Retail spending in the Tampa Bay market is on course to decline by 11% this year, while negative net absorption reached 650,000 square feet over the past 12 months, according to Marcus & Millichap's latest research report. Asking rents decreased by a full percentage point in the first quarter alone and will likely fall at least 6% this year, to just above $14 per square foot.
As for construction, only a million square feet is expected this year, mainly in smaller projects, Marcus & Millichap projects. Last year, 3.6 million square feet was put into service, including the 642,000-square-foot Shops at Wiregrass in south Pasco County.
Negative net absorption is expected to reach 2.5 million square feet around Tampa Bay this year, possibly discouraging prospects not only for building but investment. Additional store closures are expected, putting even more vacant space back onto the market.
"With investors looking for distressed properties at discounted prices, there appears to be little interest in stabilized assets with solid tenants and little inclination to sell," says Bryn Merrey, Tampa regional manager with Marcus & Millichap. He estimates that single-tenant properties are being offered at cap rates between 8% and 9%, while multi-tenant cap rates are exceeding 10%.
Retail brokers say they won't be surprised if Tampa Bay's retail vacancy reaches 10% well before the end of the year. "Summer is a pretty slow time," observes Patrick Berman of Cushman & Wakefield in Tampa, who predicts that mark could be reached in the third quarter.
Berman tells GlobeSt.com that closings of larger retailers, such as Circuit City and Linens 'n Things, are having more of an impact on vacancy than new development. For example, the Shops at Wiregrass are currently near 85% occupancy, while Ikea's new 353,000-square-foot store near Downtown Tampa opened fully occupied.
There could be other confident retailers ready to take up some of the vacancy left behind by bankrupt merchants. For example, electronics and appliance retailer HHGregg is reportedly interested in leasing former Circuit City stores as part of its aggressive expansion into Florida.
"Now is a good time to be a big-box tenant because you can basically write your own ticket," Berman says. He recently signed Red Tag, an overstock merchandise liquidator, to a short-term lease for 61,642 square feet at Ulmerton Road and 49th Street in Clearwater, with the store's opening scheduled for Independence Day weekend.
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