Continued population growth a good sign for retailers

1. Jeff Dervech is optimistic about the retail real estate environment on Florida’s Gulf Coast. The Tampa-based executive says the population growth the state has seen in the past couple of years will continue to create demand, which means retailers will want to come into Florida and those already here will want to expand.

But that’s not necessarily easy because “there’s really, really high barriers to entry.”

“You know, they want to want to enter a lot of these sub-markets and it’s very challenging for them because there’s no available product. People that are here are continuing to stay in spaces, renew leases and they’re not going anywhere.”

With tenant demand so apparent, the outlook for the market heading into 2023 is encouraging, he says.

2. Something Dervech has his eyes on is shopping center development. He’s already seeing projects pausing for three to six months while developers wait to see how interest rates move. He’s seeing sales contracts fall through because the cost of financing got too high.

This has put some property owners in a tight spot. With it becoming more expensive to borrow funds, he says, buyers are approaching sellers saying “listen, we’ll still buy your property, but it’s going to be 30% less than our initial offer or 20% less than our initial offer.”

Property owners who are unencumbered can sit back and hold on to a property, waiting two or three years until the values rebound.  

As for property owners who have debt, Dervech believes they’ll be more willing to work with buyers. “I think that’s where the opportunity lies.” Property owners who have relatively conservative debt levels will want to work with buyers who have a plan and may be willing to be a little bit more flexible with terms and timing to get the price that they want.

3. But he cautions that given the state of the economy, how shoppers are behaving needs to be watched carefully.

“It’s very difficult, quite frankly, right now to predict 2023 from a consumer sentiment standpoint because, obviously, many are going to get impacted,” Dervech says.

He says an early sign of what may be coming is increased sales in the grocery sector starting over the summer, in response to inflation and rising interest rates. What happens in December, during the holiday shopping season, will be another good indicator of what the next year will be like.

“As we move into the first quarter of 2023. I’m curious to see how (the economy) impacts people, how they dine out,” he says. “You know, a lot of people will want to eat in if they can, get their groceries and cook food. Instead of eating out three, four or five times a week, maybe they’re just doing it one or two special times.”