Retail developers like Orlando
The city’s population growth and stability make it attractive, a new study says.
Despite a slumping housing market and rising construction and insurance costs, Orlando remains a hot spot for retail development, according to a Florida retail real estate report expected to be formally released on Monday.
Orlando led the state in number and value of shopping center deals for the first half of 2007, the report said. That may slacken as terms for financing are expected to tighten in the next six months.
A total of 45 shopping center transactions worth about $850 million took place in Orlando in the first half of 2007, according to an International Council of Shopping Centers retail report for Florida.
“People are really chasing after deals here,” said Justin Greider, co-author of the report and senior financial analyst at Staubach, a Dallas real estate company with offices in Orlando.
The volume of deals consummated this year in Orlando is nearly double the first six months of last year, the report said.
Greider said interest — and investment — in the Orlando market is being fueled by the region’s anticipated population growth as well as solid occupancy and rental rates, which have remained relatively stable the past six months.
Further, Orlando’s “cap rate,” or expected return on investment, sits just below 5.9 percent, the lowest in the state. That means investors are willing to accept an initial lower return rate in order to nudge into the region, Greider said.
“People believe it is an inherently strong market,” he said. “They are taking a smaller return now because they know that return is going to grow over time.”
In Florida, nearly 230 retail centers with a total value of more than $4.5 billion were purchased in the first half of 2007, more than all of 2006. The ICSC report cautioned that the subprime mortgage meltdown and other factors could make it tougher for investors.
Mark Chediak can be reached at mchediak (at) orlandosentinel (dot) com or 407-420-5240.