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Ask the Expert: What major trends are impacting the retail market in Orlando?

Ask the Expert: What major trends are impacting the retail market in Orlando?

“Historically, there has been a natural ebb and flow in the landlord-tenant relationship based on the level of supply and demand in the market. This situation can create one-sided advantages for either party and likewise affect how retail deals get done. In the last four years, the leasing tides have turned favorable for landlords, a stark contrast from the 2009 to 2015 period. Since then, the demand from retail occupiers has outpaced the development of quality retail space.  We have seen considerable retail redevelopment, but it is extremely expensive with underlying land costs and constructions costs spiraling out of control. 


Because of this current market situation, landlords of top-notch retail locations are aggressively searching for better operators that will improve the quality of occupiers in their centers. They want occupiers who can pay higher rates, have stronger financial positions, and are more desirable to the market. As occupancy levels are at or near record highs, their efforts are no longer spent finding tenants for vacant space, but rather in this push to quality. Landlords are taking on more responsibility in the tenanting effort.  While we are in this high occupancy level with relatively little new development, we will see leasing commissions squeezed and assignments more difficult to come by. As the market cools, as it always does, we will eventually see the pendulum shift. But for now, it’s a landlord’s market.”

Terrence Hart
Senior Director – Retail Landlord/Tenant Services 
Franklin Street 
D: 407.458.5406 
Terrence.Hart@franklinst.com

 
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Franklin Street Arranges 2 New Leases for Autism Therapy Centers in Metro Atlanta

Franklin Street arranged two long-term leases for the opening of the fifth and sixth Georgia locations for Hopebridge Autism Therapy Centers. The Indianapolis-based autism therapy center chain is now occupying 11,910 square feet at Market Square in Douglasville, Ga., which is located 20 miles west of downtown Atlanta, and 9,765 square feet at Fayette Pavilion in Fayette, Ga., which is situated 22 miles south of Atlanta. Franklin Street’s Sam Krueger and Mariah Klein represented the landlord in the transactions.

The new centers serving the Atlanta autism community are located at:

Douglasville Hopebridge center: 9503-9579 US Hwy 5, Douglasville, GA 30135
Fayette Hopebridge center: 72 Pavilion Pkwy, Fayetteville, GA 30214

“For 15 years Hopebridge has served various communities with autism treatment services and improved the lives of affected children and families,” said Krueger, senior associate at Franklin Street’s Atlanta office. “These two store openings reflect the growing need for unique medical uses in retail shopping centers. Retail centers provide healthcare tenants with great parking opportunities and easy curbside access. The new locations in heavily-trafficked corridors made them an ideal fit for Hopebridge.”

Hopebridge Autism Therapy Centers currently operates in four states; Georgia, Indiana, Kentucky and Ohio, with additional states planned in 2019. These two additional centers will bring Hopebridge’s growing network to 34 centers in four states consisting of Georgia, Indiana, Ohio and Kentucky, with additional states planned in 2019. For a complete list of Hopebridge centers and the services each offers, visit hopebridge.com/centers.  

About Franklin Street: Founded in 2006 during one of the toughest real estate climates, Franklin Street focused on delivering value-added solutions to meet the evolving needs of clients. Through a collaborative philosophy of leveraging the resources, expertise and experience of each of its divisions – Investment Sales, Tenant and Landlord Representation, Capital Advisory, Insurance, Property Management and Project Management – Franklin Street offers unmatched value and optimal solutions for clients nationwide. Learn more about Franklin Street at FranklinSt.com.

 
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Ask the Expert: How long are the retail leases in your market on average?

Ask the Expert: How long are the retail leases in your market on average? 

“The typical length for retail leases is five years. Now, this is not a hard and fast timeline and the duration of retail leases depends heavily on the size/location of the space and the type of tenant looking to lease it. 

Smaller local groups usually have less capital and are not as financially strong, so we may see leases signed for only three years in this case. These spaces are also usually smaller and less than 3,000 square feet. However, larger big box space at a strong retail center will attract bigger regional or national tenants who have stronger credit and will sign 10-year leases with several renewal options. 

So, the length of retail leases is not set in stone. It is really dependent on several factors from what the tenant needs, their strength of credit, and as per usual with real estate, the location of the space.” 

Kyle Coughlin
Senior Associate, Retail Landlord Services
Franklin Street
Kyle.Coughlin@FranklinSt.com
813.839.7300 x 0296  

 
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Columbia Care to open three Orlando-area cannabis dispensaries as part of Florida retail rollout

Excerpted from GrowthSpotter.com story.

Columbia Care signed a 10-year NNN lease for the 4,723-square-foot building at 10615 E Colonial Dr., near UCF. Franklin Street’s Terrence Hart and Tim Rogers represented the landlord in the negotiations.

Columbia Care is one of the largest multi-state operators in the medical cannabis industry, with licenses across 15 jurisdictions in the U.S. and the EU. The company received its Florida license a year ago and has been serving patients via home delivery until now.

For full story, visit https://www.growthspotter.com/news/retail-dining-developments/gs-news-colombia-care-20190703-psfu22spzba3dhmvj7az223vgm-story.html

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Franklin Street Completes $14M Hotel Construction Project on Fla. Gulf Coast

Franklin Street, a full-service commercial real estate firm, has completed a 15-month construction management project for a newly-built, 88-key hotel in Dunedin, Fla., which opened on June 20, 2019.  The firm’s Project Management group oversaw every aspect of the $14 million state-of-the-art waterfront hotel, which will carry a Hampton Inn and Suites flag. 

Franklin Street was hired by AV Florida Hotel, LLC to serve as project manager for the property at 2641 Michael Place. The firm’s responsibilities included project planning; design management; furniture, fixtures and equipment coordination; construction management; procurement management; and budget and schedule management. 

Franklin Street’s project management team, spearheaded by Patrick McGucken out of the Tampa office, also communicated regularly with the property owner and design team to explain all required consultant services and to closely manage project costs and schedules. The new Hampton Inn Dunedin features spacious guest rooms with private balconies and ocean views, 24-hour business center, meeting room, fitness center and an outdoor saline pool. 

“With this construction project, AV Florida Hotel, LLC has established Hampton Inn’s prominence as one of the prime hotel lodging properties in this area of the Gulf Coast, providing much needed hotel rooms within close proximity of Honeymoon Island State Park,” said Franklin Street’s McGucken, vice president. “The client was impressed by Franklin Street’s ability to make this project a reality by collaborating across various business lines and bringing added value to their asset. Our team is proud to have partnered with them on this project.”

In addition to overseeing project management for the ground up construction of the hotel, Franklin Street Capital Advisors arranged debt and equity development financing for the project. Franklin Street Insurance Services also provided the builder’s risk and general liability insurance policies, while Franklin Street’s Landlord Representation team works to find a restaurant tenant for the remaining outparcel.

Hampton Inn Dunedin is located minutes from some of the Florida Gulf Coast’s most beautiful beaches. The property is just a 10-minute drive from beautiful Honeymoon Island, where guests can take the ferry to the pristine sands of Caladesi Island. The hotel is also close to several local restaurants, microbreweries and Dunedin Stadium, home of the Toronto Blue Jays spring training.

About Franklin Street: Founded in 2006 during one of the toughest real estate climates, Franklin Street focused on delivering value-added solutions to meet the evolving needs of clients. Through a collaborative philosophy of leveraging the resources, expertise and experience of each of its divisions – Investment Sales, Tenant and Landlord Representation, Capital Advisory, Insurance, Property Management and Project Management – Franklin Street offers unmatched value and optimal solutions for clients nationwide. Learn more about Franklin Street at FranklinSt.com.

 
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Polk County/I-4 Corridor Industrial Fast Facts: May 2019

Industrial Fast Fact Polk County / I-4 Corridor Florida
Source: CoStar

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Exclusive: New York company reportedly interested in new Sanford space

Excerpted from Orlando Business Journal story.

A water equipment and service provider — which employs 17,000 people worldwide — reportedly is hunting for space in a 67-acre industrial development under construction.

Rye Brook, New York-based Xylem Inc. (NYSE: XYL) wants 70,000 square feet of industrial space in the NorthPort Industrial Park in Sanford, sources told Orlando Business Journal. It’s unknown if a deal has been signed. The tenant would be among the first in the industrial park where Indianapolis-based Scannell Properties LLC is the developer.

Xylem reported $5.2 billion in revenue in 2018 and sells equipment to address the world’s “serious water challenges,” according to public documents. The company has multiple locations in Florida, including at 2152 Sprint Blvd. in Apopka.

Executives with Xylem and JLL (NYSE: JLL), which is marketing the property, couldn’t be reached for comment. Wilson McDowell, managing director with JLL, is marketing the property along with Managing Director Matt Sullivan and Senior Vice President Bobby Isola.

Scannell Properties LLC expects to build 809,700 square feet of industrial space in eight buildings on the northeast corner of North White Cedar Road and Narcissus Avenue. Construction has started for the project’s first phase, which includes 265,000 square feet of industrial space in three buildings, as previously reported by OBJ. Construction on the first phase is expected to wrap up in late 2019.

Scannell Properties bought the property for $10.1 million on Jan. 16, according to Seminole County records. Rand Yard Farms LLC was the seller.

The project’s estimated cost is $52.6 million and it may generate dozens of temporary construction jobs, in addition to full-time jobs.

The property is attractive to users due to the growth of State Road 429, which will allow trucks to bypass the heavy construction on Interstate 4, said Larry Kahn, senior director industrial with Tampa-based Franklin Street, who isn’t involved with the deal. Sanford’s workforce and housing also are attractive to new industrial users. “It’s a logical place.”

For full story, visit https://www.bizjournals.com/orlando/news/2019/05/29/exclusive-new-york-company-reportedly-interested.html

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Top Five Retail Tenant Lease Protections

Excerpted from Shopping Center Business story.

In the 15 years I have represented national, regional and local retail and restaurant groups expanding throughout Georgia and Alabama, I have gained valuable insights into important deal terms that are often overlooked.  Here is my top five list of critical protections every tenant should be aware of during the Letter of Intent (LOI) and lease negotiation process.

Require the Landlord’s Lender to sign a Subordination, Non-Disturbance and Attornment Agreement (SNDA) – A SNDA agreement protects the tenant if the landlord defaults on the mortgage.  If an SNDA is signed by the Lender, then the lender does not have the right to cancel the lease if the landlord defaults on the mortgage.  Many tenants discovered during the 2008 economic crisis that they did not have this protection in place.  Most landlords and lenders comply with the request for a SNDA agreement.  

CAP the year to year increase on CAM/Insurance/Taxes passthrough cost – It is important that the tenant negotiate a cap on the year to year increase of CAM/Insurance/Tax charge specified in the lease.  If the property is sold or the tenant signing the lease adds a substantial increase in the value of the property, a tax reassessment can be very expensive.  Without a cap on these expenses, the tenant can get hit with a hefty and unexpected added expense in the amount of CAM/Insurance/Taxes they pay through the remainder of the lease.  

Protect yourself against unexpected permitting delays – The Rent Commencement Date is the date that the tenant is required to start paying rent per the terms of the lease agreement.   Once the tenant signs the lease, they must hire consultants to design the space, submit the plans to the governmental authority and obtain all necessary inspections and permits to open for business.  Although the tenant can do everything in their power to obtain their permits as quickly as possible, there are still conditions out of their control.   Adjusted governmental holiday schedules, re-review of plans, and existing space conditions (power, unexpected roof leaks, etc..) are all examples of items that can cause delays in permitting.  When negotiating the Rent Commencement Date for the tenants I represent, my initial LOI includes a build-out period timeframe that does not start until the tenant receives their permits.  This period doesn’t start until the permits are received and protects against the tenant having to pay rent before they open for business.

Set up payment installments for your Tenant Improvement Allowance (TI) Payments from the landlord – Most tenants will only focus on the amount of tenant improvement dollars they are given by the landlord to complete their build-out.  When working with large TI amounts, it is critical that the tenant broker negotiate for the tenant a payment structure that will allow the tenant access to the TI funds during the design and build-out process.  I have had success negotiating quarterly payments, so the tenants can “draw” down the total TI amount and have access to the funds to pay consultants and contractors during the process.  Most LOIs do not address this, so the tenant is stuck having to fund out-of-pocket a large TI amount during the build-out process. 

Limit your Lease Guarantee – Most landlords require the tenant to sign a Lease Guarantee, guaranteeing the initial term of the lease.  It is the tenant broker’s job to limit the Lease Guarantee as much as possible during negotiations.  Offering limited guarantees for just a portion of the initial term is one option that covers any TI given and provides a timeframe for the landlord to release the space.

Bob Kane is a director with Franklin Street’s retail tenant leasing team in Atlanta, offering program roll-out strategies, site selection, market analysis and lease/purchase negotiations for national and regional retailers and restaurant groups expanding throughout the Southeast.  During his career, Mr. Kane has provided brokerage, development and consulting services to some of the nation’s largest retailers including: Home Depot, Kohl’s, Longhorn Steakhouse, McDonald’s, Aldi, Lowe’s and more. He can be reached at Bob.Kane@FranklinSt.com. 

For full story, visit https://shoppingcenterbusiness.com/top-five-retail-tenant-lease-protections/

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Boss Bitch Pizza ushers in the era of the ‘ghost restaurant’ in Tampa

Excerpted from Tampa Bay Business Journal story.

Direct delivery could account for 40 percent of restaurant sales or $220 billion by 2020, a Morgan Stanley analyst predicted in mid-2017, when delivery sales were $30 billion. It’s not just startups like Berlingeri’s that are fighting for a piece of that pie: Tampa-based restaurant giant Bloomin’ Brands Inc. (NASDAQ: BLMN), has started building delivery- and takeout-only storefronts in a big departure from its casual dining roots.

Boss Bitch isn’t just chasing convenience-driven customers; it has a niche, health-focused customer base of primarily women. The 12-inch cauliflower pizzas range from $15 to $25, and there are also salads and sriracha-tossed cauliflower bites served with vegan ranch.

Brian Bern, senior director of retail services at Franklin Street in Tampa, said he hasn’t yet dealt with a client seeking a virtual storefront or commissary kitchen for a delivery-only restaurant — but it makes a lot of sense.

“I think restaurants, just like retail, have to be omnichannel,” Bern said. “You have to be able to allow people easy access.”

For full story, visit https://www.bizjournals.com/tampabay/news/2019/05/06/boss-bitch-pizza-with-delivery-only-cauliflower.html

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Abandoned Property and Industrial Landlord Responsibilities

Recently, I was asked to help an industrial property owner where the previous tenant had abandoned some equipment. He wanted to know how to handle the abandoned property, what his responsibilities were, could he let other people remove equipment from the building or could the abandoned items simply be thrown away. According to Florida Statute Sec. 715.10 -715.111, before acting a landlord must provide written notice to the previous tenant and other parties (such as the tenants equipment vendor) that the landlord thinks may have a legal interest in the abandoned property.

Written notice needs to identify the property with specificity and advise the previous tenant that they must pick up the property within 10 days (if the notice is delivered in person) or within 15 days (if the notice is sent by mail) of the property being sold or disposed of.

What is the value of the abandoned property?

The landlord needs to determine the property is value. If the property value is less than $500 at the end of the applicable time period (10 or 15 days depending on how the notice was sent), then the landlord has three options: a) claim title to the property and take possession of it; b) dispose of the property, or c) sell the property and keep the sale proceeds.

If the property value is more than $500, the landlord must take an additional step. The additional step requires the landlord to advertise the abandoned property for sale for at least two consecutive weeks in a local or regional newspaper. After deducting the costs of storage, advertising, and the sale costs, any balance of the proceeds from the sale which are not claimed by the former tenant (or an owner other than such tenant) shall be paid to the county were the sale occurred.

Florida landlords can recover costs   

Whether the property value is more or less than $500, the landlord always has the right to recover the money spent storing the property, advertising its sale, and selling the property. The cost of storage is calculated by determining the fair rental value of the storage space needed to store the property either on or off the premise. The Florida Landlord/Tenant Statute is strictly construed. We suggest you follow the rules to the letter and use a real estate attorney.  

Call Franklin Street with your real estate questions, Laurence Kahn, 407 756 8861 or Larry.Kahn@FranklinSt.com.