While rent growth in the multifamily sector has quickly normalized across the Sun Belt, it is clear that retail rent growth has not. Each of the top 12 U.S. markets for retail rent growth measured over the past three years are in the Sun Belt region, and five of them are located in Florida.

The Jacksonville market not only led the pack during that period but also ranked first for retail rent growth in the nation for the trailing year ending in June 2023.

Low vacancies coupled with strong in-migration from U.S. markets outside of Florida are driving considerable retail demand in the state. A changing demographic base is also fueling stronger fundamentals as those moving to Florida are coming from areas with historically higher incomes, and therefore greater spending power.

A recent study by Smart Asset that analyzed data from 2020 and 2021, using tax returns indicating annual earnings of $200,000 or more, found that Florida was gaining more high-earning households than any other state. Net migration of these households to Florida was three times the pace of Texas and roughly five times the pace of North Carolina. As this trend further develops, it will increasingly influence which retailers target expansion in the Sunshine State moving forward.

Each of these top 12 markets has seen rates of annualized rent growth of 18% or more in the past three years, with rents in Jacksonville up roughly 28% in that time. In Orlando, which ranked eighth in the nation for rent growth as of June 2023, average rents have grown by 21% during this period. A restrained speculative development pipeline is keeping vacancy compressed while demand is on the rise, which is also contributing to rising rents.

Orlando was in the top 10 markets for retail space completed between the second quarter of 2022 and the second quarter of 2023. However, only 1 million square feet was built in that time and strong demand for space resulted in 4.9 million square feet of leasing activity. The gap between supply and demand has ensured rents will continue to move upward in the near term.

To be fair, some of the rent growth is being affected by rising costs across the board, from common area maintenance to space buildouts and insurance, and is then passed on to tenants out of necessity. Smaller tenants are also impacted more by increases in common area maintenance as many anchors have stops built into their leases, with smaller tenants paying a disproportionate share of the difference.

But what goes up must eventually come down, and while rent growth in Orlando has outpaced the nation for the past decade, it has begun to slow. Looking ahead, CoStar forecasts that rent growth in Orlando may decelerate to around 6% by the end of this year and could taper further to around 3% by the end of 2024.