scarcity of available space pushes national, local tenants...
TRANSCRIPT
Summary Statistics Q3 2018 Retail Market Central FL
Vacancy Rate 5.1%
Change from Q3 2017 (Percent) (0.6%)
Absorption (Square Feet) 145,397
New Completions (Square Feet) 0
Under Construction (Square Feet) 722,386
Asking Rents (NNN) Per Square Foot Per Year
Current Quarter $18.51
One Year Ago $16.79
Two Years Ago $15.11
Market Indicators
Relative to Prior Year Q3 2018 Q4 2018*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
Note: Construction is the change in Under Construction.*Projected.
Scarcity of Available Space Pushes National, Local Tenants to Orlando’s Tertiary MarketsExecutive SummaryCentral Florida’s retail market continued strong through the third quarter of 2018, marked by steadily increasing rental rates, a diminishing supply of available space and an uptick in investment transactions. Tenant activity remained high throughout the metro area on what little availability exists, causing several tenants to branch out into Orlando’s developing tertiary submarkets.
In the past 24 months, total vacancy throughout the Orlando MSA has steadily declined, dropping an average of 17 basis points each quarter since. Consumer confidence and spending remain high despite the many interest rate hikes by the Federal Reserve through 2018. Many investors have increased the speed of their acquisition and disposition strategies in hopes of locking in what many still view as low interest rates.
Development activity throughout Central Florida remains red hot with total projects planned and underway approaching $1 billion in estimated value.
Market Highlights > Walgreens is consolidating into many new locations throughout Orlando.
> Lowe’s Companies announced they will be closing all 99 Orchard Supply Hardware stores across the U.S., affecting three locations in Orlando.
> Roark Capital, the private equity-backed firm that owns Arby’s and Buffalo Wild Wings, purchased Sonic for $2.3 billion. The company announced the acquisition will cause “nothing major” to change with Sonic’s more than 3,600 locations across the U.S.
Research & Forecast Report
CENTRAL FLORIDA | RETAILThird Quarter 2018
2 Central FL Research & Forecast Report | Q3 2018 | Retail | Colliers International
The Orlando MSA unemployment rate posted 3.4% in August 2018. The State of Florida posted 3.7% just ahead of the national US average of 3.9%.
Source: US Bureau of Labor Statistics
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Unemployment Trends
Completions, Absorption and Vacancy Rates
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Completions Net Absorption Total Vacancy %
Vacancy Drops LowThe vacancy rate continued to decline through the third quarter of 2018 with total vacancy at 5.1%.
Source: Colliers International, CoStar
Vacancy and AbsorptionOrlando’s prime retail submarkets, such as Winter Park, Lake Mary, Doctor Phillips, continued to see high activity on what little space remains. Despite strong consumer spending, many tenants have remained disciplined in their preference for retail space and continue to hold out until their desired locations and centers become available.
Vacancy continues to steadily drop, coming in at 5.1% for the third quarter. Total vacancy marketwide has declined by 60 basis points in the past 12 months alone and 160 basis points in the past 24 months.
A key challenge facing many tenants today is competing lease restrictions in shopping centers. Although a property may have availability, pre-existing tenant’s leases often contain clauses preventing any like-kind tenant from occupying nearby space.
Leasing ActivityLocal tenants increased their activity significantly as many of the market’s national tenants have slowed with locations already locked in place from prior years. The market has experienced record-high activity in the past few years and many tenants are looking to expand into Central Florida’s developing tertiary markets such as Poinciana, Oviedo and select suburbs across West Orlando.
Rental rates continued to steadily rise throughout the metro area to all-time highs, forcing many of the market’s weaker tenants out of business, unable to pay rent. It remains a landlord’s market on what little space is available throughout the metro area with little to no available free rent. Tenant improvement allowances are allotted based on the credit of tenant and length of lease.
Tenants are seeking spaces of nearly all sizes. Quick-service and full-service restaurants, car washes, health care, dental, specialty grocers, luxury theaters and gyms were the most active tenant categories.
A number of retailers announced openings in the third quarter, including:
> Earth Fare opened their first Orlando location in Lake Nona at The Shoppes at Nona Place off Narcoossee Road.
> Marshalls and Burlington Coat Factory opened at Vineland Point in Orlando, adjacent to the Orlando Vineland Premium Outlet Mall.
> Fresco y Mas replaced the Winn-Dixie supermarket in southeast Orlando off Curry Ford Road.
> PDQ opened in Winter Park at the corner of Minnesota and Orlando Avenue, with two more locations planned at Waterford Lakes and Altamonte Springs.
> Saltgrass Steak House opened its first location at 8850 Vineland Ave., replacing the former Landry’s location.
> Café Frutos Selectos (“CFS Coffee”), a Colombian coffeehouse, opened their second restaurant in Flame Broiler’s old space next to California Tortilla in downtown Orlando’s 55 West retail space.
> Cinco Tacos + Tequila opened in Winter Park at 140 Orlando Avenue across from Trader Joe’s.
> Jimmy Hulas opened in downtown Orlando, next to Basement bar and across from Shots.
> Foxtail Coffee opened two locations in the University of Central Florida and another in College Park.
> LongHorn Steakhouse opened in the north I-Drive retail corridor across from Orlando International Premium Outlets.
3 Central FL Research & Forecast Report | Q3 2018 | Retail | Colliers International
SALES ACTIVITY
PROPERTY ADDRESS PROPERTY TYPE BUYER NAME SIZE (SF) SALES PRICE SUBMARKET
Center of WInter Park | 501 Orlando Ave. Lifestyle Center AEW Capital Management 244,977± $72,750,000 ($297/SF) Winter Park
Loch Leven Plaza | 18955 US-441 Grochery-Anchored Publix Supermarkets 72,780± $18,783,300 ($258/SF) Mt. Dora
Vine Street Square | 3105-3199 W. Vine St. Grochery-Anchored East Coast Acquisitions 118,000± $16,784,000 ($142/SF) Kissimmee
LEASING ACTIVITY
PROPERTY ADDRESS SPACE TYPE TENANT NAME SIZE (SF) LEASE TYPE SUBMARKET
2625-2785 N. Hiawassee Rd. Neighorhood Center New West Colonial
375-749 S. Semoran Blvd. Neighorhood Center El Presidente 36,245± New 436 Corridor
Rainer Rd. & South Pearl Causway Freestanding Caliber Collision 16,892± New Maitland Center
SUBMARKET BREAKDOWN
Submarket Bldgs.Total Inventory
SFDirect Vac. % Total Vac. %
Net Absorp. Current Qtr. SF
Net Absorp. YTD SF
New Completions SF
Under Construc. SF
Avg. Direct Asking Rate NNN
Downtown
Q3 '18 69 4,117,046 7.0% 7.1% 1,787 -76,487 0 100,000 $18.80
Kissimmee/St. Cloud
Q3 '18 176 8,991,910 4.6% 4.6% -45,126 7,473 0 0 $14.38
Altamonte/Longwood
Q3 '18 88 5,523,801 4.9% 5.0% -8,253 37,870 0 0 $17.22
Lake Nona/Southeast Orange
Q3 '18 102 5,528,915 4.3% 4.7% 1,865 43,841 0 122,386 $20.75
East Orange
Q3 '18 135 6,780,702 5.7% 5.7% -9,236 -40,864 0 0 $16.90
Northwest Orange
Q3 '18 131 8,231,081 8.3% 8.3% 45,201 30,826 0 500,000 $19.10
Sanford/Lake Mary
Q3 '18 90 5,666,230 7.0% 7.2% -7,996 2,731 0 0 $16.74
Oviedo/Winter Springs
Q3 '18 122 6,732,972 6.5% 6.6% 106,185 12,812 0 0 $16.13
Sand Lake/Tourist
Q3 '18 216 14,496,345 2.6% 2.6% 11,655 84,174 0 0 $24.69
West Orange
Q3 '18 52 2,690,032 3.0% 3.0% 4,964 19,082 0 0 $19.58
Clermont/Lake County
Q3 '18 41 2,172,898 2.4% 2.4% -2,153 78,798 0 0 $16.07
Winter Park/Maitland
Q3 '18 35 1,667,566 2.9% 2.9% 42,110 69,704 0 0 $30.30
CENTRAL FLORIDA OVERALL MARKET
Qtr. & Year Bldgs.Total Inventory
SFDirect Vac. % Total Vac. %
Net Absorp. Current Qtr. SF
Net Absorp. YTD SF
New Completions SF
Under Construc. SF
Avg. Direct Asking Rate NNN
2018 Q3 1,274 73,846,903 5.1% 5.1% 145,397 272,883 0 722,386 $18.51
2018 Q2 1,274 73,846,903 5.3% 5.3% -44,430 127,486 12,950 722,386 $18.64
2018 Q1 1,273 73,833,953 5.2% 5.3% 171,916 171,916 70,802 675,336 $18.20
2017 Q4 1,272 73,763,151 5.4% 5.4% 473,332 1,527,814 236,684 683,752 $17.45
2017 Q3 1,269 73,526,467 5.6% 5.7% 537,333 1,054,482 281,461 807,486 $16.79
2017 Q2 1,265 73,245,006 6.0% 6.1% 121,494 517,149 160,551 1,088,947 $17.02
4 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International
Copyright © 2018 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
Colliers International | Central FL255 South Orange Ave., Suite 1300 Orlando, FL 32801407.843.1723colliers.com/centralflorida
Justin Frye, CPRCSr. GIS & Research [email protected]
Investment SalesInvestment sales saw a steady increase in transactions in the third quarter, marked by 49 retail assets trading hands, up from 46 in the prior quarter. Only two grocery-anchored centers sold this quarter, one of which was Publix-anchored. Investor appetite remains strong for grocery-anchored centers, unanchored strip centers and NNN properties. Big box often receives interest, but does not transact as investors either shy away or attempt to discount the price at a rate sellers won’t accept.
Buyers active in the third quarter were primarily private capital groups and some foreign capital. REITs have generally acted as net sellers the past two quarters, while institutional investors have begun to search secondary markets, such as Orlando, in search of higher yields amid rising interest rates. Locally, cap rates on Publix-anchored shopping center sales averaged 6.5%, while unanchored strip centers fell closer to 7% and big box reaching 8% and above. It is anticipated the beginning of the fourth quarter will see another uptick in investment activity prior to the interest rate hike announced for December.
The inevitable increase of interest rates have sped up investment activity. Buyers and sellers anticipate these hikes will begin having a significant impact on pricing and cap rates and are eager to lock in rates. Debt capital remains available for retail with limited amounts for big box assets.
New DevelopmentApproximately 722,286 square feet of new product is underway for Central Florida. Many of these developments are slated for completion the final quarter of 2018 or early 2019.
These projects include:
> A Publix-anchored shopping center, Lake Nona Creekside, is under construction in Lake Nona, located at the northwest corner of Boggy Creek Road and Lake Nona Boulevard. The center will include a 46,000-square-foot Publix, scheduled to open in October, along with nearly 11,000 square feet of retail with tenants including Giovanni’s, 7-Eleven, Lee Nails, Nationwide Vision and AT&T.
> In September, local developer Timothy Green announced plans for a $300 million mixed-use entertainment district just north of downtown Orlando’s Amway Center. The 12-acre project would include more than 1.5 million square feet of mixed-income housing, retail, an office tower and a hotel.
> Equinox Development announced plans for WaterStar Orlando, a 48-acre project across from Margaritaville Resort Orlando, east of the State Road 429 and U.S. 192 interchange. The development would include more than 200,000 square feet of retail and entertainment and overlook a 5-acre lake.
> Halvorsen Holdings announced plans for a Publix-anchored shopping center across from the Providence golf community in Polk County. The shopping center, dubbed “Loughman Crossing,” calls for a 52,739-square-foot store with approximately 20,000 square feet of attached retail and five outparcels.
> Unicorp National Developments Inc., the developer behind I-Drive 360, the up-and-coming O-Town West and many more, announced a $200 million project in Daytona Beach that will include roughly 200,000 square feet of retail, 300 luxury apartments and 200 homes. Construction is slated to begin the first quarter of 2019 and will be completed in three phases.
Danny RiceManaging Director & Market LeaderCFL, Tampa, SWFL, Clearwater [email protected]
Sean GlickmanExecutive Managing DirectorRetail Investment [email protected]
Joanna RobinsonManaging DirectorRetail [email protected]
Jeffrey JohnsonAssociateRetail [email protected]
Scott CorbinExecutive Managing DirectorRetail [email protected]
Jorge Rodriguez, CCIMExecutive Managing DirectorRetail [email protected]
Brandon RaponeSenior AssociateRetail Investment [email protected]
Michael SweeneyAssociateRetail [email protected]
Ryan KratzPresidentSoutheast Region | U.S. [email protected]
David GabbaiExecutive Managing DirectorRetail [email protected]
Genny HallManaging DirectorRetail [email protected]
Chris SmithSenior AssociateRetail Investment [email protected]
Updated May 2012
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