"After several major retailers declared bankruptcy in 2001 and 2002, the worst seems to be over," Trammell Crow senior associate Amy Young tells GlobeSt.com.
But submarkets with rising vacancies continue to be found at the 11-building, 2.9-million-sf International Drive tourist area; the 20-building, 2.3-million-sf Casselberry-Winter Springs hub; the seven-building, 645,732-sf St. Cloud area; the 109-building, 1.3-million-sf Clermont market; the 15-building, 1.8-million-sf South Orange axis; and the 24-building, 3.6-million-sf central area of Orlando.
I-Drive vacancies are at 14.52%, the highest of all 21 submarkets monitored by Crow but still an improvement from 16.21% vacancy in June 2003. Casselberry-Winter Springs is at 13.02% vacancy, up from 12.33% in mid-2003.
St. Cloud, 15 miles from Walt Disney World in Osceola County, shows a 10.85% vacancy, up from 1.67% eight months ago. Clermont in South Lake County has a 10.4% vacancy level, up from 2.4% in the summer of last year. South Orange County space is 10.84% vacant, up from 10.14% in June of last year. Central Orlando vacancies are at 11.1%, up from 10.09% in mid-2003.
"The hottest retail markets in Orlando continue to reflect the residential growth patterns and infrastructure improvements, as well as the ever-changing lifestyles of Orlando residents," says Young. "Strong residential growth in the East, West and Southwest Orlando areas make these markets the hottest in terms of retail development and planned commercial growth." Additionally, the broker says "the renaissance of urban living has positioned Downtown as a retail hot spot, with easy lifestyles dictating retail growth."
Wal-Mart, Kohl's, Target, Home Depot and Lowe's continue their expansion plans in the metro area; but big-box powerhouse centers "continue to fight for market share with many new developments" in Orlando, Young says. "At the north end of metro Orlando, Wal-Mart, Lowe's, Linens-N-Things and Bed, Bath and Beyond are all establishing their positions" in the Sanford market on Rinehart Road in the path of the Florida Greenway (State Road 417) extension.
"The many power centers planned for the South Orange County/Kissimmee markets (however) are fighting for tenants, as retailers try to strike the best deals with their numerous options," Young says. But vacated space by several Kmart stores, which typically use 80,000 sf to 100,000 sf per store, "will appeal to a variety of big-box retailers … making the space more affordable" as landlords are forced to offer more concessions.
In the grocery sector, the expected closing this year of 34 Kash N Karry stores in Florida totaling two million sf "will put many landlords at a disadvantage, as Kash N Karry pays above-average rental rates, and to re-lease the spaces, landlords may have to agree to lower rents and agree to additional concessions," Young says.
The loss of these stores "will raise vacancy rates slightly but also presents an opportunity for more successful and possibly new grocery retailers to enter Florida's market," the broker says.
Overall, the Central Florida retail market "has remained sound, despite the war with Iraq and the slow economy," Young concludes. "Occupancy rates remained stable compared to 2002, and rental rates show a positive trend, particularly in the new-town center developments and residential growth areas.
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