Homegrown and independent tenants — the types landlords might well have overlooked roughly a decade ago — have come into high demand in California as shopping centers re-create themselves to give fickle consumers something fresh and surprising. “With all the changing demographics and population segments in California, we’re seeing a lot of new and different retailers,” said session leader Alan Clifton at this week’s Western Conference & Deal Making in San Diego. “But they aren’t replacing traditional retail; they’re creating something new and exciting with a community feel and an Internet connection.” Clifton is ICSC’s Western Division operations chairman and a senior vice president of investments and operations at Irvine, Calif.–based Passco Cos.
The Greater Los Angeles market is a good example, Clifton said. The newly renovated Anaheim Packing District sports a roster of locally grown and independents tenants — with such names as Bar and Vitaly, BXCR: The Underground Wine Society, Cafecito Organica, Crepe Co-Op and Hammer Workshop. The district’s Anaheim Packing House, a new food hall and marketplace, opened last year in a 42,000-square-foot, century-old former Sunkist packing plant. The complex, at Anaheim Boulevard and Santa Ana Street, features an outdoor events center with a fireplace and an orange grove.
Numerous ethnic residential and shopping enclaves have sprung up in the past 10 to 15 years throughout the state. “There are new Hispanic districts, Asian districts, Middle Eastern Districts and others — they all present opportunities for local people who get to know these markets,” said Clifton, speaking at the session titled “Now that Retail is Back in the Black, How Do We Get the Green?” and held Wednesday.
“If you look at the authenticity of these projects, it makes it very important for owners and developers to pay attention to the trend,” Clifton said. “They just can’t come in and plug in any old format. Even the basics, such as the [requisite] service tenants, may not work.” That makes field research more important than ever. “Talk with the checkout person, pop into convenience stores, go to city hall — find out what is working and what is needed and get to know the neighborhood.”
The Los Angeles Basin retail market, which includes Los Angeles and Orange counties and the Inland Empire, recorded a net absorption of 943,300 square feet of retail space last year, according to Colliers International. Both Orange County and Los Angeles County show just 4.7 percent retail vacancy, while the long-struggling Inland Empire improved to 9.5 percent over the high double digits, postrecession. The Bay Area is thriving too, with some 774,000 square feet of shopping center projects in the pipeline and about 1 million square feet more planned, according to DTZ.
There is room for national tenant growth in the Golden State. Among the new projects is the $450 million Village At Westfield Topanga, in Woodland Hills, a cog in the reshaping of the western San Fernando Valley’s retail landscape, which is set to open this Friday, Sept. 18. Among the 88 inaugural tenants at the 550,000-square-foot open-air center are Burke Williams, Costco, REI, 24-Hour Fitness, and a studio and performance-event center for public-radio station KCSN 88.5, plus the Il Fornaio Cucina Italiana restaurant and 28 other eateries, many of them local.
In Orange County, work on the mixed-use Source lifestyle center, in Buena Park, at the high-traffic intersection of Beach Boulevard and Orangethorpe Avenue, is under way. Lynnwood, Calif.–based M&D Properties is developing the property, which will contain 400,000 square feet of retail, 57,000 square feet of offices, 150 hotel rooms and 300 living units.
Meanwhile, foreign capital continues to pour into the state. “Those investors don’t have a problem buying in at a 4.5 percent to 5.5 percent cap rate,” Clifton said. “They just need to get the money out of their countries — they can get four times the return here that they’re getting at home.”
This article was originally published on Shopping Centers Today.
