You've heard it a thousand times. “Congratulations, (insert major sports figure). You've just won (insert major sports championship/accomplishment). What are you going to do next?” The reply has been the same since 1987, when Super Bowl MVP Phil Simms of the New York Giants first uttered that now famous phrase, “I'm going to Disney World!” Apparently it's not only our favorites sports icons that make their way to Florida.
In 2002, 76.2 million visitors, domestic and international, traveled to Florida — the highest amount of visitors Florida has ever seen in one year, according to Visit Florida Corp. So why, in a state where tourism has such a great impact on the retail market, are retail sales down almost 4 percent from 2000 in many of its major metropolitan areas?
The answer may lie in the decrease of international and overseas travel to the United States. The September 11th attacks and a sluggish economy have reduced flights coming in and out of the United States. In just two years, international travel to the United States dropped more than 20 percent to 35.9 million visitors in 2002, according to reports published by the Office of Travel & Tourism Industries. “Because the number of international visitors went down, the amount of spending went down, and that can have a greater effect than you can imagine,” says Tom Moriarity, a principle at Economics Research Associates.
For example, the unemployment rate in Orlando — ranked No.1 in Florida for tourism — reached its peak in 2001 at 5.5 percent. For 2003, Marcus & Millichap estimates the market's unemployment at 5 percent. Statewide, claims for unemployment insurance are still more than 400,000 per week, a red flag for a potential recession, according to economists at the University of Florida.
The overseas traveler to Florida usually spends more time on his visit than his or her domestic counterpart, which ultimately leads to spending more money. Per trip, an overseas traveler spends $1200, compared to the average domestic visitor who spends $704, according to Visit Florida Corp. International travel expenditures alone generated $16.6 billion in the state of Florida in 2000, the most of any state in the union. On the other hand, domestic travel expenditures in Florida amassed a measly $41.7 million, according to reports from the Travel Industry Association of America.
But those domestic travelers love their fast food, a fact that has steadily strengthened the single-tenant, net-lease property market throughout Florida. According to Marcus & Millichap research, the median sales price of Orlando fast-food restaurants increased from $211 per square foot in 2001 to $290 per square foot in 2002. In the popular submarket of Kissimee, near Disney World, no single-tenant deals occurred in 2002, a sign that owners are holding on to a property type they feel will only continue growing in value. And food chains and franchisers such as Atlanta Bread Co., Checkers, Carvel, Sonic and YUM Brands are descending en masse on ICSC's upcoming 2003 Florida Conference.
And Americans are still vacationing and retiring to Florida. “In areas like West Palm Beach and Fort Lauderdale, the ‘snow birds’ make up the single largest part of the economy and create nearly a 30 percent increase in retail sales,” says Britt Beemer, a consultant at America's Research Group. For example, during the snowbird season, furniture stores usually double their business and major electronic and appliance stores see sales increases of 50-55 percent, according to Beemer.
Due to the flurry of snowbirds, plus a healthy supply of year-round retirees, net-lease drug stores have become some of the state's most sought-after properties. But owners that control them are reluctant to sell. Among freestanding drug stores that did sell in 2002 in Miami, the median price per square foot was $230, up from $184 in 2001, according to Marcus & Millichap.
And in Tampa, single-tenant property cap rates on well-located properties with national tenants will likely fall 50 basis points in 2003, to 8.5 percent, according to Marcu & Millichap. Keep reading for our in-depth analysis of the Tampa market.
Asking Rents In Major Florida Markets*
|West Palm Beach||$15.38||$16.37||$16.77||$17.14|