As a commercial estate leader in Jacksonville that brings together hundreds of developments with business tenants, Franklin Street has a distinct view of the marketplace.
Franklin Street’s Q4 2023 Retail Report finds Jacksonville‘s retail market still flexing despite a crowded market.
The Business Journal recently had a conversation with Franklin Street Senior Vice President of Retail Carrie Smith and newly promoted Regional Managing Director Ricky Ostrofsky. The two discussed rising retail costs, the hottest areas of retail growth and what companies are helping to drive expansion in the region.
This conversation has been edited for length and clarity.
(Franklin’s Retail Report) showed downward pressure on total retail sales volume and retail development under construction. What’s your perspective on that?
Smith: The trend in new construction was largely driven by an increase in construction costs and the cost of capital. And so, shopping center developments get built, rent increases then get pushed down to the tenants and rents start getting to a place unmanageable for tenants. So there’s been a pullback.
Two years ago, we were doing deals, and you could see there was a hesitancy from developers. Now the data proves that to be the case.
Anecdotally, I travel quite a bit, and there’s no lack of interest. Restaurants are packed. Airlines are packed. While data suggests inflation is having an impact, in the Southeast, it’s quite apparent that things are strong economically.
Ostrofsky: If you look at expansion in terms of retailers, there’s still high demand. We can speak only to the markets that we work in, but they’re expanding.
Smith: We’re seeing several projects with delivery dates. That is impactful for deal making because you can give a timeline to your clients. I feel like we’re going to see by the end of this year that construction starts have gone up.
Where are you seeing a lot of potential for new development?
Ostrofsky: St. Johns County. There’s been so much residential growth. If you look at a heat map of permits being pulled, you can see these pockets of deep, deep red. Beachwalk, Beacon Lake, Nocatee, World Golf Village, RiverTown. These communities are just growing so quickly, thousands and thousands of residential units, and commercial’s following.
Smith: I’m optimistic about downtown. I feel like a broken record because I have for years. But we’ve met with Gateway several times, and I think that project’s not only going to happen, but it’s going to be great for downtown. If that does take place, and they can turn that into something similar to what they did in Tampa Water Street, that could spur more development.
You’re also seeing demand in some of these older markets that’ve been historically overlooked because supply’s been low, but retailers and restaurants still want to open up businesses.
How do you feel about national brands coming to the market?
Smith: I have primarily worked with national companies my whole career. People have a lot of sentimental value held to mom and pop shops and independents, but they also shop at national brands. That does not negate the love we have for local brands. We frequently shop at them and do deals with them at the centers that we represent. It’s just a different economic structure when you’re dealing with someone whose life savings are going into a business versus a national company.
Ostrofsky: To Carrie’s point, when we have a property, more times than not, we have national brands coexisting right next door to mom-and-pops.
Smith: Those neighbors that are opening up Jimmy John’s, or Row House or Any Time Fitness, those are your next-door neighbors, and they’re also independent owners. They’re putting their life savings into it even if they have a national brand. That’s just as important to our industry.
I think people also forget that Jacksonville is the place where a lot of national brands have grown from. Firehouse is a great example. That was a local mom-and-pop business that started here in Jacksonville, and it’s now a billion dollar company.
Ostrofsky: We live in Avondale as an example, and we lease Ortega Park, a shopping center redevelopment in the neighborhood. We want to see those businesses serve our community. We have the vision and the lens of how it’s going to impact our communities.
