says.

On the rental front, owners “enjoyed moderate pricing power in 2003, as rents advanced by 3.2%,” he notes. Similar gains will be realized in 2004, with the overall average rent advancing to $16.33 per sf. “Would-be investors will be watching for retail centers that benefit from the area’s robust financial services firms, tourist traffic in and around the port area, or the planned light rail system,” Ekovich says.

He adds, “There is no secret to the success of Tampa’s retail market, given that two primary drivers of retail–residential construction and job growth–are having an impressive showing. With employment and population growth well established, small retail center owners will experience greater stability in their tenant rosters and welcome back solid rent growth.”

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