Kelly Pulignano, Senior Vice President, TSCG (The Shopping Center Group)

Kelly Pulignano, senior vice president of TSCG (The Shopping Center Group), talked to Invest: about the current state of Jacksonville’s commercial real estate market, particularly how its retail space has shifted in the past few years in the wake of COVID, inflation, and high interest rates. She added that her firm is poised to remain active and successful through diversification.

What have been the main highlights for TSCG over the last 12 months?

Over the last year, we have been particularly proud to execute market penetration strategies for a few new retailers to the market with aggressive expansion requirements. Despite headwinds including strong existing retail competition and low vacancy, we have successfully identified several off-market sites for our clients within their ideal market footprint. While these expansions are still in progress, being able to capitalize on the plan we set out for these expanding tenants has been one of the biggest wins of the last year.

We have also been able to keep our existing portfolio of shopping centers well occupied and stable by swiftly backfilling any vacancy. Finally, we have made exciting progress on a few new retail developments which will have game-changing impacts upon completion.

Could you expand on the state of Jacksonville’s retail market in terms of any shifting dynamics?

In the retail space in Jacksonville and nationwide, there has been limited new development due to high construction costs and interest rates. Occupancy has remained extremely high in traditional shopping centers within desirable retail corridors. For new tenants entering the market or looking for new space, it’s challenging to find the premier space that many require. Many retailers are having to think about rent differently. Whereas they may have previously targeted a specific occupancy ratio to remain healthy, they now may need to become more aggressive to secure their ideal sites. There is not a lot of retail product to lease while demand from tenants continues to increase. This trend has continued for a few years now, and hopefully with the recent political shakeup there will be positive economic ramifications. Jacksonville continues to grow and operate as a target market for strong retailers.

Are you observing an uptick in demand for any specific services?

Tenant representation is the most in demand service line in retail brokerage right now. Retail tenant site selection requires more work than ever to dig up opportunities. Given the lack of vacancy, it is imperative that retail tenant representatives operate proactively and creatively to uncover opportunities for clients, so the role of tenant representation is important right now. It is rare to see a sign on a main-and-main retail corner where you can simply call a landlord and make a quick deal; you typically have to have relationships in place and consistently monitor existing tenants that may be struggling in order to get ahead of potential site opportunities before they hit the market. While most premier retail products are well-occupied and stable, landlord representation is still an in-demand service line given the local market advisory needed to quickly fill vacancy and advise on any renewing tenants.

In what ways does TSCG differentiate itself from other competitors?

TSCG is strictly retail-focused; from the top down, all our resources and technology are geared towards how to best service retail owners and occupiers. We have a specialized, niche approach due to our retail-only focus. We are part of a network called ChainLinks, which provides us with a partner company in every major MSA throughout the country. Even though TSCG’s offices are concentrated in the Southeast, our nationwide network allows us to compare notes and share resources with top brokers throughout the country. For instance, we are seeing an influx of new-to-market concepts in Jacksonville and are able to consult our network nationally for intel to overcome challenges in negotiating with those new-to-market tenants. TSCG has a well-established presence in Florida, so our brand recognition is strong.

Despite the limited market, are you looking to expand within Jacksonville to new developments?

We would love to expand our portfolio. Given that many traditional shopping centers are quite stable, many industry peers are picking up a diverse book of business to continue staying active in retail landlord representation, whether that means working on a pre-development consulting basis for a mixed-use development or picking up less traditional quasi-medical retail space. We are currently working on a few exciting new construction retail developments and look forward to being able to announce more details in 2025.

How has TSCG benefited from Florida’s increased population growth and business relocations?

Retail demand is healthy in Jacksonville because of the ever-growing residential growth of well-educated and solid income consumers. Given this growth, there are new pockets of the market that retailers are considering entering. St. Johns County has exploded over the last few years and is now considered one of the top retail targets of the region.

What are the primary challenges for the commercial real estate industry at the moment?

Inflation has been a significant challenge over the past few years. Many retail landlords have been looking for creatively structured deals to contend with this inflationary environment. While historically retail tenants may have had long-term leases with fixed, annual rent increases, we now may need to consider a rent escalation structure that ties in with CPI or a recalculation of fair market value after a certain number of years. Navigating the economic issues over the last few years has been a challenge. Given our established market presence, our strong portfolio and our national network, we have the resources to brainstorm creative solutions to these problems, and our clients have been satisfied with the deal structures we have been able to execute.

Are there additional avenues that are driving growth and retail expansion in the Greater Jacksonville area?

Beyond St Johns County, there is also significant growth on both the north and west sides of Jacksonville. We are seeing the market expand from the inside out with many new constructions, and desirable, multi and single-family residential communities.

What are TSCG’s main goals and priorities for the next two to three years?

We intend to continue growing and diversifying our book of business. The economic impacts following Covid have proven that it’s important to commit to diversification, both regarding business lines (i.e. landlord and tenant representation) and product/retailer types within those categories, to ensure that you are able to remain active if one particular sector slows down. Our clients also appreciate a diverse understanding of the market that can be achieved by working on a variety of differing assignments. We will continue to expand our geographical footprint outside of Jacksonville proper. Ideally there will be some positive new economic impacts that will lead to the ability for developers to do more ground-up retail and mixed-use projects. I anticipate we will continue contributing to the growth of Jacksonville, bringing exciting new concepts to the consumers here and continue diversifying to stay as active as possible.

Read the full interview here.