Real Estate Watch: Retail
Value Retailers Lead OC Market
By JEFF MOORE
Orange County continues to buck the national retail real estate recession.
That’s a surprise at first glance. After all, amid the sluggish economy, forecasters say the jittery stock market is contributing to weaker consumer demand.
Nationally, the consumer confidence index has declined for four consecutive months. Kmart closed more than 250 stores in the U.S. in the summer and is expected to close another 500 after the holiday buying season. Gone from the OC retail scene are Homebase, House2Home, Montgomery Ward, Homelife Furniture, Mars Music and Crown Books, among others.
So the OC retail market must be in the tank, right? Well, no.
The county retail trade has been relatively unscathed by the recession and remains as one of the strongest markets in the nation.
OC has 2.9 million residents and ranks as the 14th largest metropolitan area in the U.S. Forbes consistently ranks the county as one of the top 10 places to do business in the country. Healthy population and household income gains continue.
And the impact of the Sept. 11 terrorist attacks and recession are waning, while the housing market stays resilient.
Retail follows rooftops. Population growth generates and sustains consumer demand. Consumers still need groceries, clothes, transportation and other retail goods and services, even in the worst of times.
OC had positive absorption and tightening retail vacancies in the third quarter. More than 3.6 million square feet of retail construction is under way.
Active retail tenants driving development include Lowe’s, Target, Kohl’s, Wal-Mart and Albertson’s.
Retailers targeting ethnic consumers are also starting to have a larger impact on the retail scene. Grupo Gigante SA de CV, the largest grocery chain in Mexico, has announced it is opening several stores in the county to serve the growing Hispanic population.
While the empirical evidence for a healthy retail market is evident, the market is more cautious. Consumers are focusing more on “value and necessity” items. Retailers are more conservative with their inventories.
Retailers that focus on value are the ones that will lead the way.
Moore is a senior vice president of retail properties in the Anaheim office of CB Richard Ellis.
