The Tampa Bay retail sector will rise higher in 2019 as landlords and tenants look to ride the wave of new construction and economic development underway. The most notable trend has been a dramatic rise in the number of mixed-use developments being built here, such as the 22-acre Midtown Tampa and the $3 billion Water Street project in downtown Tampa. While some other cities were faster to embrace these types of “live-work-play” communities, Tampa is seeking to completely redefine the concept of urban living.
The fact that these projects finally broke ground is especially significant because the Tampa area had not seen any new mixed-use developments in years. Developers are also building similar mixed-use properties in the trendy Hyde Park and Seminole Heights neighborhoods. Local retailers are taking notice as many shops and restaurants are already looking to either add a new location or to relocate from their existing site at less popular shopping centers. We expect to see traditional mall retailers to consider moves to up and coming mixed use locations with potential for higher foot traffic.
Grocers, health & wellness drive growth
As the mixed-use construction surge rages on, Tampa’s grocery store chain market continues to show room for further growth. In the 1990s, Florida residents mostly had two large grocers to choose from — Publix and Winn-Dixie. More recently, the area has welcomed several organic and discount food retailers including Lucky’s, Aldi, Trader Joe’s, Sprouts, Whole Foods and Earth Fare. Their success has become the rising star of Tampa’s retail market as many redevelopments and new developments include a grocery anchor. Some of these chains will certainly be seeking future homes at mixed-use properties currently under construction.
Another trend to keep an eye on is the ongoing expansion of wellness brands across the Tampa Bay market. Urgent care centers, health specialists, boutique fitness brands, and new beauty concepts are pursuing spaces in retail centers. These tenants are popular with landlords because once the client base is established, these tenants bring steady traffic through their centers and are typically resistant to any coming recession.
Occupancy and rental rates climb
Midtown Tampa and Water Street are already making a major positive impact on the surrounding neighborhoods and shopping centers. The Downtown area is seeing strong investor demand for available land nearby. Retail occupancy and rental rates have been climbing steadily and they may hit record levels. New construction will push rents higher as the costs of construction, materials and labor are all increasing at a rapid pace unsustainable pace. At some point retail rents will likely pass the tipping point of sustainability.
How long will it take before rising construction and labor costs hit a peak and new development slows down? Nobody knows for sure, although these exciting new mixed-use projects give us solid reasons to believe that Tampa will sustain its growth in 2019 and beyond.
About the Authors
As Senior Director, Brian Bern oversees all of Franklin Street’s retail leasing business development for the Retail Tenant Services Group in Tampa. He specializes in retail tenant representation, landlord leasing, disposition, land transactions, and helping developers identify sites for shopping center development. He can be reached at [email protected].
As Senior Director specializing in Retail Landlord Representation in Franklin Street’s Tampa office, Alex Wright works with commercial real estate owners and developers to improve tenant retention, stabilize operating income and maximize the value for retail properties throughout West Florida. He can be reached at [email protected].