Tampa, Miami, Orlando Make Florida the Heart of US Retail Rent Growth
Tourism Dollars, Population Increase Help Florida Landlords, Analysts Say

By Paul Owers
CoStar
Published: Apr 15, 2019

Florida is the center of retail rent growth in the United States, a sign the tourist-centric state may be benefiting from visitors amid the changing landscape of stores and restaurants.

Tampa Bay, Miami-Dade County and Orlando rank among the top six regions in the country for retail rent growth, making Florida the only state with more than one area on that list. Visitors to tourist areas from Walt Disney World to Miami Beach may be helping Florida's retail landlords boost their bottom lines.

Greater Tampa's year-over-year same-store rents increased 5.9%, according to CoStar data. Only Sacramento, California, at 7.3%, and Nashville, Tennessee, at 6.2%, were better.

Miami-Dade, at 3.9%, was fifth behind Portland, Oregon's 4.1%. Orlando and Baltimore tied for sixth at 3.8%.

A large percentage of retail sales in Florida comes from visitors, who are less likely to indulge in online shopping, explained Christos Costandinides, an economist for CoStar Market Analytics.

"When they're on vacation, they want to shop in the stores – not online,” he said, adding that increased store traffic leads to higher sales and eventually pricey rents.

Costandinides and CoStar analyst Elinor Avant Gutierrez addressed retail and other commercial real estate sectors in two state-of-the-market presentations to brokers and other professionals in Miami and Fort Lauderdale, Florida.

They explained that brick-and-mortar retail nationwide is undergoing a major shift influenced by the emergence of e-commerce. Mall owners are re-imagining older properties to attract millennials, many of whom prefer to shop on the Internet. Some owners are adding so-called experiential retailers, incorporating housing into the malls or knocking down the buildings and replacing them with modern outdoor shopping venues.

"A big part of it is, if you're not growing, you're dying," said Dave Preston, executive managing director for retail sales for Colliers International in Miami.

"If you're not keeping up with current trends, you're not maximizing the value of your property. A lot of these developers are paying top dollar, and they've got to figure out a way to squeeze every dime of net operating income out of the property that they can."

Florida's steady population growth also is a likely reason for robust retail rents, noted David Restainer, managing director of commercial real estate for the Douglas Elliman brokerage.

"If you walk around Brickell [Avenue in Miami] or downtown Fort Lauderdale, you see an awful lot of young people in the urban core," he said.

In Miami-Dade, experiential retailers have moved to trendy neighborhoods such as the Miami Design District and Wynwood, Costandinides said. He also noted that retail stalwarts Macy's and Bloomingdale's pulled out of the $4 billion Miami Worldcenter along NE 1st Ave. after the downtown development switched from an enclosed mall to an outdoor center with plans to attract restaurants and lifestyle tenants.

"Miami is ahead of the curve,” Costandinides said. "Retail is all about the experience. A store is no longer the place you go to pick up the product. It's the place you go to experience the product.”

Meanwhile, Miami-Dade leads the United States with the highest level of retail construction as a percentage of total inventory, CoStar data shows. The county's 3.3 million square feet accounts for more than 2% of the existing inventory. New York ranked second, with its 9.1 million square feet representing more than 1% of its retail inventory.

Retail construction has slowed dramatically nationwide, but it's too soon to tell if the still-strong fundamentals in Tampa Bay and Miami-Dade mean those areas have escaped the brunt of the retail transformation, Costandinides warned.

"It could just be a delayed reaction,” he said.