retail
In 2023, only 6 projects were completed, with 5 more in 2024, and just 3 scheduled for 2025. Notably, 70% of the projects in the 3-year pipeline are mixed-use developments. Explore the full list of new projects by clicking the link below.
Notably, prices in 2023 tumbled by 12% compared to the previous year. The average capitalization rate paid in 2023 stood at 6.75%, signaling a significant 20% decrease in value for asset sales over $15 million. Amid these challenging circumstances, investors like Woolbright anticipate a turnaround in 2024, with hopes pinned on the Federal Reserve's potential interest rate cuts to reignite the retail property market.
South Markets include: Atlanta, Nashville, Charlotte, and Raleigh/Durham
Even among the top 10, the top four: Wells Fargo, Truist, Band of America and Chase are all in "the 400 Club" and each of them operates over 400 branches. While Florida's population has record growth, the top 10 banks are still shrinking by 1.5%. In 2023, they closed 41 branches out of the nearly 3,000 they operate in the state. Amongst the top four, Wells Fargo and Truist both shrank by about 5% which is a substantial contraction. On the other hand, Bank of America and Chase basically remained unchanged. In 2023, Fifth-Third Bank grew by 10% and TD Bank grew by nearly 5%. As Florida's population continues its record growth, Woolbright predicts that over the next 5 years, Florida's banks will start to expand once again with much of that growth likely coming from the smaller banks.
In 2023, there was a net increase of 172 new restaurant locations or a growth rate of 1.2%, which is in line with the pace of population growth. Starbucks was Florida's restaurant growth leader with 38 new stores. The top 8 companies accounted for nearly all of the net gain. On the other hand, there were three companies, Burger King, Boston Market and Subway, that combined closed just over 100 stores in 2023. To achieve the 1.2% growth, the restaurant companies opened 519 new locations and closed 347, so there is a constant battle with small gains in this highly competitive business.
In recent years, there were 3 openings for every 2 closings, but in 2023, Bed Bath & and Tuesday Morning closed a combined 101 stores which cancelled out the expansions. In 2024, Woolbright forecasts a return to big box openings far exceeding closings.
In addition, the price levels in 2023 fell by 12% as compared to 2022. The average capitalization rate paid in 2023 was 6.75% for asset sales over $15M. Woolbright, like many investors, expects that retail property values and volumes to improve significantly in 2024 as the Federal Reserve cuts interest rates.
Dollar General and Publix led the 100 companies operating big box stores in Florida. Today's leaders are far different than past years where mega chains like Walmart, Target, Lowes, Home Depot and Costco dominated.
Throughout our time together, we'll dive deep into the ever-evolving trends, the formidable hurdles, and the boundless opportunities that shape the future of retail development right here in Florida. Drawing from my decades of experience in this dynamic field, we'll explore the strategies and insights that have helped Woolbright Development thrive in this vibrant environment.
Please click on the links below to see the details for each new project.
2022 Annual Openings: Florida Major Markets
Please click on the links below to see the details for each new project.
2021 Annual Openings: Florida Major Markets
From 2014 to 2021, the market cap of these top 20 companies shrank by $4.4 billion. Those that did manage to grow in size only did so through the acquisition of competitor companies.
Take Kimco, for example. In 2021, they bought WRI’s 29 million square foot portfolio. And yet, between 2014 and 2021 Kimco’s GLA only grew by 10 million square feet. This means that were it not for the WRI acquisition, Kimco’s total GLA would have actually contracted by 19 million square feet in those six years. Similarly, Kimco’s market cap appears to have increased by $3.1 billion in that same six-year period. And yet, when we consider that they acquired Weingarten with a $4.8 billion market cap, were it not for that purchase, Kimco would have lost $1.7 billion in value. And yet, Kimco’s stockholders paid 7.6% in general and administrative fee and awarded Kimco’s CEO $7.7 million in compensation for the privilege.
Talk about a herd of big, inefficient elephants in the room.
Big box space comprises 75% of the retail inventory in Florida and represents 80% of sales. Far from shrinking, in 2021 big box retailers added 182 locations across the state and added a net of 4.0M SF of new space. So clearly, neither the retail apocalypse or the pandemic are affecting the big box players.
Small shops, meanwhile, represent all of the retail contraction in Florida, closing a total of 480 stores statewide. But the majority of these closures were not from retailers or restaurants ‒ those national tenants closed only 38 and 31 stores, respectively, which represents only a minor post-Covid adjustment. Instead, the majority of the national retailer contraction was felt in the service industry and in the banking sector. While the pandemic may explain the challenges faced by the service industry, banks were primarily affected by two factors. First, SunTrust and BB&T merged into Truist, a move which directly caused 50% of the branch closings. Second, the continued rise in online banking has impacted the banking industry as a whole, prompting the entire sector to operate more efficiently.
New retail projects are very rare, but keep an eye on apartments – with Florida’s continued growing population, we will need to add 5M new housing units and apartments by 2040. Existing retail centers will go through a good deal of redevelopment and any new construction will almost inevitably contain a large apartment component.
Retailers are now embracing new ways to grow their sales with deliveries and curbside pick-ups. These growth-driving innovations are driving up sales without the need for additional retail space. Retail as a whole is transforming into a hyper-efficient system.
By 2017-2018, all four major markets surpassed their previous highs ‒ and the numbers have only increased since. Over the last seven years retail property rents have risen by 3-4% annually, significantly exceeding the overall rate of inflation or CPI. By 2023, we project base rental rates to range from $28-36 depending on the market.
The Great Financial Crisis in 2008 saw a major spike in vacancy rates, the effects of which lasted well into 2014. However, retailers have been filling vacancies at a steady pace since then. As of 2021, vacancy rates in all four major markets dipped below 10% and are projected to be at or below 8% by 2023.
This might seem alarming, but it isn’t an apocalyptic indicator that retail is dying; rather, the data indicates that the nature of retail itself is changing. With the rise of curbside pickup, delivery services, and front-door stores seeing increased back-door sales, the average square footage of retail space per person in the state will contract over the next decade and retail development will nearly stop. In the 1980’s, Florida had approximately 17 sf retail space per person. By 2030, we will return to that level. This is just another system that is going through self-optimization.
