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KISSIMMEE, FL-Retail landlords should work with their tenants to avoid trouble that could lead to higher vacancies during the ongoing economic downturn, panelists advised audience members during the International Council of Shopping Centers’ 2008 Florida Conference. Although Florida’s retail market remains one of the nation’s strongest and is still favored by merchants and tenants alike, experts warn that occupancy and rental rates have already fallen two percentage points in the past year alone.

“A store occupied is still better than one unoccupied, even at half the rent,” said Stanley Tate, president of Tate Enterprises in North Miami and an advisor to the Federal Reserve. Tate also warned of the prospect of 85 additional bank failures nationwide over the next 30 days, further eroding the ability of retail property investors to obtain financing in the current credit crunch.

Tate also predicts that $1 trillion worth of commercial properties will go into foreclosure in the coming year as owners default on loans, adding that “those who are heavily leveraged are going to have a very difficult time.” However, he pointed out that financing remains available for landlords and developers who are willing to work with banks at lesser loan-to-value ratios.

Tate was perhaps the most outspoken among dozens of panelists during the annual gathering Monday at the Gaylord Palms Resort & Convention Center, attended by well over 4,000 ICSC members from Florida and several other states. The general consensus among speakers and listeners is that Florida remains a desirable state for retailers, with a statewide population expected to exceed 20 million in the next five years, and that other well-performing merchants may be in line to take up space vacated by those declaring bankruptcy or going out of business.

“In this environment, if you have a tenant that is viable, you should work with them to keep the lights on,” said Seth Layton, executive vice president with Kimco Realty in Sanford. On the other hand, he added, this may also be the time to dismiss tenants that are unable or unwilling to make rent: “Now is the chance to do something really spectacular with your shopping center.”

As chair of the ICSC Florida State Government Relations Committee, Layton told the group’s members they should be wary of efforts by elected leaders to shift property taxes to commercial real estate owners, especially after passage of Amendment 1 earlier this year to provide some relief to homeowners. “We’ve got to be careful that we don’t keep getting overburdened,” he says.

For those seeking good news in a seemingly dour retail market, experts predict that Florida is better suited to weather the downturn because of the significant strength built between 2002 and 2005, as well as future growth. “The state will be poised to explode again once the larger economy returns to better health,” Justin Greider, associate director with Holliday Fenoglio Fowler in Orlando, stated in ICSC’s latest Florida Retail Report released Monday. He also notes that Florida’s midyear retail occupancy rate of 92.8% remains well above the US average.

The ICSC conference is scheduled to conclude Tuesday afternoon with the second day of the Florida Deal Making Exhibition. Many of the crowds attending this year’s conference decided to stay both days despite the prospect of Tropical Storm Fay moving ashore later Tuesday after reaching landfall in the Florida Keys Monday afternoon, though they paid close attention to weather radar displays within the exhibition hall.

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