Florida remains major destination for national retailers looking to expand

Retailers and industry insiders gathered in Orlando last week to talk, network and make deals.

By Louis Llovio
| 5:00 a.m. September 5, 2023
| 2 Free Articles Remaining!

The International Council of Shopping Centers held its annual Florida conference in Orlando last week.

Florida

From fast casual restaurant chains to gym franchisees, merchants continue to show a strong interest in Florida with dozens actively looking to expand footprints in the state or to debut concepts here.

This interest is due in large part to the number of people moving here since the pandemic began in 2020. And it continues despite economic realities of rising interest rates, high labor costs and the state’s property insurance crisis.

Just how bullish retailers are when looking at the state was evident last week at the International Council of Shopping Center’s conference in Orlando. About 4,000 people turned out for the event which brings retailers, shopping center owners and commercial real estate brokers together.

While there is a trade show and panel discussions, the event is part cattle call and speed dating, with merchants coming together with the people who have spaces to lease for their expansions along with the companies that will provide the capital.

While deals are being made, the event is also a good place to gauge the state of Florida’s retail industry and see what could be coming.

Among retailers that showed up were Books-a-Million-owned bookstore chain 2nd & Charles. It likes locations where other retailers have left and is looking for space across the state, including Lakeland. David Kerr, a real estate manager for the company, says it offers a “treasure hunt shopping experience” similar to retailers like TJ Maxx and that its offerings, including books, video games and collectibles, are attractive to young families in exurbs and large metro areas.

Anne Goldman, a retail real estate development executive for Dave’s Hot Chicken, which is already working with franchisees in Tampa, talked about how the company, despite being a fast-casual food chain, prefers spaces without drive-thrus. “We want you to come in and experience the culture,” she says.

But for all the talk of growth there are concerns about whether momentum in the state can continue, with costs rising for construction and the insurance market in crisis while the availability of quality space remains a challenge. There is a fear that what Florida is experiencing is fleeting, and if developers don’t plan accordingly there could be trouble that will affect the entire economy.

“I think Florida is hallucinating,” says Shlomo Chopp, managing partner of the New York-based asset managing firm Terra Strategies, which specializes in distressed properties.

“I think Florida thinks everything's going to be great forever and ever. When you develop, you're buying the option on demand two years or three years from now, right? People developing today I ask, ‘Do you really think the market's not going to decline a bit?’ And you may say, ‘Well, long-term we’ll be okay.’ Well, how's the interest payments doing? How's that going to work if you can't make payments if things don't work out?”

Despite these issues and worries, the overall sentiment was Florida will remain attractive to retailers and investors for a long time to come.

Ross Cooper, president and chief investment officer for shopping center owner Kimco Realty says, “the fundamentals continue to be very strong.” The company owns about 550 centers, including 15 on the Gulf Coast — in Cape Coral, Sarasota, Clearwater, Tampa and St. Petersburg.

“Not only are we looking to acquire assets and continue to grow our sites, but we’re putting capital back in. And that’s very important, making sure that we have the formats that retailers and customers want to shop at.”

Council Conference Q&A

Matt Siegel is Colliers’ market leader for West Central Florida. While at the ICSC conference last week he spoke with the Business Observer about the state of the retail industry in Florida. Edited excerpts:

Why are retailers so interested in Florida right now?

The desire for Florida from tenants is real. I mean, there's a definite demand. One of the takeaways is tenants, retail tenants, want to be in Florida. Developers and investors want to be in Florida. So you’ve got natural growth. Obviously, there's a lot of drivers for that growth, tourism, relocation. There's a natural progression of why retailers want to be in the state of Florida.

Is it sustainable? And how is that dynamic playing out from Pasco County south to Collier County?

Florida has similar strong demand and population growth along I-75 and the water. It's real. It has been real. If you go along 75, the markets you mentioned, Naples, Fort Myers, Sarasota, retailers want to be there. The challenges that I think all markets are facing is construction costs, insurance, interest rates that recently have made some deals more challenging for tenants. Quality space has been in demand. If it's quality space, it's leased.

Are there any trends jumping out at you right now, whether it's tenants or the type of shopping centers being developed?

There’s a lot of layers to that, macro markets, submarkets, and every market is different. Certainly, high growth areas are always going to be targeted. Retail is going to follow the rooftops. There are certainly blue-chip areas that are going to always have strong demand. I think you're seeing infill opportunities, maybe buildings that have been obsolete. There are challenges but where there's challenge, there's opportunity, too. So, there's a lot of layers to that question. But, ultimately, going back to some of these drivers, that's where retailers are figuring out that if they have new brands that are rolling out or growth, they're going to target Florida. If you reverse engineer from that, you know the states that have sustained high growth and the reasons for that.

What advice are you giving clients and property owners about what to expect the next couple of years?

No one has a crystal ball. Part of our responsibility is serving our clients and delivering market information that we feel is the most accurate in the industry. So, yes, there are short-term trends. Like I said, I don't think anybody has a 36- or 48- month crystal ball where you're going to make those decisions accordingly. But there's always going to be challenges when it comes to the market. We've seen it before, we'll see it again. I would say costs are always an issue. Certainly, insurance is a challenge that property owners — residential and certainly commercial property owners — are dealing with.

What keeps you up at night with worry?

There’s a lot that keeps me up at night, but right now it's not retail. If you had to compare the major food groups of commercial real estate, retail in the state of Florida, where we sit now, there's optimism. It's an encouraging asset class in this state. Tenants want to be here. Developers and investors want to be here. And capital will always chase where there's demand.

When you attend an event like this, ICSC, what do you go in expecting? And what do you hope to accomplish?

Speaking on behalf of our team, which does a fantastic job on the retail asset class, I think ICSC in general, from Las Vegas, Florida, New York City, is a great way for people to stay in touch. It's such a relationship business. So, you know, being with your colleagues, clients, dealmakers, that's the opportunity that ICSC allows you. You talk deals, deals happen because of ICSC. So I think it's a touch point. I think is a great way for introductions to be made, for relationships to continue to flourish.

author

Louis Llovio

Louis Llovio is the deputy managing editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.