Buccing a Trend
Aug 1, 2007 12:00 PM, By Patricia L. Kirk
The bursting of the housing bubble has hit Florida hard, but that has not slowed one of the fastest-growing sections of one of the fastest-growing states in the nation. Thus Tampa along with its surrounding suburbs remains one of the best bets for retail real estate development.
Rapid growth throughout the region has translated into existing retail projects bursting at the seams; region-wide vacancy rates are between 4 and 5 percent, according to CB Richard Ellis Inc. Anyone who brings new product to market will lease it up, says David Conn, CB Richard Ellis senior vice president for retail services in the Tampa area. And even with the local economy taking a hit as a result from the slowdown in housing expectations are that GNP growth will slow from 3.3 percent in 2006 to 2.3 percent this year retail demand remains strong.
As a whole, the Tampa-St. Petersburg-Clearwater area grew by 10.5 percent between 2000 and 2005, adding about 252,000 people, according to the U.S. Census Bureau. That pace is expected to continue despite an increase in hurricanes and resulting escalating home insurance premiums. By 2050, the metropolitan area, which includes Hillsborough, Pinellas, Pasco and Hernando counties, is expected to add 1.2 million people, taking the population from 2.8 million to 4 million.
The region remains a draw for relocation because of the rapid job growth, according to a report from Wachovia senior economist Steve Vitner. Last year, the region added 44,700 new jobs, leaving unemployment at 3.3 percent about 100 basis points below the national average. Consequently, Vitner predicts that despite continued troubles in the residential real estate sector median home prices have dropped $26,500 from a year ago down to $203,000 today according to the National Association of Realtors job growth will help counteract that trend.
That doesn't mean the forecast has no clouds. The pace of new development worries Conn, who sees a potential correction looming on the horizon.
At the end of the day, high land values, high impact fees, high construction costs translate to very expensive deals, so the frenzy over land has started to curtail, Conn says. Already, there is some trepidation on the investment sales side, where Conn says there is a growing disconnect between what sellers are demanding and what buyers are willing to pay. With more product coming on line in the next 12 to 24 months, that picture is not expected to change.
Downtown developments
As is the trend elsewhere, the cities of Tampa and St. Petersburg are experiencing a renaissance in their central business districts (CBDs). Tampa officials have identified 12 separate redevelopment districts within the city's CBD to promote a mix of residential, commercial and civic development, including a concentration of retail in the Franklin Street District and the Riverfront District with a proposed 2.2-mile riverwalk.
A total of 1,061 new residential units have been completed or are under construction in downtown Tampa and another 4,993 are approved. The promise of a neighborhood though slow to get going is beginning to take shape too, with a number of retail services recently opened or in the works, including coffee shops, cafes, restaurants, boutiques, and neighborhood services. Additional retailers are expected to open their doors with the completion of 110,000 square feet of ground-floor retail at local developer Mercury Advisors' new $145-million Channelside District project, Grand Central at Kennedy, which includes a 372-unit residential tower and 90,000 square feet of office condominiums.
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