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2/16/16
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Orange County’s retail market has come on strong in the last year and a half, with overall transaction volume in 2015 up roughly 40% over 2014, according to Coreland Companies President Chris Hite. This upbeat outlook was generally shared by each of the participants on the Retail Panel at RENTV’s Orange County State of the Market Conference, held January 28 at the Hilton Airport in Irvine.
L to R: Hite, Voorhees, Kehl, McKeon, Moothart and Wheeler |
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Along with Hite, other experts participating in the session included: panelists Nelson Wheeler, Partner at Strategic Retail Advisors; Chris Kehl, Associate at Springstead & Associates; Shaun Moothart, Vice President of Debt & Structured Finance at CBRE; and Casey McKeon, VP Acquisitions at Heslin Holdings; along with moderator Philip Voorhees, Executive VP at CBRE National Retail Investment Group-West.
Opening the session, Voorhees pointed out that at the moment there is very strong demand for the best quality product in Orange County, particularly for single-tenant properties. Turning to the panelists, Voorhees asked about any trends that stand out. Kehl focused in on the drug store chains, noting that CVS, in particular, is looking to open more stores because the population is very dense with 140,000 people within a mile of many locations. The push to open more CVS stores has led the chain to set up an arrangement with Target for locations within their stores.
Hite noted that food and quick-serve are high-growth categories right now and are seeing high rent increases, although that trend may slow down in the near future. Wheeler also felt quick-serve and fast-casual are strong categories, with multiple players often lining up for opportunities in new centers. He added that health club growth is also very strong.
On the flipside, Wheeler commented that department stores are getting crushed because of increasing consumer dollars being spent on the Internet. Thrift stores and other low-end players, he noted, are still doing well, perhaps because a substantial percentage of those customers may have limited Internet access. Chains like TJ Maxx and Ross have had a great run-up since coming out of the recession.
According to Wheeler, in the best submarkets, rents at “A” centers are higher than the 2007 peak of the last cycle. But, the rent drop-off in “B” – “B+” centers is significant, maybe 25% less than “A” centers.
Looking forward to the rest of 2016, McKeon expects more of the same, with strong results and continued growth. Moothart, also, is bullish on 2016 and, on the sales side, expects pricing in the mid-$3s for core properties. Wheeler, too, expects the region to remain strong for the next year or two, partly because Orange County is creating more high-wage jobs than other parts of the country.
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