CBM’s Retail Shopping Center Management & Leasing Blog

Retail Real Estate News & Trends in Southern California
 

29051 S. Western Avenue, Rancho Palos Verdes, CA

Centers Business Management (CBM) leasing agent, Jason Ehrenpreis, recently completed a lease transaction representing the landlord and tenant, Pie Rise, a gourmet pizza restaurant, on a 4,650 SQFT freestanding retail building. The property, formerly a Marie Callender’s, is at the intersection of Western Avenue and Trudie Drive in prime Rancho Palos Verdes. Immediately adjacent to the site is a Broiler Express drive-thru location and a Denny’s restaurant. Across the street is a Ralph’s anchored community shopping center with a Carl’s Jr drive-thru on the hard corner.


Congratulations once again to CBM’s 2017 CoStar Power Broker Award winners!

Dave O’Connell, Jason Ehrenpreis, and David Levcovitch were formally awarded their 2017 Power Broker plaques at a ceremony this past Thursday.

The event was held at CoStar’s fiftieth floor offices at the 777 Figueroa Street building (adjacent to the 7th+Fig shopping center) in the heart of downtown Los Angeles.

A grand time was had by all on hand, set against the stunning backdrop of panoramic LA skyline views.

 


24372 Vanowen Street, West Hills, CA

Centers Business Management (CBM) leasing agent, David Levcovitch, recently completed a lease transaction representing the landlord and tenant, a local martial arts studio, on 2,800 SQFT retail space. The corner strip center is at the intersection of Vanowen + Valley Circle in prime West Hills. A newer, well-maintained, 2-story property, the center is home to Allstate, Farmers, and State Farm insurance agencies, in addition to a diverse mix of service-oriented tenants.


1453 N. Azusa Avenue, Covina, CA

Centers Business Management (CBM) Valley Division Director, Dave O’Connell, recently completed a lease transaction representing the landlord and tenant, Boost Mobile, on 1,576 SQFT retail space. The unit is in a sprawling community shopping center at the intersection of Foothill and Mountain in prime Upland. In addition to Ross Dress for Less, the center’s A+ regional co-tenants include El Super (Hispanic grocery store), Fashion Q (clothing outlet), Western Dental + Orthodontics, and El Polo Loco. Additionally, the center is immediately adjacent to a Walmart anchored shopping center that also hosts Fallas Paredes (Hispanic discount clothing retailer). And is across the street from a Lowe’s hardware anchored center, also home to County Buffet, Subway and more.


Net-Lease Rides Wave of Retail’s True Fundamentals

By Globe St. May 31, 2018

”Retail sales will continue to grow this year as discretionary income ascends.” So Marcus & Millichap kicks off its First Half 2018 Net-Leased Retail Research Report.

Recently named national director of retail Scott Holmes points to a two-fold driver of this good news. First, “The tax law changes and the general health of the economy are creating more discretionary income for many purposes, including investments,” he tells GlobeSt.com.

Holmes also points to a release of last-year’s pent-up demand on the part of investors waiting to see where the then-proposed tax reform would lead. “There was a lot of fence-sitting last year,” he says, “which has turned into increased volume.”

Interestingly, much of that volume is coming from apartment investors, seeking higher returns and lower management responsibilities. “We’re seeing some apartment investors selling that product type at historically low cap rates and moving that money into less management-intensive products, such as single tenant, net-lease retail,” he observes, “and they’re doing so generally at a higher cap rates than apartments.” (Cap rate spreads remain at such historically high levels, the report notes, that they may temper any adverse impact from Federal Reserve rate increases.)

The result of these myriad tailwinds are evident. “This year,” the report states, “retail spending is forecast to post a 4.5% advance, buoyed by the continued acceleration of e-commerce growth. Although online stores consistently expand their footprint, the e-commerce sector is just a small part of a much larger retail setting.”

Among the net-lease retail sectors, “Dollar stores continue to perform well due to their inexpensive convenience items crafted to serve low-income households,” according to the report. “Grocery stores remain a highly sought-after asset as well, which can be largely attributed to the continued improvement of the overall experience. Dine-in options, wine and cheese bars, and more quality products keep foot traffic high and occupancy strong for owners of these assets. Necessity-based stores, like grocers, have proved to be relatively resistant to the rise of e-commerce.”

Tracking the development side of the net lease picture, Marcus & Millichap reports a contracting pipeline. “As the retail marketplace has improved throughout the cycle,” says the report, “builders have largely responded by supplying build-to-suit product for net-leased tenants. As a result, single-tenant structures have routinely made up more than two-thirds of annual deliveries since the recovery began in 2009.

“Despite rising inventory availability due to several high-profile closings,” the report continues, “net absorption has remained positive, generating robust growth in the average asking rent, which rose above 2008 levels for the first time in 2017. Elevated development costs that could be bolstered by the new metal tariffs may trigger further upside in asking rents as tenants vie for the limited space coming online.”

Even interest rates, for the time being at least, are fueling volume. The interest-rate question was the biggest issue after the wait-and-see Holmes indicated previously. “We had a pretty rapid rise in the 10-year Treasury last year,” he says. “It seems to have settled down to the new normal, and for that reason as well more people are transacting. There has been a modest rise, but it always depends on the market and the product type, especially in retail.”

In fact, he adds, high-credit, long-term net lease transactions have in general been less impacted than other types of retail, such as power centers. But it’s really “a case-by-case question,” he says.

As both the report and Holmes point out, the fundamentals of the market–and the resultant investor interest–belie the headlines of doom-and-gloom. In fact, despite said headlines, there were more store openings (4,000 in all, according to Marcus & Millichap) than closings last year.

In all, Holmes sees a strong market for the foreseeable future, with only one bit of advice. “Certainly, the refrain for quite a while now has been cautious optimism,” he says. “There have been some headlines, but as you go through the fundamentals on a broad national basis, conditions, especially earnings, still very much lean to the positive. Despite the headlines, vacancies are near all-time lows, there’s rental rate growth and supply is constrained.”

Which leads us to the advice, directly tied to the essentially local nature of the retail market: “Do your homework on the market,” he concludes.


321 Willow Street, Long Beach, CA

Centers Business Management (CBM) property manager, Roselene White, recently completed a lease transaction representing the landlord and tenant, Flame Broiler, on a 1,716 SQFT retail space. The property is just off the intersection of Willow Street and Long Beach Boulevard in prime Long Beach. Boasting a bevy of A+ co-tenants, the property hosts Metro PCS (cell phones), Subway, and H&R Block. Additionally, a drive-thru Burger King is situated on property’s hard corner, with Rite Aid, McDonalds, Carl’s Jr on the three adjacent corners.


5 Trends in Retail Reinvigoration

By Globe St | May 30, 2018

The face of retail has changed over the past decade with the introduction of e-commerce and changing consumer spending habits. Though it may appear this is having a negative effect on the retail real estate world, it’s become an age of reinvigoration for these properties.

With Partner touching around 10% of CRE transactions in the US (during due diligence or development), we asked our staff from across the country “What are you seeing? What are some of the interesting retail transformations happening?” In this informal poll, these 5 trends stood out:

1. Big Box Getting New Purpose in Life

Many of the big box and anchor mall stores are being left vacant due to poor performance, bankruptcy of retail chains, or in favor of a smaller space for those still operating. While these spaces are generally considered a difficult property to reuse due primarily to the sheer size, a new type of consumer is creating different needs and therefore bringing new life through re-purposing.

We’re seeing the repurposing of ‘big box’ retail stores into self-storage facilities, especially those with highway visibility and those that can be fitted for the often requested climate controlled storage fact, we are seeing self-storage not just transforming big-box stores but also underused urban mid-rise buildings with the suburban to urban shift. For example, we helped Hickory Capital with the adaptive reuse of a 75-year old downtown Cincinnati building into high-density storage.

We are also seeing examples of grocery stores conversions to medical office or assisted living. These projects are unique from an engineering perspective with the need to re-work the mechanical, electric and plumbing (MEP) system demands that are required in order to support medical needs, such as specialized ventilation/heating/cooling systems, electrical system support for emergency generators or medical equipment, and plumbing systems that can accommodate the new use.

Another trend we’re seeing is conversions to trampoline parks, a reflection of consumer desire for “experiential” visits and a more family-friendly destination. We see this particularly in the Midwest region via former grocery stores. Some lenders hesitate to finance such a creative reuse, but others including 44 Business Capital (a division of Berkshire Bank) are willing with the right safeguards in place. In one instance, we provided construction risk management support for the conversion of a former HHGregg into the Altitude Trampoline Park in Sanford, FL.

2. From “Busted Mall” to “Experiential Destination”

Consumers are driving retail to move from the traditional, now-struggling suburban malls to lifestyle centers where retail is a part of an overall experience. Consumers are looking for an experience – whether it be going to a restaurant, catching a movie, or just enjoying outdoor recreation. By creating a mixed-use campus, retail shopping can be more of a leisure activity and not a chore. A notable example is Orlando’s former Festival Bay Mall / Artegon Marketplace. We contributed pre-development due diligence here for luxury developer Dezer Development in turning this struggling mall in a prime location into an entertainment complex and event center. The redevelopment includes an automotive museum featuring Mr. Michael Dezer’s private collection of James Bond movie vehicles. A movie theater and non-traditional anchor tenant, along with the large parking lot presenting hospitality opportunities will ultimately bolter the property’s value and overall experience. In another creative example, we performed environmental due diligence at a Prescott, AZ retail property being transformed into an activity center featuring rock climbing, yoga studio and a café.

3. Industrial to E-commerce Warehouse

With the inventory of space sitting vacant in prime locations, some investors and lenders are looking for ways to make these facilities useful again and the e-commerce trend is helping. The need for warehouse and distribution facilities in metro areas are at an all-time high and with little to no green lots, these large, open, unoccupied buildings can be an answer. In the time of Prime’s 2-day or same day delivery model, inventory must be easily accessible to not only to urban and metro areas, but to surrounding suburbs and even more rural areas. With these projects, we help clients to take a close look at whether the structure and configuration are appropriate for distribution purposes. We answer questions such as: is there enough turning radius in the dock area? Is the clear height sufficient in all or certain areas? Is the concrete pad suitably flat for lift truck traffic, and strong enough for heavy racking systems?

4. Retail to Residential

A multi-building/strip mall style retail may initially seem difficult to re-purpose, but thinking outside the big box is key to creating attractive possibilities. We’ve been involved in multiple projects where retail strip malls centers or and multiple stand-alone retail buildings are turned into multifamily or student housing when in the higher education setting. We’ve also seen a larger stand-alone retail building be converted into multiple housing residential spaces. In an urban example, we were involved in the conversion to luxury apartments of an historic downtown Detroit building with a long-time vacant big box store.

5. Digital Brands Expanding into Brick and Mortar

The convenience and easy accessibility of online shopping has become a daily habit for most consumers but there are still some who like to see and feel the actual product before making a purchase. Some exclusively online retailers, like Modcloth, Glossier, and Boll & Branch have begun opening small ‘showroom’ type stores with a variety of online inventory displayed, customer service representatives that are knowledge about the product available to answer questions, and in store ordering systems that will still give you the convenience of delivery to your door.

More than others, retail is an evolving market in terms of commercial real estate, and we are fortunate to have the hands-on experience of the changes that are occurring today. Distinct trends have emerged and it’s clear that thinking outside the big or small box is worth the risk and investment.


6403 Van Nuys Boulevard, Van Nuys, CA

Centers Business Management (CBM) leasing agent, David Guardado, recently completed a lease transaction representing the landlord and tenant, a legal aid provider, on a 2,200 SQFT street retail space. The unit is one door down from the intersection of Van Nuys Boulevard and Victory Boulevard. An ideal location for a legal aid business, the site is close to the nearby Van Nuys Courthouse and Los Angeles Registrar-Recorder/County Clerk’s office.


2944 Cark Drive, Long Beach, CA

Centers Business Management (CBM) leasing agents, Geoff Grossman and Aaron Guido, recently completed a lease transaction representing the landlord and tenant, a local coffee shop + cafe, on a 1,080 SQFT retail space. The unit is in a mid-block strip center situated on busy Clark Avenue, just east of Spring Street, across from a massive office park that stretches several blocks along Clark Avenue.


22990 Ventura Boulevard, Woodland Hills, CA

Centers Business Management (CBM) leasing agent, David Levcovitch, recently completed a lease transaction representing the landlord and tenant, a local beauty supply store, on a 1,200 SQFT retail space. The unit is in a midblock strip center on heavily trafficked Ventura Boulevard, two blocks west of Fallbrook, just east of the Woodlake Avenue exit off the 101 freeway. An attractive, well-maintained property, the center includes a diverse mix of restaurant and service-oriented businesses.