Central Florida Retail Market Report

Market Overview

Central Florida’s economy is strong, with an annual job growth rate in 2023 that ranks second among the top 50 metros in the United States, trailing only Austin, and retail trade and real estate have driven GDP growth. The region’s population also increased by 2.1% over that time, exceeding previous forecasts of 1.6% growth. This increase contributed to a 3.7% increase in consumer expenditure. The forecast additionally calls for consistent demand to keep vacancy rates around 4.0% over the next several years, significantly below the U.S. average.

Tampa

Market Overview

Tampa’s retail market has Florida’s lowest availability rate. Since mid-2021, the market has maintained an availability rate of less than 5%, which averages abut 3.5% as of the fourth quarter of 2024. The construction pipeline has reached a near-decade low, with 320,000 SF under development. The limited amount of available space, along with little to no pipeline, has had an influence on the market’s leasing activity and subsequent absorption. Rent growth is expected to reduce in the coming quarters. However, owners who signed five- or ten-year leases will see significant rent increases if their current tenant does not renew. Furthermore, they should anticipate that those vacancies will be filled very quickly, as the median months to leas has been less than six months for more than a year.

Tampa By the Numbers

• Vacancy Rate: 3.0%
• Rent Growth: 4.4%
• Absorption in SF: 1.2M
• Deliveries in SF: 1.3M
• Sales Volume: $1.2B | Last 12 Months | Source: CoStar Group

Market Performance

Tampa’s retail market has had a strong run of positive absorption in recent years, with 1.2 million SF recorded over the previous 12-month period. However, the market’s availability rate has been below 4% for more than two years, limiting retail leasing activity. As a result, the majority of the market’s move-ins have been for new development, with multiple Publix retail malls and car dealerships delivering year-to-date. Retail asking rents in the Tampa market increased 4.4% year over year in the fourth quarter of 2024. While down from a record 8.5% in 2022, current rent growth is still substantially higher than the ten-year average of 5.4%. Additionally, the Tampa market is surpassing the rest of the country, with rental rates increasing by 2.1%.

Tampa also ranks among the top markets in the country for five- and ten-year rent growth, with rises of 35.6% and 68.9%. Over the last few years, new retail construction has mostly consisted of build-to-suits and new automobile dealerships. Around 1.2 million square feet has been completed in the last year. Tampa will likely remain a key market for retail investors. Availability has reached an all-time low over the last two years, and the building pipeline is already 80% pre-leased. Tampa’s consumer base continues to grow, allowing landlords to hike asking rents. However, asset prices are expected to decrease in 2025 due to a slowdown in consumer spending. Even at the expected low of $230/SF, prices are likely to remain significantly higher than pre-pandemic levels.

Orlando

Market Overview

Orlando’s fast-expanding population and growing economy have fueled a steady retail demand in the region. However, in recent months, the pace of demand has slowed down as vacancy has tightened and quality blocks of retail space have seen increasingly short supply. The region remains a target for expanding retailers, but anchor space opportunities are decreasing as 2.3 million SF of retail space was absorbed in 2023. The lack of speculative construction contributes to the market’s limited supply. Only 1.0 million SF of new retail space has been finished in the last year. However, the majority of the 1.1 million SF of new retail space under development has already been leased. The majority of new retail projects are currently delivering in Osceola County, where the need for retail has increased with the rapid population expansion.

Orlando By the Numbers

• Vacancy Rate: 3.4%
• Rent Growth: 4.4%
• Absorption in SF: 674K
• Deliveries in SF: 1.1M
• Sales Volume: $969M | Last 12 Months | Source: CoStar Group

Market Performance

While demand briefly fell into negative territory in the third quarter, the fourth quarter is likely to be the greatest for retail demand in 2024. Approximately 400,000 SF of absorption is anticipated in Q4. Rent growth has been robust over the last year, backed by strong consumer spending. The market is currently tied with Atlanta and Northern New Jersey for the strongest year-over-year rent rise in the United States. Asking retail rents are up 4.4% over the previous 12 months to an average of $30.00/SF. This greatly exceeds the 2.1% growth in the National Index during the same time span.

Retail assets on important corridors with strong anchor tenants and food traffic remain on investors’ radars. The possibility of additional interest rate cuts in the following months will most certainly help to boost investment activity in 2025. Rising operating costs may, however, make certain deals more difficult to execute if the acceleration in rent growth settles to levels more in line with the US average.

Sarasota

Market Overview

Sarasota’s retail availability rate has been at or around 4% for more than two years, with an average of 3.3% as of the fourth quarter 2024. A shortage of available retail space, particularly in the last 12 to 18 months, has slowed market absorption. Over the last 12 months, the market has absorbed 310,000 SF. This is a modest increase from the previous year’s absorption of approximately 340,000 SF. The building pipeline has increased over the last year, with 500,000 SF under development as of the fourth quarter of 2024. The majority of the pipeline is pre-leased, with only 10% still available for lease. A lack of new retail space entering the market is projected to limit the market’s lease activity and absorption over the next several years.

Sarasota By the Numbers

• Vacancy Rate: 3.8%
• Rent Growth: 3.9%
• Absorption in SF: 314K
• Deliveries in SF: 374K
• Sales Volume: $325M | Last 12 Months | Source: CoStar Group

Market Performance

The limited amount of available space in Sarasota’s retail market is reducing leasing volume and, as a result, absorption. For more than a year, the market has maintained an availability rate of 4% or below. Availability now stands at 3.3% in the fourth quarter of 2024. Sarasota’s rent growth has reduced over the last year but remains higher than the national average. Rent growth has climbed 3.9% year-over-year, compared to a 2.1% growth rate in the U.S. Malls, power centers, and neighborhood centers are leading the region in asking rent increase, all increasing by more than 4% year on year. It is forecasted that asking rent growth will slow in the next quarters, but maintain around 2.5% until the end of the year.

Over the last 12 months, about 350,000 SF have been delivered, with an additional 500,000 SF under construction. While the majority of trades in Sarasota are minor, one large transaction occurred this year. Benderson Development Company, a local development and investment firm, paid $30.5 million for Glengary Shoppes. The three-building deal was 97% filled, with anchor tenants including Best Buy, Barnes & Noble, and Regions Bank.