It's beginning to look a lot like ...a boom

It's beginning to look a lot like ...a boom

RETAIL INDUSTRY TRENDS by Mark Gordon | Managing Editor

A population spurt is driving growth in shopping centers all along the Gulf Coast. Highlights include a new JCPenny concept, a Best Buy in every market and a segment of tiny national retailers.

Housing may be slumping and a property insurance crisis threatens, but retail is booming in Florida. Few places is that more true than on the Gulf Coast - and particularly Lee County - where population is driving several large retail projects, according to several experts.

"There's buying power from all kinds of sides," says Brad Peterson, a Trammell Crow Co. analyst who studies the Gulf Coast retail market. "You have it from retirees, young folks and tourists."

Trammell Crow, a global real estate firm, and Orlando-based Crossman & Co. contributed to an extensive research report on the retail market for an International Council of Shopping Centers conference held in Orlando last month. Statewide, the report shows several trends connected to population growth, which Trammell Crow predicts will continue to push the state's economy forward.

For example, Florida leads the way nationwide in population growth projections: 15 of the 100 fastest growing U.S. counties are in Florida, including the biggest gainer, Flagler, which grew 10.7% in 2005, according to the U.S. Census Bureau. On the Gulf Coast, Lee County grew 5.8% last year and both Pasco and Hernando counties grew 5.2% each. The Tampa Bay-area population has grown 9.5% since 2000, to nearly 2.7 million full-time residents.

Plus, the people who live in and are moving to the Gulf Coast tend to make more money, the report shows, as the Naples and Fort Myers areas are state leaders in mean and median incomes. The Sarasota market tends to rank high in those surveys as well, but the ICSC report includes that market in the Tampa region.

The report concedes the much-discussed negative factors are real problems for the industry: Housing costs are forcing people to look elsewhere to live; gas prices have remained high; construction costs continue to climb; and the property insurance industry is on the verge of an overhaul, breakdown or some combination.

On some of those fronts, though, Peterson remains optimistic, because if people move away from the high-cost coastal areas, they won't move too far, he predicts. They will go inland in many counties, such as Lee and Collier, north and east in Manatee County. Those areas are exploding in growth, Peterson says, and the proof is in the planned retail centers being built and financed.

Here's a look at retail trends on the Gulf Coast, as well as a glimpse at future retail projects. The Sarasota-Bradenton area is considered part of Greater Tampa in the International Council of Shopping Centers report and the Fort Myers and Naples areas are broken out into separate regions.

Tampa/Sarasota

The Tampa Bay-Sarasota-Bradenton-area retail market in 2006 is growing, albeit less and at a slower pace then in the past two years. Vacancy rates are going down, slightly, and rental rates are going up.

Overall, the area has about 101.1 million square feet of retail space, with about 6.4% of it vacant. The average rate per square foot of space is $13.21, with new projects reaching the high $20 range. The average rate for space is up 2.6% from 2005, when space was going for $12.89 per square foot.

The more noticeable slowdown in the market comes from sales of shopping centers. "After seeing a number of centers close at prices above $140 per square foot in 2005 and one over $200," the ICSC report states, "there are still no sales in 2006 to surpass $100 per square foot."

The growth, therefore, will come from new centers, and there are several large ones being planned and developed, including:

l University Towne Center: Expected to be 2 million square feet when completed, the center will be anchored by a SuperTarget expected to open in October. Other stores to open in 2007 include Best Buy, Bed Bath & Beyond and PetSmart. The center is less than a mile from the University Parkway exit of Interstate 75, on the Sarasota-Manatee county line.

l The Shops at Wiregrass: One of three large centers in the works for Pasco County, the more-than-one-million-square-foot town center-style development in Wesley Chapel will be anchored by Dillard's and JCPenny, with more than 100 specialty shops and restaurants. The JCPenny store will mark the debut of a new concept for the national retailer, as it plans to provide shopping carts and put its cash registers at the front, like SteinMart or Target;

l The Grove at Wesley Chapel: Another large center for Wesley Chapel, this one an 835,000-square-foot plaza featuring a Best Buy and a Dick's Sporting Goods. The center is 98% pre-leased;

l Cypress Creek Town Center: The Richard E. Jacobs Group is planning this development for 2 million square feet on State Road 56, near I-75 in southern Pasco County.

Fort Myers

Greater Fort Myers is not only one of the hottest retail areas in the state, but in the country, the ICSC report shows. The boom stems from a combination of massive population growth and available land for new retail developments.

A peek at Lee County building permits shows that growth most dramatically: More than 29,000 building permits were issued in 2005 and another 11,000 were issued through May of this year.

Those increases are greater than the totals of any other Florida county by a wide margin, the report shows, and what's more, accounted for 11% of single-family building permits in the entire state, according to the Bureau of Economic and Business Research at the University of Florida.

To meet the population boom, there's 4 million square feet of retail space in the pipeline, a whopping 40% bump from the current inventory of 9.6 million square feet. And with most of the space in the new centers already pre-leased, rates in the new buildings are spiking, going as high as $30 per square foot.

Several large centers are in the works for the area, including at least three that are 1 million square feet and up. New projects include:

l Coconut Point Town Center: Built by Simon Property, the open-air center in Estero is expected to have about 1.2 million square feet of space. The Estero area already boasts an outlet mall, which has been a regional draw.

l The Loop: A million-square-foot project in Punta Gorda being developed by the Wilder Co., a Boston-based development firm. The company has already built a Loop project in the Orlando area, featuring a mix of retail, dining and entertainment in an outdoor, old-town center like environment.

l The Gulf Coast Town Center: At 1.7 million square feet when completed, the Fort Myers center is expected to include a Bass Pro Shops, a Belk department store and a Best Buy. Expected restaurants include Blu Sushi, Bar Louie and P.F. Chang's.

Naples

Naples and Collier County have a two-fold boost from the population boom and its impact on the retail sector. First, the county continues to grow, even as housing prices squeeze many in service and hospitality sectors out of the area. Second, the population increases by about 25% from November to April, from 320,000 people to 420,000 people.

And the residents, both seasonal and year-round, spend money, the ICSC report shows. Naples has the highest mean and median income in the state in 2006, at $84,400 and $56,700 respectively. Also, 1.4 million tourists visited Collier County in 2005, generating more than $1 billion in economic activity.

The pending and current developments are dotted with the types of stores and centers that mirror an area with such high-end residents. New projects include:

l The Mercato: Scheduled to open in 2007, the Lutgert Co. development at the extension of U.S. 41 and Vanderbilt Beach Road is expected to have Main Street style restaurants and stores, as well as a Whole Foods. It's projected at about 375,000 square feet.

l Waterside Shops: The center has been overhauled over the last year and new, tony tenants include Burberry, Gucci, Tiffany & Co. and Nordstroms.

l The Collection at Vanderbilt: The 235,000 square-foot Woolbright Development project on Vanderbilt Beach Road is being built in two phases. A Fresh Market will anchor the first phase, expected to open by the end of the year.

AT A GLANCE

The Florida grocery industry

The Florida grocery market industry has been going through a period of change, yet at least one fact holds: Publix is still the king.

The Lakeland-based company has a little more than 40% of the grocery store market share in Florida. And its closest grocery-only competitor, Winn-Dixie, has not posed much of a threat over the last few years, as the Jacksonville-based chain continues to sell stores nationwide as it reorganizes under bankruptcy.

According to the International Council of Shopping Centers Florida retail report, here are some other trends for the grocery market sector expected over the next year: Albertsons plans to close 100 under-performing stores in several states, including Florida; SweetBay plans to convert all of its Kash n' Karry stores in the Tampa area to the SweetBay name by the end of the year, with the rest of the state's stores to follow by 2007; and Publix will build two new stores in South Florida under its Sabor brand, which caters to the Hispanic community.

­-Mark Gordon

Florida Grocery Market Share

Retailer Number of stores %Market share

Publix 642 40.6%

Wal-Mart Supercenter 130 23.1%

Winn-Dixie 395 13.9%

Albertsons 104 5.1%

Kash n' Karry 109 3.3%

SuperTarget 21 1.5%

Save-A-Lot 75 1.4%

(There are 13 other chains with a market share of under 1%, including Whole Foods Market, Fresh Market and Sarasota-based Richards Whole Foods.)

Source: Shelby Report of the Southeast, International Council of Shopping Centers

Florida Income by MSA

MSA 2006 Mean 2006 Median

Alachua County $54,100 $36,100

Broward County $66,500 $48,200

Daytona $54,700 $41,700

Fort Myers $66,300 $47,800

Jacksonville $65,200 $49,500

Miami-Dade County $60,400 $41,400

Naples $84,400 $56,700

Ocala $48,300 $37,600

Orlando $63,400 $47,700

Palm Beach County $76,200 $51,200

Panama City $54,600 $42,800

Port St. Lucie $61,900 $44,500

Tallahassee $56,900 $42,100

Tampa* $59,600 $44,000

*The Tampa area includes the Sarasota-Bradenton MSA.

Source: Claritas, International Council of Shopping Centers

Recent Shopping Center Sales/Naples

Property Size Year Built Price Sale date Occupancy Buyer Seller

Naples Town Centre 109,372 1983 $11.7/$107 March, 2006 98% Buckingham Properties Naples Towne Centre Associates

Norris Furniture Building 45,832 1999 $11.6/$254 February, 2006 100% Interface Naples LLC Larry G. Hendricks

Naples South Plaza 87,146 1980 $16.6/$190 December, 2005 N/A DBR Asset Management Naples South Realty Associates

(Price represents total in millions/per square foot)

Source: International Council of Shopping Center, Trammel Crow Co., Crossman & Co., The East Coast Retail Investment Team

Recent Shopping Center Sales/Fort Myers

Property Size Year Built Price Sale date Occupancy Buyer Seller

Colonial Shoppes College Parkway 78,879 1970 $13.5/$171 March, 2006 100% The Cornfeld Group Colonial Properties Trust

Colonial Sqaure Center 38,210 1980 $4/$105 March 2006 N/A Colonial Omni Realty LLC Colonial Square Shopping Center Inc.

Circuit City Center 50,700 1991 $8.3/$164 November, 2005 N/A Jaffe of Weston II Inc. Circuit City Center of Fort Myers

(Price represents total in millions/per square foot)

Source: International Council of Shopping Center, Trammel Crow Co., Crossman & Co., The East Coast Retail Investment Team

Recent Shopping Center Sales/Tampa Bay

Property Size Year Built Price Sale date Occupancy Buyer Seller

Former Kmart 119,530 1993 $4/$33 March, 2006 N/A Paradise Development Corp. Krausers Korner LLC

Palm Harbor Plaza 43,000 1986 $4.2/$98 March, 2006 88% Springhill Partners LLC Ross G. Tidemann

Strawberry Plaza, Plant City 109,172 1986 $10.1/$93 March, 2006 73% Kendall Pavillion LLC Lindell Properties

Polk Parkway, Lakeland 53,750 1979 $2.9/$53 March, 2006 N/A Lakeside Manor Apartments Inc. Ten Cap Partners

(Price represents total in millions/per square foot)

Source: International Council of Shopping Center, Trammel Crow Co., Crossman & Co., The East Coast Retail Investment Team