Orlando Retail Sector Strong
- Apr 17, 2015
Last year builders completed 600,000 square feet of retail developments in Central Florida and Marcus & Millichap researchers anticipate that 1.5 times more space, 900,000 square feet will come online by the end of 2015. Universal Studios, Walt Disney World and SeaWorld expanded parks in 2014, while the $429 million Dr. Phillips Center for the Performing Arts opened in November. This means that tourism is unlikely to subside this year and the accompanying spending will continue to fuel developer and retailer confidence, according to Marcus & Millichap’s market outlook for 2015.
With Tupperware’s new Crosslands project scheduled for completion this summer and the highly anticipated Orlando Eye opening next month along with the new SEA LIFE Orlando Aquarium, a whole arsenal of new leisure and retail developments will enrich the Central Florida market. Despite the strong construction figures, vacancy continues the downward spiral, reaching 6.2 percent by year-end. This accounts for a 60 basis-point drop from 2014, when vacancy dropped 40 basis points. The expanding inventory coupled with investors’ growing appetite will impact employment indicators in Orlando. As a result, employers are expected to hire 38,000 workers in 2015. This translates into a 3.4 percent expansion, outpacing the projected national average of 2.3 percent.
As more and more retailers enter the market, the increased demand for retail space is expected to push up rent rates. As such, average asking rents will grow by 2.4 percent, reaching $15.80 per square foot. This is a considerable jump, taking into account that average rents grew in Orlando by a mere 0.5 percent last year. However, with aggressive bidding pushing up property values, cap rates will start to compress and owners who have held onto assets since the recession may start selling their properties for a profit, according to Marcus & Millichap’s market forecast.
These changes are expected to contribute to a one-place climb in the company’s National Retail Index, landing Orlando in the top half, at Rank 23.
Charts courtesy of Marcus & Millichap