Orange County’s retail market—particularly its inventory of big-box space in the region’s top locations—has largely recovered from the effects of the Great Recession, according to a new brokerage report.
As of midyear, there was no empty big-box retail space in any of OC’s higher-end malls and other class A locations, according to a retail report by the Newport Beach office of CBRE Group Inc.
The report defines big-box as retail buildings of 20,000 square feet or more of contiguous space in shopping centers or free-standing buildings.
There’s been nearly 1.8 million square feet of big-box space absorbed in OC over the past two years, about 700,000 square feet of which CBRE defines as class A space, primarily newer locations in the area’s best-known shopping centers.
OC’s retail market totals about 95 million square feet, much of it anchored by big-box stores. The area’s vacancy rate for retail space now stands at about 5.5%, down 0.3% from a year ago.
Twenty high-end big-box locations, including spaces previously occupied by Mervyns, Best Buy and Pavilions, have been leased over the past two years, with the last few empty spaces snapped up this year, according to the report.
Hobby Lobby has been the most active tenant for such space in the market of late, with four spaces recently leased, including two locations opening this month in Anaheim Hills and Foothill Ranch.
Other active tenants for class A space include Total Wine & More and Nordstrom Rack, the report said.
There are still 52 empty big-box retail spaces in OC that total a little less than 2 million square feet, including older space in less-prominent retail locations.
Much of that space falls under CBRE’s class B designation. It includes older buildings in power centers, community centers and other free-standing locations.
Vacant class B space has recently increased, with 37 empty buildings in OC, due in large part to downsizing by grocers and office supply stores, according to the report. Tenants taking their place have included Wal-Mart, Stein Mart and a variety of fitness centers.
There’s been a notable improvement in 2013 among older and less generally desirable class C spaces, CBRE said.
Five of the six class C spaces absorbed in the past two years were absorbed this year. Businesses taking over the space have included ethnic grocery stores and discount retailers. There are still 15 vacant class C big-box locations.
The average monthly rent for retail space in OC is about $2.22 per square foot, up more than 6% from the end of 2012. Big-box space commands average monthly rents of $2.25 per square foot.
Tustin Refi
Tustin Ranch Plaza, a nearly 130,000-square-foot neighborhood shopping center on the Tustin side of Jamboree Road, got new financing.
The 13.7-acre property, a few blocks east of the Santa Ana (I-5) Freeway, recently got $34.5 million in permanent financing, according to Irvine-based Johnson Capital, which arranged the loan.
The nonrecourse loan has a 15-year term with an initial interest-only period. It then amortizes on a 30-year schedule, according to Johnson Capital’s Richard Caterina, who works out of the company’s San Diego office. Prudential Mortgage Capital Corp. provided the debt.
An affiliate of Irvine-based Sanderson J. Ray Development owns Tustin Ranch Plaza, which it built in 1995.
The company, whose co-owner, Walkie Ray, is on the board of the Orange County Great Park Corp., owns and manages a variety of retail and office properties in Irvine, Lake Forest and Rancho Santa Margarita, among other locations.
The Tustin center is anchored by a Ralphs grocery store and a Rite-Aid drugstore and is fully leased. It sits next to Irvine Company’s Tustin and Irvine Marketplace developments at the intersection of Jamboree Road and Irvine Boulevard.
Johnson Capital’s Caterina said it is the fourth time he’s financed the Tustin Ranch Plaza property since its development.
“We had a great deal of interest from many top tier life companies,” Caterina said in a statement, “enabling our client to take advantage of the low rates and aggressive terms unique to such a unique asset.”
