Gainesville, Tallahassee, & Panhandle Retail Market Report

Gainesville, FL Market Overview

Gainesville is the county seat of Alachua County and the largest city in North Central Florida, with a population of over 141,000. The city can be characterized as a college town serving as the home of the University of Florida, which has over 50,000 students. The University is a major financial boost to the community, with hundreds of thousands of dollars in revenues created by the athletic events that occur at UF and SEC football games.

Gainesville’s retail industry and the economy will be stable for 2023. The vacancy rate is slightly higher than last year but lower than the regional and national averages. Net absorption for the past year was 78,000 SF, mostly due to a few buildings with negative absorption in Q2 2022. There has been minimal construction over the past 18 months, with only 17,000 SF currently underway. Despite recent price growth, investors have been active in the Gainesville market.

Highlights

• Gainesville is one of the most heavily traded submarkets in the region.
• The largest transactions were made with tenants such as home and decor, furniture, and beauty supply businesses, mainly in the West Gainesville and Northwest Gainesville areas.
• Average rents as of Q2 2023 are $23.00 per square foot, slightly below the U.S. average of $24.00 per square foot.
• Over the last year, there were 68 retail industry transactions totaling $190 million. The 2022 activity level was the second highest in the past 10 years.

Rents | Vacancy | Construction

For 2023, there will likely be mild net absorption but remain positive due to the lack of significant move-outs and limited new space under construction.

Retail rent growth peaked at 6.2 year-over-year in Q3 2022 but has been declining since then. Currently, rent growth is strong at 5.4 percent but is expected to decrease to around four percent by the end of 2023, which is consistent with the historical average. While overall vacancy has varied, currently standing at 3.4 percent, rent growth has remained steady at approximately three percent annually over the last five years. As of Q2 2023, average rents are $23.00 per square foot. Strip centers had the slowest rent growth in the past year at 4.1 percent, while mall rents increased by 8.1 percent year-over-year. There are currently 17,480 square feet of retail space under construction.

Sales

Compared to larger neighboring markets like Jacksonville and Orlando, Gainesville’s midsized retail market attracts a slower pace of investor demand. However, there were still 68 retail trades totaling $190 million in the past year, and 2022 was the second highest year in the past decade for activity. Secondary and tertiary markets like Gainesville have become more appealing to investors seeking quality assets. The market cap rate in Gainesville is 6.9 percent. In the past 12 months, neighborhood centers had the largest share of investment activity at $100 million, followed by general retail properties at $79.0 million and strip center properties at $10.9 million.

The largest year-over-year transaction was the sale of a neighborhood center anchored by Publix in northwest Gainesville. The grocery chain bought Hunters Crossing
Shopping Center for $24.5 million in October 2022. It was part of a four-property portfolio sale of just over $50 million from Case Pomeroy & Co, Inc. in New York.

Gainesville by the Numbers Past 12 Months

• Square Feet Delivered: 120,000
• Properties Under Construction: 2
• Sales Volume: $194M
• Rent Growth: 5.4%
• Vacancy Change: 0.2%

Tallahassee, FL Market Overview

Florida’s state capital, Tallahassee, is in the north of the state and is renowned for its beautiful scenery, active culture, and extensive history. Tallahassee, which has a population of about 190,000, attracts both locals and tourists because it provides a blend of urban comforts and outdoor recreational activities. As the state capital of Florida, Tallahassee has a rich historical significance, including numerous educational institutions, most notably Florida State University and Florida A&M University.

Highlights

• Over the past year, there has been a 3.3% increase in the number of jobs.
• More than $220 million of retail assets were sold in the last 12 months.
• Rent growth has slowed in the last year, although it remains high at 4.6% year-over-year.
• Over the last year, the market capitalization rate has declined to 6.8%, and it is now in proximity to the national average.

Rents | Vacancy | Construction

The retail market in Tallahassee has experienced a decrease in vacancy rate by 1.4 percent over the past year, currently standing at 2.7 percent. During this same period, there has been an absorption of 450,000 square feet, and 110,000 square feet have been delivered. Rent prices have increased by 4.5 percent from a year ago, now at $18.10 per square foot, and over the past three years, there has been a cumulative rise of 12.8 percent. 91,000 SF is under construction, representing a minor 0.4 percent expansion of inventory. Employment opportunities have increased by 3.3 percent in the past year, while population growth has only increased by 0.1 percent.

Sales

In the past year, retail assets totaling over $220 million were sold, and general retail deals accounted for $154 million of the total sales.

Tallahassee is a mid-sized retail market, where 112 retail sales have closed in the past year, which is average compared to similar markets. This level of deal activity has been consistent over the past five years, with an average annual sales volume of $136 million. Based on the price movement of every retail property in the market, the estimated market pricing is $179 per square foot as of Q2 2023, showing an improvement compared to the same period last year. The price level is still much lower than the national average. The market cap rate has fallen over the past year to 6.8 percent, which is close to the national average but below Tallahassee’s five-year average.

Tallahassee by the Numbers Past 12 Months

• Square Feet Delivered: 148,000
• Properties Under Construction: 2
• Sales Volume: $224M
• Rent Growth: 4.5%
• Vacancy Change: -1.4%

West Florida Panhandle Market Overview

In recent years, the West Florida Panhandle has become an increasingly attractive destination for retailers looking to expand their market presence. With a growing population and a thriving tourism industry, the retail market across the West Panhandle offers a range of opportunities for businesses of all sizes and industries. From local boutique shops to national chains, the area is a promising location for retailers seeking to capitalize on the region’s unique characteristics and consumer base. The Florida Panhandle is the northwestern part of Florida and is roughly 200 miles long, lying between Alabama on the north and the west, Georgia on the north, and the Gulf of Mexico to the south. The following report contains data on Pensacola, Ft. Walton Beach, and Panama City.

Highlights

• The retail market in Pensacola currently has a vacancy rate of 3.3%, which has risen by 0.6% in the last 12 months.
• Over the past year, there have been 78 sales in Ft. Walton Beach, and the current market sale price is $235 per square foot, which is higher than the average sale price of $217 per square foot in the previous three years.
• The current rent rate in Panama City is approximately $16.30 per square foot, reflecting a 4.2% increase compared to the rent rate of a year ago.

Rents | Vacancy | Construction

The average retail market rent per square foot in the West Panhandle is $18. Ft. Walton Beach has the highest market rent per square foot at $21, below the U.S. average of $24 per square foot. Ft. Walton Beach also has the highest year-over-year rent growth, currently at 4.7 percent. The average retail vacancy for the cities is 2.3 percent, with Panama City having the lowest. Panama City’s vacancy rate of 0.7 percent is below the 10-year average and has decreased over the last four quarters. Construction activity is bursting in several of these cities, with over 121,224 square feet currently under construction. Yet again, Ft Walton stands above the rest regarding development activity. The city currently has 83,571 square feet of retail space under construction.