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Summary Statistics Q3 2016 Retail Market Tampa Bay, FL
Vacancy Rate 7.0%
Change From Q2 2016 (Percent) +0.2%
Absorption (Square Feet) (70,999)
New Construction (Square Feet) 44,000
Under Construction (Square Feet) 121,267
Asking Rents Per Square Foot Per Year
Current Quarter $13.93
Previous Quarter $13.39
Year Ago $13.48
Market Indicators
Relative to Prior Period Q3 2016 Q4 2016*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE *Projected
Local Tenants Displaced as Class A Rates Continue to ClimbExecutive SummaryThe Tampa Bay retail market remained strong through the third quarter of 2016. Tenants reported strong activity and sales throughout Tampa Bay. Job growth, rising incomes, new housing development and increased tourism have positively influenced the market. Landlords are holding firm on rates and nearly all submarkets are experiencing robust activity.
The strength of the market has lent substantial negotiating power to landlords. In some cases, local tenants are being displaced by national, creditworthy tenants throughout the market. Some national credit tenants are beginning to resort to Class B assets in locations near their preferred, Class A spaces.
Investor demand was steady through the third quarter. Capital remains abundant and inexpensive. However, total transaction volume is down nearly 50 percent compared to the third quarter of 2015. Grocery-anchored retail assets continue to be the most preferred retail asset for investors. Investor interest in experiential retail continues to grow.
Market Highlights > The cost of acquiring land for retail development has become very expensive in recent quarters. Land costs are beginning to top out across the Tampa Bay region.
> Although investors continue to demand and prefer grocery-anchored retail assets, investors have growing interest in “experiential retail.” These assets contain tenants that are highly resilient to the sales disruption caused by e-commerce.
> Negative absorption in Tampa Bay’s retail market is sourced primarily from the mass closings of Sports Authority stores. Sports Authority vacated six stores and approximately 200,000 square feet in Tampa Bay. This fact, when combined with the area’s normal absorption, resulted in a negative outcome.
Research & Forecast Report
TAMPA BAY | RETAILThird Quarter 2016
2 Tampa Bay Research & Forecast Report | Q3 2016 | Retail | Colliers International
Completions, Absorption and Vacancy Rates
Source: Colliers International, CoStar
Unemployment Trends
Source: US Bureau of Labor Statistics
0%
2%
4%
6%
8%
10%
12%
-200-1000100200300400500600700800900
Q3 '16Q2 '16Q1 '16Q4 '15Q3 '15
Vac
ancy
Squ
are
Feet
(In
Thou
sand
s)
Completions Net Absorption Overall Vacancy
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Aug-
16
Feb-
16
Aug-
15
Feb-
15
Aug-
14
Feb-
14
Aug-
13
Feb-
13
Aug-
12
Feb-
12
Aug-
11
Florida Tampa MSA USA
The Tampa Bay MSA unemployment rate posted 4.6 percent inAugust 2016. The State of Florida rate posted 4.9 percent unemployment, mirroring the national average.
Vacancy Continues to RiseTampa Bay’s vacancy continued to rise in the third quarter of 2016, totaling 70,999 square feet of negative absorption.
Market ActivityOverall vacancy in the Tampa Bay retail market increased by 0.2 percentage points from Q2 2016, totaling 7.0 percent for the third quarter of 2016 with 70,999 square feet of negative absorption. The Westshore/NW Tampa and Mid-Pinellas submarkets posted the lowest total vacancy, both at 6.1 percent. The Pasco County submarket reported the highest total vacancy at 8.3 percent with 31,858 square feet in absorption.
Throughout Tampa Bay, numerous submarkets are experiencing robust tenant and leasing activity. Only areas that have not yet gentrified are seeing less demand, such as Port Richey, New Port Richey, Holiday and Hudson.
Landlords continue to have strong pricing and negotiating power throughout the Tampa Bay retail market. For desirable space in Class A centers, there are often multiple letters of intent on a single space. This has given landlords several options when choosing their preferred tenant mix, as well as a diverse choice of creditworthy tenants.
Leasing ActivityLeasing activity was steadily higher in all regions of the metropolitan area and in all property classes. Several micro-markets, such as South Tampa, Sarasota and Old Northeast in St. Petersburg, saw asking rental rates of $55 per square foot (PSF). During the third quarter, Tampa Bay’s average retail rental rate increased by 54 cents from $13.39 to $13.93 PSF.
Retail space ranging from 1,800 to 2,500 square feet is in high demand. End cap space maintained a premium rate through the third quarter and is difficult to find throughout the region. Visibility from passerby traffic remains a highly desirable attribute for retail space.
Overall, very little free rent is available on new retail leases. Tenant improvement allowances are available primarily for creditworthy tenants.
Active TenantsQuick-serve restaurants, health clubs, pizza concepts, medical (including dental and vision), pet care, household improvement and home furnishing stores were active in the third quarter of 2016.
New retail tenant openings for the third quarter of 2016 include:
> Portillo’s opened near University Mall on East Fowler Avenue.
> Earth Fare, HomeGoods, Bealls, Pollo Tropical and Five Below opened in Seminole Town Center.
> Ulta, Stein Mart and Kirklands are still under construction at Seminole Town Center.
> Sprouts has announced three stores averaging 30,000 SF each throughout Tampa Bay (South Tampa, Carrollwood, and Palm Harbor).
> Cheddar’s Scratch Kitchen opened in Wesley Chapel at Cypress Creek.
> Tibby’s in Brandon has opened on W. Brandon Boulevard, across from Portillo’s.
> Goody Goody has opened at Hyde Park Village on W. Swann Avenue.
3 Tampa Bay Research & Forecast Report | Q3 2016 | Retail | Colliers International
SALES ACTIVITY
PROPERTY ADDRESS PROPERTY TYPE BUYER NAME SIZE (SF) SALES PRICE SUBMARKET
Mitchell Ranch Plaza on Little Road Power Center Publix 199,554± $55,600,000 ($279/SF) Pasco
Fountain Oaks Business Center Mixed-Use Dalfen America 205,443± $19,500,000 ($95/SF) NW Tampa
Lake Brandon Shoppes Strip Center Crow Holdings Capital 20,453± $7,500,000 ($380/SF) East Tampa
LEASING ACTIVITY
PROPERTY ADDRESS SPACE TYPE TENANT NAME SIZE (SF) LEASE TYPE SUBMARKET
4340 W. Hillsborough Avenue Community Center Crunch Fitness 38,000± New NW Tampa
4340 W. Hillsborough Avenue Community Center Altitude Trampoline Park 31,400± New NW Tampa
40840 U.S. Highway 19 North Community Center Ulta Beauty 12,308± New North Pinellas
SUBMARKET BREAKDOWN
Submarket Bldgs.Total Inventory
SFDirect Vac. % Total Vac. %
Net Absorp. Current Qtr. SF
Net Absorp. YTD SF
New Completions SF
Under Construc. SF
Avg. Direct Asking Rate NNN
Pasco County
Q3 '16 217 11,942,725 8.3% 8.3% 31,858 27,895 0 0 $11.87
Westshore/NW Tampa
Q3 '16 246 14,400,890 5.9% 6.1% (23,174) 72,368 0 0 $15.22
I-75 Corridor
Q3 '16 216 12,271,258 6.4% 6.4% (71,708) (79,953) 0 0 $11.73
North Pinellas
Q3 '16 170 8,103,302 6.6% 7.5% (15,603) 2,314 0 0 $18.52
Mid-Pinellas
Q3 '16 198 9,690,270 6.1% 6.1% (25,231) 131,915 0 85,000 $13.35
South Pinellas/St. Petersburg CBD
Q3 '16 155 7,879,082 6.8% 8.7% (27,309) 43,447 0 0 $11.81
TAMPA BAY OVERALL MARKET
Qtr. & Year Bldgs.Total Inventory
SFDirect Vac. % Total Vac. %
Net Absorp. Current Qtr. SF
Net Absorp. YTD SF
New Completions SF
Under Construc. SF
Avg. Direct Asking Rate NNN
Q3 2016 1,347 70,782,355 6.6% 7.0% (70,999) 330,224 44,000 121,267 $13.93
Q2 2016 1,346 70,738,355 6.6% 6.8% 223,019 401,223 55,765 165,267 $13.39
Q1 2016 1,345 70,682,590 6.9% 7.1% 178,204 178,204 178,415 221,032 $12.90
Q4 2015 1,341 70,504,175 6.9% 7.1% 759,511 1,081,502 604,740 319,180 $13.37
Q3 2015 1,337 69,899,435 7.1% 7.4% 208,332 321,991 0 838,920 $13.48
Q2 2015 1,337 69,899,435 7.3% 7.7% 164,831 113,659 0 701,490 $13.66
Q1 2015 1,337 69,899,435 7.5% 7.9% (51,172) (51,172) 44,687 657,490 $13.97
Q4 2014 1,336 69,854,748 7.4% 7.8% 218,321 878,299 0 535,627 $13.94
Q3 2014 1,336 69,854,748 7.7% 8.1% 208,978 659,978 0 44,687 $13.99
FOR MORE INFORMATION
Mike Gordon, CPRCGIS & Research [email protected]
Investment SalesThe Tampa Bay retail investment market was robust through the close of the third quarter. Capital remains abundant and inexpensive for acquiring retail properties. Despite this, transaction volume is lower this year, down 50 percent compared to the third quarter of 2015.
Publix continues to be the preferred retail investment asset. However, as Publix continues to acquire many of the centers containing its stores, investor interest is shifting to other grocers in the market as well as “experiential retail.” These retailers are increasingly resilient to the sales disruption of e-commerce.
Average cap rates on Publix-anchored centers hover at 6 percent, while other grocery-anchored centers range from 7 to 8.5 percent. Unanchored strip centers average between 7.5 to 9 percent, depending on the location.
Triple-net (NNN) retail assets are commanding cap rates as low as 5 percent with strong locations and credit. Restaurants and auto parts stores are among the most desired tenants for NNN retail. There were 71 NNN transactions in the third quarter in Tampa Bay. These assets traded 80 basis points lower in cap rate than the national average for NNN retail.
New DevelopmentDuring the third quarter, 44,000 square feet of retail space was completed and 121,267 square feet remained under construction in the Tampa Bay market.
Notable completions and announcements include:
> Rivercrest Commons, a Publix-anchored center, is near completion in Riverview off South Highway 301.
> Sears at Tyrone Mall in St. Petersburg is being redeveloped. The plan includes a Lucky’s Supermarket, PetSmart and Dick’s Sporting Goods, as well as several outparcel buildings.
> Thorntons and additional in-line retail is under construction on 34th Street North in St. Petersburg.
> Construction has begun on a mixed-use residential property at East Twiggs and Meridian in Channelside and will include a newly constructed, 38,000 square foot Publix.
> Kennedy Boulevard is seeing numerous redevelopment projects, such as: (1) A multi-tenant retail development at Henderson Blvd. and Kennedy Blvd. at the Central State Vacuum site; (2) A 9,000 square foot strip center at Kennedy Blvd. and Dale Mabry Hwy.; and, (3) the redevelopment of Kuhn Plaza on Kennedy Blvd. between Grady and Hale Avenues is set to begin.
Jim KovacsManaging DirectorRetail [email protected]
Stephanie AddisDirectorRetail [email protected]
Amy Barrett, CCIMSenior AssociateRetail & Land [email protected]
Christopher Pollard, J.D.AssociateRetail Investment [email protected]
Mike Milano, CCIM, MAIManaging DirectorRetail Investment [email protected]
Tom ChambleeDirectorRetail & Land [email protected]
Tyler Peterson, CCIMSenior AssociateRetail [email protected]
Melissa Riccardi, CPMC, CPRCClient Services SpecialistRetail [email protected]
Ryan KratzPresidentCentral | Tampa Bay | Southwest [email protected]
Lisa McCaffreyManaging DirectorRetail [email protected]
Ron SchultzDirectorRetail Investment [email protected]
Britney Mroczkowski, CCIMAssociateRetail & Land [email protected]
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Updated May 2012
CONTRIBUTORS
Thevenin J. Campton, CPMC, CPRCClient Services [email protected]
4 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International
Copyright © 2016 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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