The Tampa Bay Retail Sector vacancy rate dropped to a fifteen-year low of 5.4% as competition for space in core submarkets remained high, driven by the overall positive outlook by retailers due to the area’s centralized location, continued job growth and positive net migration.
The national and global economy saw their fair share of fluctuations during the quarter, from geopolitical events and increased interest rates to the ongoing war in Ukraine and recovery from the pandemic. However, signs of activity and demand for retail space in Tampa Bay remained relatively constant in light of the negative economic forces globally.
The Tampa metro area unemployment rate hit 3.2%, falling 120 basis points (bps) year-over-year (YOY), on the addition of 30,898 jobs, for a job growth rate of 1.2%. In addition, retail landlords benefited from steady employment gains in sectors that positively impacted demand. Those sectors included an increase in leisure and hospitality of 13.1%, accommodation and food services job growth of 11.9% and food services increase of 11.7% over last year.
As a result, the overall vacancy rate decreased to a historic low of 5.4% during Q2 2022 and a 130-basis point drop year-over-year. Vacancy rates for 1st generation space (space built within the last five years) decreased to 1.0%, a decline of 270 bps as space is quickly absorbed and delivered to the market. Second generation space vacancy dropped to 5.3%, a 140-basis point decrease over last year. As retail rental rates climb alongside escalating construction and labor costs, the deal cycle has lengthened to complete lease transactions, an expected trend throughout the year and into 2023.
Lender financing for retail investments remained plentiful during the year’s first half, albeit becoming tighter as interest rate fluctuations took shape. Single tenant retail, which carries investment-grade lease guarantees, was in line with the previous year’s transactions and average sale price of $341 per sq. ft., which was 63% higher than the same period in 2019. The number of transactions of multi-tenant centers tripled over last year with approximately 30 properties changing hands at an average sale price of $264 per sq. ft., which was 56% higher than a year ago.