Retail, Rates, and Reality—Finding the Core In Submarkets

We’ve had a whirlwind of a year. Despite the noise—from the media, the Fed, and the memes—the local retail market remains resilient. Tenants are expanding or relocating to be closer to core markets, creating more competition for the small but successful brands that thrived in tertiary markets and now want a shot at the urban stage.

These tenants aren’t jumping straight into downtown. Instead, they’re hedging—targeting space near the core without getting caught in the premium pricing of the central business district. They're chasing emerging submarkets.

In St. Petersburg, that means the Edge District and Grand Central—corridors offering visibility along Central Avenue without downtown costs. In Tampa, it’s Seminole Heights. In Orlando, the Milk District. These submarket plazas are typically leasing between $30–$40 per square foot, depending on the building’s age and condition.

On the sales side, B and C class plazas are trading between $280–$350 per square foot—what used to be new construction pricing just a few years ago. As the old brokers say: never pay more than it costs to build new.

These figures are holding across Central Florida. Orlando is pacing Tampa in both leasing and sales rates. CAP rates remain compressed, floating between 6.5% and 7.8%. Finding anything above 8% requires more than a listing—it takes field work, relationships, and broker leverage.

Investors active in this tight market are clear on their buy-box. Value-add plays are in high demand as everyone aims to lift the cap post-close. But serious operators are also acquiring stable assets at lower caps, planning to exit at elevated values through lease restructuring. This trend is especially evident in the anchored centers now changing hands.

Landlords, meanwhile, are tightening their tenant improvement (TI) allowances. TI budgets are structured to support only those improvements that benefit future re-letting—avoiding costly demos or retrofits down the line. In response, tenants are negotiating more option periods beyond the original lease term to create flexibility without committing to a 10-year deal.

Landlords are accommodating this shift, largely because commission payouts are smaller on shorter initial terms. But they’re protecting downside: options typically reset at 95% of then-market rates, or escalations are structured more aggressively to guard against inflation.

Second-generation space remains in high demand. If the TI is for restaurant or medical use, landlords tend to be more flexible. Office buildouts, however, are largely avoided due to longer vacancy periods and slower lease-up cycles.

Mac Autrey