Urban retail is an obvious answer to a great consumer demand in densely populated city centers around the world. In contrast, Florida retail growth has long been focused on the sprawling suburban markets, where grocery-anchored and power center retail developments flourish. Merchant developers and retail tenants live by the adage "retail follows rooftops" and suburban growth has provided just that.

While the past two years have seen condo projects finish and speculators fleeing, the vast majority of existing condo units have been or will be absorbed, and whether in the form of renters or owners, this absorption will provide a tower full of consumers. Considering the lifestyle of a typical condominium resident, they comprise a highly sought-after demographic for retailers: "laptops and lattes" and "empty nesters" which both boast high discretionary incomes and a steady appetite for consumer goods.

If you speak to any retail leasing professional, they will be quick to discuss the difficulties in today's retail marketplace. The current economic slowdown has stalled expansion of national tenants, while the availability of debt has increased the barriers to entry for smaller "mom and pop" tenants, both in Florida and throughout the country. Notwithstanding the current environment, these urban retail locations are offering a unique opportunity to break into underserved markets.

SkyPoint, a recently completed 389-unit Downtown Tampa condo tower, is a prime example. As residential units filled, the 10,000 sf of commercial space located on the ground floor saw a flurry of interest for leases, attracting competitive rents in the mid-$20s per sf. According to the landlord's representative, just one smaller unit remains available and is garnering serious interest from a variety of retail concepts aiming to fill the needs of the future residents, whether they are in search of a cup of coffee, a place to dine, their local bank or some form of entertainment.

Major metropolitan areas have been familiar with the term "retail condo" for the greater part of the new millennium. In areas such as New York City, Washington DC and Boston, investors have been reaping benefits that have raised premiums over time. Some NYC investors are paying upwards of $2,500 per sf for these assets, and Washington has seen sale prices over $1,000 per sf.

Even with Miami's surplus of residential condos, investors are still paying top dollar for prime retail units. As recently as July, a German investor purchased a retail condo occupied by Whole Foods for $31 million, equating to $565 per sf.

Obviously, Florida lacks a densely populated MSA to rival the name-brand cities the likes of New York, Boston and Chicago. However, as urban residential units are absorbed, retail condo units will become more prominent not only for potential tenants, but passive investors as well.

The views expressed here are those of the author and not of Real Estate Media or its publications.

Patrick Nutt is a senior associate with Calkain Cos. in Tampa. He can be reached at [email protected].