A total 7.8 million sf of new space is either proposed or under construction. On the drawing boards is another 2.5 million sf. A total 3.9 million sf came on line in the last 12 months. And the average vacancy rate of 9% is one of the lowest in the state.
"Orlando continues to exhibit strong population and employment growth, translating to an increase in demand for retail products and services," Real Estate Specialists Inc. president Alan Charron tells GlobeSt.com.
Retail expansion in the immediate future is expected to be dominated by new mall construction and expansion of existing properties, category killers and supercenters locating in new markets and repositioning in old ones.
Charron notes, however, "This activity is expected to decline once the projects in the pipeline are completed." He also anticipates seeing more existing retailers complement in-store sales with online sales.
Retail property transactions volume was down over the last 12 months, but the average price psf was up. A total of 2.66 million sf was transferred versus 3.37 million sf exchanged in the comparable period a year ago. The average price psf rose to $66.66 compared to $60.56 in the previous period.
Retail land prices are staying steady. Shopping center sites exceeding 10 acres are selling in the $6 psf range. One to two-acre outparcel sites are going for $13 to $18 psf.The highest price psf for a grocery-anchored center was $117.49 psf for a newly-completed Publix hub on South Orange Blossom Trail in the vibrant Southchase/Hunter's Creek area.
Orlando remains a seller's market, Charron says. Cap rates remain fairly steady from last year's level. However, "the Federal Reserve's persistence in raising interest rates to cool the economy will ultimately lead to higher cap rates due to slower growth and increased cost of capital," the broker believes.
Currently, quality-anchored newer projects are selling at around 9% caps. Older class B anchored and unanchored strip centers are selling at or above a 10.5% cap.
Freestanding facilities net leased to credit tenants are still selling at a premium with cap rates as low as 8%. The reason: Investment safety; scarcity of product; buyer competition, particularly among the 1031-Exchange buyers; and availability of attractive single-tenant financing.
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