By PETER MOERSCH
Vacancy in the Orange County retail market continued to go lower in the third quarter.
All segments but power centers showed either stability or lower vacancy. Although there are a few projects planned, only about 700,000 square feet of retail space is under construction.
These conditions show the strength of the retail market. This is especially true given the roughly 10% increase in rents versus the prior year, which bring average rents for all types of retail space to $2.08 per square foot, compared to $1.88 a year earlier.
Neighborhood, strip and power centers still account for the greatest amount of rent increases. Specialty and community centers, though representing less than a third of the centers surveyed, have been seeing stable rents overall.
Still, specialty centers continue to outpace other retail types with rents averaging $2.38 per square foot, versus $2 to $2.07 per square foot for the others.
Retail center owners such as The Irvine Company have adapted qualities from specialty malls to their new and older centers. Outdoor seating areas with umbrellas, fountains and music have been added to the developer’s Culver Plaza and University Village shopping centers.
The fact that the Irvine Co. is bullish on the market hardly is surprising given the county’s strong housing market and absorption in the office and industrial commercial markets.
Development will continue to be limited because land is in short supply. The Irvine Co. continues to grow with its Woodbury project and the next phase of the Irvine Spectrum Center.
The scarcity of development opportunities will allow the Irvine Co. to be selective in maintaining its tenant mix. Redevelopments such as the Orchard (formerly Saddleback Valley Plaza) and the Arbor (formerly Kmart Plaza) at the intersection of El Toro and Rockfield typify the opportunities for retailers to enter the Orange County market.
Overall the market remains strong with upward pressure on rents as vacancy drops.
Moersch is a senior associate, retail specialty in the Anaheim office of CB Richard Ellis Group Inc.
