Real Estate Watch: The Retail Market
What Retail Recession?
By JEFF CYR
Depending on the reporting source, Southern California’s retail economy,and particularly Orange County’s,either is recovering from or never felt the recent economic swoon that affected the rest of the country.
With retail vacancy down 5% in the March quarter, net absorption up more than 100,000 square feet and a solid average lease rate of $1.72 per square foot, this market is stable and improving.
Retail sales were higher in the first quarter, a good sign that consumers are back on track after the effects of Sept. 11 hurt the already slowing national economy.
Although retail sales growth is modest, it is a positive sign that the consumer-driven trend is helping the major discount retailers, such as Costco, Wal-Mart and Sam’s Club.
Retail development and site acquisition programs remain strong as the dominant retail players focus on new site selection, continued sales and market share growth within their industries.
The supermarket and drug store chains continue to battle it out head-to-head on virtually all available sites in the market. Both types are forced to look at non-conventional acquisitions for growth via buyouts, relocating tenants and any other creative means.
Kohl’s (department stores) is aggressively pursuing many sites in its strategy to open about 20 stores in the Southland in spring 2003. Costco is relocating stores to accommodate its latest 150,000-square-foot building prototype and on-site gas station.
Construction activity in North County includes a Lowe’s, Wal-Mart and Sam’s Club, anchoring ICI’s power center at the southeast corner of Beach and Imperial Highway in La Habra. In Seal Beach, Kitchell Corp. recently completed the Seal Beach Towne Center, with a new Target, Ralphs and Sav-On, which has forced owners of the original Rossmoor center to re-think their ownership strategy and reposition and renovate for the future.
In the South Coast area, Ikea is planning to build a 300,000-square-foot prototype at the northeast corner of the 405 freeway and Harbor on the former bean fields owned by C.J. Segerstrom & Sons.
And there has been a myriad of changes in the South Coast Plaza with a home furnishing store recently added, and more coming soon with Room & Board and Retrospect in the former Computer City space.
Along the coast, the Irvine Company is developing a unique retail center on Pacific Coast Highway at Crystal Cove, anchored by The Gap and Banana Republic. In South Orange County, the Kohl’s-anchored center in Rancho Santa Margarita is nearly complete and another mall further south in Ladera Ranch will be anchored by another Kohl’s and is scheduled to open in 2003.
In Central County, aggressive Hispanic retailers such as Gigante, Famsa La Curacao and others are eager to find sites in the densely populated areas in and around greater Santa Ana.
With all the activity in the local retail marketplace, it appears that OC has out-paced the U.S. economic trends and will continue to improve ahead of the nation.
Jeff Cyr is a vice president of retail properties in the Anaheim Office of CB Richard Ellis Services Inc.
