Orange County’s retail market should stay hot through 2005, according to the latest forecast from Marcus & Millichap Real Estate Investment Brokerage Co.
The brokerage cites strong consumer spending here, based on employment growth.
“Retailers are expanding in the county at an accelerated pace, fueled mainly by significant retail sales growth,” said John Przybyla, regional manager in Marcus & Millichap’s Newport Beach office, in a statement.
The report’s other predictions:
Employers should add 35,600 workers this year, according to the brokerage. Growing sectors include professional and business services, leisure and hospitality.
At the same time, development should slow this year. Builders are on track to finish about 915,000 square feet by January, which isn’t that much compared to the past. Most buildings coming online this year are for one store only. Construction could pick up in future years, with developments in Anaheim and Tustin in the works.
Demand from retailers this year should nudge vacancy down 10 basis points to 2.7%.
Such market conditions are giving owners more negotiating power, which should result in a 5% jump in asking rents to $2.31 per square foot.
On the sales side, the report noted investors are competing for buildings with one tenant. And buildings with a strong retailer can sell for more than $500 per square foot. A lack of development could cause sales prices to keep rising.
Still, the volume of shopping center sales is slowing, according to the report.
A final lawsuit related to a long running spat between two subprime lenders here came to a head late last month.
Irvine-based New Century Financial Corp. could be on the hook for $11.5 million awarded to rival ECC Capital Corp., which goes by Encore Credit, and others by a jury in Orange County Superior Court.
New Century settled its legal woes with Irvine-based Encore in 2003. But the company previously indemnified Christopher Lappi, the defendant in the remaining lawsuit.
Lappi allegedly gave New Century disks with confidential information regarding Encore. The jury said New Century was wrong to take the disks.
“New Century strongly disagrees with the jury’s verdict that the company engaged in any sort of wrongdoing,” the company said in a statement to the Business Journal. “New Century is advised that Mr. Lappi intends to appeal the judgment once it is final.”
“We are evaluating our obligations, if any, related to the indemnification of Mr. Lappi. Regardless of the outcome related to the indemnification, New Century does not believe this matter will have a material impact on its business, results of operations or financial position.”
The spat dates back to 2000, when Steven Holder left New Century. He cofounded Sprint Funding Corp., another mortgage company, and cofounded Encore in late 2001.
Jon Daurio, another cofounder of Encore, said in a previous interview that New Century sued in 2002, alleging misappropriation of trade secrets and intentional interference with pros-pective economic advantage, among other things. Encore countersued.
Amid the legal wrangling, Lappi, a former employee of Sprint Funding, allegedly gave New Century disks with information about Encore.
“He absolutely needed to take steps to recover these disks to protect his client information,” said Robert Sall, an attorney for Daurio.
Sall, of Laguna Beach-based The Sall Law Firm, said Judge Robert Gallivan should hold a hearing next month. Sall also represents Encore, Holder and Sprint Funding.
Dangerous Curve Ahead?
So if not higher interest rates, then what will chill the hot housing market?
That provocative question was poised by Mark Gongloff, in an opinion piece on the Wall Street Journal’s Web site.
It’s also a question I’ve been wondering for sometime, if there is some other threat looming, unseen in the shadows, while all the attention is on mortgage rates.
Gongloff gives some possible scenarios.
some minor event spooks speculators, causing a chain reaction that chases them from all hot markets.
a recession.
a flattening yield curve.
As to the first two, they seem logical but rather vague. The flattening yield curve, however, is becoming reality.
Banks and other lenders make money by borrowing at short-term rates and lending at long-term rates. Well, long-term rates have been falling,the yield on a 10-year Treasury fell below 4% in May,while the Federal Reserve Bank has pushed up a key short-term rate eight times.
The federal funds rate now is 3%, and is expected to get another push to 3.25% in June. There is some speculation the Fed will stop or ease up on rate hikes after that.
The London Inter-Bank Offered Rate, another key short-term rate, has been on the rise. In early June, three-month LIBOR was 3.36%, compared to 1.36% a year earlier.
