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ORLANDO—Orlando is recording retail real estate improvements so far this year—and it could get even better going forward. Marcus & Millichap reports that retailers continue to open new locations at a measured pace in 2012 as reduced rents have made many locations feasible.
Employers will create 26,000 positions this year, representing a 2.6% increase in local payrolls. Only 7,300 workers were hired in 2011, M&M reports. At the same time, asking rents will rise 0.5% to $17.08 per square foot in 2012 and effective rents will climb 0.9% to $14.51 per square foot, the firm reports. The vacancy rate fell 60 basis points in 2011.
“Big box retailers are ‘right-sizing’ their stores and landlords are working to accommodate the downsizing so that they don’t lose them to competing centers, Genny Hall, a vice president at CNL Commercial Real Estate, tells GlobeSt.com. “We have seen a few large retailers with standard 15,000- to 30,000-square-foot floor plans begin to rework their concept for a space as small as 7,000 square feet.”
Hall says she has witnessed expansion interest from several new retailers that aren’t currently doing business in the Orlando market, including Five Below, Best Buy Mobile, Versona, and Goodwill. She is also seeing franchisees aggressively expand in the market and in many cases going head to head on sites.
“Discount retailers are taking advantage of incentives and relocating into locations that they typically could not afford in a stronger economy,” Christin Jones, a vice president at CNL Commercial Real Estate, tells GlobeSt.com. She points to Tuesday Morning, Rue 21, Rainbow, Dollar Tree.
However, she adds, space is becoming more limited as landlords respond quickly to fill vacancy with other expanding retailers: “Class A retail centers in primary areas have seen rental rates increase by as much as 40% in the last year, while the more tertiary submarkets in Orlando are struggling with store closings and the reality of lower rates and the need to offer incentives to attract and retain retailers.”
On the retail development front, M&M reports developers will bring online about 200,000 square feet of retail space for the second consecutive year. Nearly all of the new properties are in Orange County. And investment-wise, Publix-anchored shopping centers will remain primary targets, M&M reports, but investors will assess the impact on grocery-anchored property cap rates from the sale of Winn-Dixie to the Bi-Lo grocery chain late last year.