Retail Investment Accelerating Across North, Central Florida Markets
/By Brian Alford
CoStar Market Insights: Annual Sales Volume Continues to Increase Across the Region, Outpacing National Average
Investor demand remains robust across northern and central Florida markets, with annual sales volumes increasing in most of the region’s largest metropolitan areas. Among the seven markets with total retail inventory exceeding 30 million square feet, only Daytona has experienced a decline in year-over-year sales volume.
By sheer volume, Tampa leads the pack with roughly $1.3 billion in completed transactions over the past four quarters, followed closely by Orlando at just over $1.2 billion, according to CoStar data. Jacksonville, with $588 million; Sarasota, at $400 million; Melbourne, with $196 million; and Lakeland, at $176 million, round out the top six Florida markets.
Daytona, the lone market to post declining annual sales volume, also comes with a caveat. Sales surged in the second quarter of 2019, with roughly $90 million of activity. This was the third-largest quarter on record for the market, and it exceeded the prior three quarters combined.
Northern and central Florida retail sales have been impressive of late by almost any metric. Over the past four quarters, the nation saw retail sales volume modestly increase by 2.8%. Each of the top six sales volume markets in the region posted year-over-year gains of at least four times the national average. The biggest gains were seen in Sarasota, with a 137% annual growth rate, nearly 50 times the national rate.
As previously reported by CoStar, Florida’s retail markets benefit from some of the nation’s strongest population and job growth rates, which, along with significant tailwinds from robust tourism, generate high levels of personal consumption and retail demand. Retail investors are attracted by the region’s strong demographic trends and retail market capitalization rates that are typically above the national average.
The Florida markets, for the most part, have near record-low vacancy rates, assisted by this cycle’s low levels of retail construction.
The tight vacancies have helped fuel some of the nation’s best annual rent growth rates over the past five years, and continue to do so in 2019. The three largest markets: Jacksonville, at 6.6%; Orlando, with 5.8%; and Tampa, at 5.0%, remain in the top five retail rent growth markets out of the 390 metropolitan areas tracked by CoStar.
The high levels of annual rent growth are driving up Net Operating Incomes, and ultimately the market retail pricing, to record highs, which is likely to continue attracting investors for the foreseeable future.
Additionally, the supply pipelines appear manageable across most markets from a historical perspective, which should alleviate concerns over future supply-side impact upon future annual rent growth.