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August 17, 2018

Real Estate

Malls in Florida are bucking the trend

Mike Vogel | 5/24/2017

Look at Florida retail real estate numbers and see a picture of health. Vacancies in many major markets are low — about 4% when a figure twice that would be acceptable. Rents are rising. Investment activity overall is strong. In Broward, in a recent quarter, investment activity was up 417%, the best quarter in a decade, reports Colliers International South Florida.

Yet nationally, with 3,500 big-box stores slated to close this year, the phrase of the moment is “retail apocalypse.”

It’s a confusing time in retailing, says Ken Krasnow, executive managing director of the south Florida region for Colliers International. Florida retailers benefit from the state’s 20 million residents and 113 million visitors. Even for struggling national retailers, Florida stores rank among their best-performing. Only two of the 138 stores JCPenney closed this spring were in Florida — in Palatka and Jacksonville.

There’s also a perception issue. Some sites and retailers do better than others, and major store closings get more notice than small openings. “There are a lot of concepts both local and national that continue to expand strongly,” says Zach Winkler, a retail leasing leader in south Florida for commercial real estate firm JLL.

On the mall front, his colleague, Bobby Palta, a CBRE first vice president in Orlando, says Class A and Class B malls in Florida markets are doing fine. Some do better than fine. Florida is home to the nation’s most productive mall, the Whitney family’s luxury Bal Harbour Shops, at $3,185 in sales per square foot, and is home to No. 5, Turnberry Associates’ Aventura Mall at $1,595 in sales per square foot, according to California-based Green Street Advisors.

But the stats and outlier malls hide the toll that shifts in consumer spending to online are taking, shifts especially bad for traditional malls. “A lot of the transformative effect hasn’t taken shape yet. You’re going to see it accelerate,” Krasnow says.

Says Stan Rutstein, a veteran retailer and commercial broker based in Bradenton, “The excitement of spending the day in the mall is gone. That is not coming back. There are too many other things to do.”

The brick-and-mortar retailer’s challenges “have just, frankly, begun.” He predicts years of space being repositioned.

'Experiential' tenants

A given mall’s decline usually begins with an anchor store going dark, leading to a death spiral of lower foot traffic, more closings and fewer customers until the mall fails. To combat that, mall landlords so far are banking on adding the “experiential” — fitness centers, theaters, restaurants — and backfilling empty spaces with discounters and new retail concepts. Clearwater-based online used-bookseller 321 Books, for instance, this year opened its first brick-and-mortar location at the Tyrone Square Mall in St. Petersburg. Some mall owners are taking down roofs and creating open-air spaces, while others convert the big boxes to offices, call centers, government uses, education, health care, industrial use or add multi-family housing to the site. Even yesteryear malls offer redevelopment opportunities as they occupy attractive sites, highly visible, wellserved by roads with good demographics nearby. Just this summer, Bed Bath & Beyond moved into space formerly occupied by a Belk department store in West Oaks Mall in Orlando not to open a store but for a 75,000-sq.-ft. call center. “There are plenty of alternative uses,” Palta says.

Tags: Real Estate, Retail & Sales

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