Underpinned by a $50 billion tourism industry that drew a record-breaking 62.3 million visitors in 2014 in addition to strong job, population and residential growth, there is no question that Orlando’s retail real estate market is stronger than ever.
According to 2014 U.S. census data, Orlando outpaced 99 of America’s 100 most populous MSAs in year-over-year population growth. The City Beautiful also recently ranked as the No. 1 U.S. city for job growth by Fortune Magazine following a 3.7 percent increase in its employment base in the same year. The Orlando retail market has also benefited heavily from healthy gains in the housing sector, powered by Central Florida’s tourism and construction industries, which stimulate economic development in the region. Orange County Property Appraiser, Rick Singh, reported that average home sale prices were up more than 10.5 percent in 2014, while residential construction rose 79 percent in the same period.
With this type of growth, Orlando is experiencing strong consumer spending and an increase in demand for retail space. The Orlando region’s Index of Retail Activity rose 8.5 percent year-over-year in the second quarter of 2015, while the metro-wide retail vacancy rate decreased to 6.5 percent, down from 8.2 percent at the end of 2009.
White-Hot Submarkets
The Tourism Corridor is perhaps the most notable booming retail area in all of Orlando. As the focal point for the Orlando retail market, the Tourism Corridor is home to many of Central Florida’s major demand drivers, including theme parks, world-class entertainment, dining, shopping, lodging and convention facilities, including Walt Disney World, Universal Studios, SeaWorld and Islands of Adventure.
Encompassing well-known areas such as Millenia, International Drive and Lake Buena Vista, The Orlando Tourist Corridor is also the only submarket in the United States with four properties that boast sales per square foot figures north of $1,000. With that being said, the area is home to some of the highest rental rates in all of Orlando, reflecting the extremely high demand for property space in the submarket.
Sand Lake Road has also proven itself as one of the major retail hotbeds in Orlando. Orlando’s Restaurant Row, which is located right along Sand Lake Road, is a mecca for the most affluent residents in Central Florida. The area serves as the first stop for many business travelers and large corporate groups, as well as tourists visiting the nearby theme parks. All of the competitive retail projects along Restaurant Row are institutionally owned assets and command the highest rental rates in the Orlando MSA.
The affluent demographic suburb of Winter Park is another noteworthy submarket in Orlando that has undergone and maintained considerable retail growth over the past few years, specifically along commercial corridor U.S. Highway 17-92. Central Florida’s first Trader Joe’s location was constructed along U.S. Highway 17-92 in Winter Park last June and there are also current plans by Tennessee-based UP Development Inc. to build the area’s second Whole Foods Market as part of a 76,000 square-foot retail center on U.S. Highway 17-92 and Lee Road. With an average household income north of $80,000, Winter Park is an area widely recognized for its historic Park Avenue signature shopping district featuring more than 140 boutiques, sidewalk cafes and museums.
New Developments
The Orlando metro area is currently home to more than 161 million square feet of total retail space, which has grown by a sparse 7.6 percent throughout the past eight years. The limited number of new deliveries has set the stage for solid rent appreciation and occupancy gains during that time period.
There is currently more than 775,000 square feet of retail space under construction in the area, representing less than 0.5 percent of current inventory. The majority of this new construction has taken place in the South Outlier and Orlando Airport submarkets, which are both located in the southeastern region of Orlando. DDR Corp.’s development of Lee Vista Promenade, a 450,000-square-foot retail complex near the Orlando International Airport, is one notable shopping center development that will have a dramatic impact on the Orlando Airport submarket.
The Crosslands Shopping Center is another major retail development taking place in the Orlando suburb of Kissimmee. With delivery expected in the fall of 2015, The Crosslands is a 427,000-square-foot retail complex that will be Central Florida’s largest retail center completed in several years and the first power center to come to fruition since the Great Recession.
Looking Ahead
With population, job and tourism growth rates at record levels in Orlando, transaction volume is extremely high with many types of investors clamoring to enter the Orlando retail market. In the past 12 months, for instance, 16 retail centers valued at more than $10 million have traded in Orlando. With an oversupply of buyers and ripe selling conditions for Orlando retail, Orlando’s position as a leading retail market will only strengthen as we move into the future.
— By various members of HFF’s Orlando office. This article originally appeared in the August 2015 issue of Southeast Real Estate Business.