The second quarter brought signs that luxury shoppers are back in Orange County, a turn that has brought a bright spot to the retail market.
Luxury stores and upscale malls are seeing a strong sales recovery here and across the nation.
That has fueled robust leasing at upscale shopping centers in Orange County, with South Coast Plaza in Costa Mesa and Fashion Island in Newport Beach adding luxury and upscale lifestyle stores at a brisk pace. Both of those centers continued to reinvest in their properties during the recent downturn and now appear to be reaping the benefits with dozens of new store openings over the past several months, and more to come.
Unconfined
The bevy of new tenants has not been confined to retailers. Several new casual dining and fine dining restaurants have also been added at the two centers.
A lack of new development also is benefiting landlords for high-end retail. New ground-up projects in the pipeline tend to be smaller niche centers in the coastal areas, such as ETCO Homes’ Newport Bay Marina and Ridgeway Development’s Mariner’s Pointe.
The activity at the high end helped ease the effects of the spotty economic recovery. The overall vacancy rate for retail space here was 4.4% in the second quarter, up from 4.3% the prior period. The average asking lease rate rose slightly to $2.46 per square foot.
Many vacant spaces formerly occupied by big-box retailers are being absorbed by financially healthy, expansion-minded companies.
Financing
Availability for financing for retail developers has increased dramatically so far this year.
The market for commercial mortgage-backed securities has started up again, although there’s been a slight slowdown over the past several weeks due to global market concerns. National and local banks are lending again. Borrowing rates are now in the 4.5% to 6% range depending on terms.
Whether the recovery continues for high-end retail and the rest of the sector depends on a number of variables, including the stock market and global economy.
Crocenzi is senior vice president in the Newport Beach office of CB Richard Ellis. Data and analysis provided by CBRE Research.
