By PETER MOERSCH
Many were predicting a decline in the retail real estate market at the start of 2007. The only decline seen at this point is a decline in vacancy.
The trend toward positive absorption numbers in the fourth quarter was followed by higher absorption of space through the first quarter.
Overall vacancy has slipped to 3% after rising slightly during the past three quarters.
Vacancy has declined for all types of space with the lone exception being a tenth of a percent increase in vacancy in strip centers.
Many categories are at record low numbers. Power centers are below 2% vacancy at a time when several new power centers have hit the market.
No further growth by construction is on the books for power centers. This should support, if not decrease, vacancy.
Construction is under way for other types of space with a notable amount in the specialty category.
This segment has a million square feet under construction, representing 17% of the existing base of specialty retail.
The impressive part is that despite the growth, vacancy has declined from the prior year.
Because of the nature of this type of development, new products, new tenants and new retail prototypes are populating many of the leasing plans both recently completed and near completion.
The density of the county and lack of available land for development is forcing a trend toward mixed-use and urban development.
Much of the retail development is part of a project that includes offices, homes and recreational uses. The new urban communities in Anaheim’s Platinum Triangle are taking shape with condominiums under way around Angel Stadium of Anaheim.
Stadium Promenade has seen the opening of its remodel with two new restaurants. The success of these restaurants is a leading indicator the successful growth of the urban core of the area.
Other pods of restaurants are emerging in the areas around the Disneyland Resort and the Jamboree Corridor in Irvine.
The success of many of these newer projects also is a trend that translates to the investment market. Showpiece properties still are trading at low capitalization rates.
Fewer buyers in the market have limited the frenzy of buying that characterized much of the past few years. At this point, the retail market forges through as it continues to change and grow in the county’s new urban image.
Moersch is a vice president in the Anaheim office of CB Richard Ellis Group Inc.
The Orange County retail market includes retail centers 50,000 square feet or larger and excludes strip centers and freestanding retail buildings. Vacancy and rents exclude regional malls and are shown for shop space only, excluding anchor tenants. Gross available excludes space under construction. Availability does not include sublease space. Absorbed square feet does not include preleased space. Retail rents are triple-net, per square foot per month, excluding rent, tenant improvements and other concessions and are weighted by the amount of vacant square feet. Historical figures may have been adjusted and may not agree with previously reported ones. Data provided by CB Richard Ellis’ Global Research & Consulting.
