California may be feeling more than its share of pain from the nationwide recession, but you would never know it from looking at the state's retail industry. Unemployment is at its highest level since 1996, the state has been bleeding jobs by the thousands and both state and local governments are looking at massive layoffs for the new budget year. Yet the retail sector appears to be sailing along serenely. Sales have been steady and vacancies are low in retail developments. Rents are rising.
Rick Caruso, president of Caruso Affiliated Holdings and developer of several high-profile Southern California retail centers, says sales at his properties remain very high, with tenants of the Santa Monica-based firm's newest project, The Grove, a 450,000-sq.-ft. specialty center adjacent to the Farmer's Market in Los Angeles, posting sales well ahead of projections. FAO Schwarz, for example, beat projections by more than 100% and Bodega Chocolates by almost 40%.
Reza Etedali, a retail investment specialist and senior vice president at Sperry Van Ness in Irvine, seconds Caruso's view. Based on monthly conversations with “probably 1,000 California retail property owners,” he finds no indication of trouble.
“I don't see any warning signs,” he emphasizes. “To this day receivables look pretty solid. Occupancy levels are relatively strong in pretty much all markets. Other than tenants taking a little longer to negotiate new space, I don't see any dark clouds.”
But not all statistics support the two men's observations. The California Board of Equalization, which collects state taxes, reports retail store sales increased 3.7% last year to $73.9 billion. On the other hand, sales declined 4.4% and 5.1% in the third and fourth quarters, respectively, suggesting a significant downward trend has begun.
In addition, the California Employment Development Department (EDD) reports the state lost 180,000 jobs last year, leading to an unemployment level that has hovered between 6.2% and 6.5% since January. In July the figure stood at 6.3%, 0.4 of a point above the national rate. Pointing to likely job losses from budget cuts by state and local governments, EDD warns the rate may rise before it falls.
Another danger sign: Californians' personal income rose 1.4% last year compared with a national increase of 4.9%, according to a March report from the Anderson School at UCLA.
So how to explain the discrepancy between the poor macroeconomic picture and the continuing strength of the retail business? In a word, growth. Whether the economy goes up or down, the state continues to get larger, adding a continuous stream of new customers to fuel retail expansion.
“In California, growth is inevitable,” says Randall Lewis, principal and executive vice president with Lewis Retail Centers in Upland, Calif. “The issue isn't, is growth coming, but where can it go? What are the jurisdictions that will welcome it? Where is the infrastructure available to support it? And where are the places people want to live?”
According to the U.S. Census Bureau, California's population hit 34.5 million in 2001, more than 12% of the U.S. total. Even the current economic downturn has resulted in gain rather than loss, with the state adding more than 700,000 people between April 2000 and July 2001, the most recent period for which statistics are available. The figure translates to an annual growth rate above 1.5%.
It does not necessarily translate, however, to equivalent economic growth. While the state is growing in gross numbers, the mix is skewing in a less affluent direction. During that 15-month period, 88,000 U.S. citizens left the state and nearly 350,000 foreigners entered. The rest of the population growth was 375,000 more births than deaths, a figure that does not do much beyond the Pampers aisle.
Board of Equalization figures show per capita spending rose only 1.7% last year, going from $2,089 per person in 2000 to $2,125 in 2001.
A June report by the Anderson School predicts improving economic conditions for the state, as indicated by a recent jump in semiconductor sales, and projects personal income growth at 3.9% from fourth quarter 2001 to fourth quarter 2002. However, the subsequent revelation of the loss of 3,750 high-tech manufacturing jobs in May suggests the report could be off the mark. In any event, the report's authors warn not to expect a significant upturn for at least a year.
Infill the blanks
Retailers that want to tap into the California market in anticipation of even stronger sales when the economy recovers face a hurdle: Almost everyone in retail agrees California suffers from a severe shortage of developable sites. Given the growing outcry over spoiling undeveloped land, infill, conversion and redevelopment are clearly the order of the day.
“I think there are great pockets of opportunity in California,” Lewis says. “People still want to live here. The challenge is finding infill locations and sneaking something in that's better than people expect so you can get approval.”
Though well established, the trend has a long way to go. “Development of retail projects in urban areas is still fairly new,” notes Clifford Goldstein, a partner at J.H. Snyder Co., a Los Angeles-based retail and residential developer. “We're not facing an oversupply [of infill projects]. It's only in the past four to six years that retailers have joined forces with developers to move aggressively into the heavily populated parts of older cities.”
For a variety of reasons, Goldstein identifies tying retail into residential development as the wave of the future for California. “Even the most blighted and dilapidated properties are going for a very high price. Mixed-use, by adding density, helps the economics work better,” he says.
More importantly, mixing retail and residential makes sense politically. The state's critical housing shortage pressures local governments to approve projects that include a residential component, while the tax setup encourages approval of retail development to compensate for the relatively low return on housing development. According to Michael Coleman, a consultant to the California League of Cities, a typical five-acre California apartment complex would cost $56,653 more in local services than it would generate in local taxes, while the equivalent retail project would generate $73,798 more than it would cost.
Developing in established markets has other advantages as well. According to Goldstein, the population density along La Brea Boulevard where his company is building the 250,000-sq.-ft. West Hollywood Gateway approaches 1 million within a 5-mile radius. That's about 10 times the population a developer would generally look for to support a project that size. Goldstein says he regularly gets calls from retailers begging to find sites in West L.A. and other high-density infill areas.
Built-up areas unfortunately come with built-in problems, the foremost being the shortage of available sites and high cost of land. To compensate for these shortcomings, says Goldstein, retailers must be willing to abandon standard suburban prototypes in favor of multi-level environments. Where a 50,000-sq.-ft. supermarket typically requires 170,000 sq. ft. of land, Goldstein says he can fit one on half that by going to structured parking and on even less by making the store itself multi-story. Snyder fit West Hollywood Gateway on 5 acres by building two levels of underground parking and two floors of shops. A similar suburban-style project would require 20+ acres, he says.
Goldstein says more and more national retailers are accepting a multi-level scenario in order to find entry into dense but still under-served markets such as West Hollywood. He says a multi-level store Snyder built for Bed, Bath & Beyond in Woodland Hills performs so well, the retailer is rolling out duplicates, while at West Hollywood Gateway, Target agreed to put its 130,000-sq.-ft. store on the second floor, a flagrant violation of shopping center protocol. “They realized the only way to get into that market was to take a risk,” he says.
Ethnic markets flourish
Foreign immigration has had a profound impact on the state's retail industry, generating an increasing number of ethnic shopping centers and shopping districts. For example, Lynnwood, Calif., is planning the 36-acre Plaza Mexico as the Latino equivalent of a local Chinatown, while in Sacramento, Chinatown L.L.C. completed a 10,000-sq.-ft. expansion of Pacific Plaza to 140,000 sq. ft. The 14-acre project caters largely to Asian-Americans, with the tenant roster composed almost exclusively of small merchants of Chinese, Southeast Asian and Filipino descent. The anchor is the 48,000-sq.-ft. Shun Fat supermarket.
Impressed with Pacific Plaza's success, Sacramento developer Buzz Oates Enterprises has proposed converting a neighboring 10.5-acre, 157,000-sq.-ft. former department store into a retail complex catering to the region's ethnic communities. Even high-end developers are jumping in. Blake Hunt Ventures, a Walnut Creek, Calif., developer that previously concentrated on projects in affluent communities, is working with the San Jose Redevelopment Agency to turn two underperforming retail centers into a 26-acre project targeted to Latinos.
Company president L. Gerald Hunt says ethnic projects enjoy a major advantage over standard shopping centers because they draw from a wider radius. He expects the San Jose project to attract shoppers from 80 miles away, compared to the 15- to 30-mile draw of a typical mall. San Francisco entrepreneur Shiraz Jivani made a success of the first Hindi-language multiplex in the United States, the 3,100-seat Naz 8 cinema at the Hub in Fremont, by pulling from the entire nine-county Bay Area. The theater in fact has done so well, Jivani says it rivals Target and Borders in its importance to the Hub and he hopes to lease a shuttered 10-screen theater nearby to double attendance.
The majority of vendors at ethnic centers are mom-and-pop operations, but a small number of ethnic-oriented chains has arisen. The most successful is TAWA Supermarket Cos., a Buena Park, Calif., company that operates two dozen Asian grocery stores under the name 99 Ranch Market. However, it may soon be rivaled by Grupo Gigante, Mexico's second-largest supermarket chain, which has several stores in the Los Angeles area, including a 50,000-sq.-ft. outlet at Covina Marketplace in Covina, and plans to open 20 stores throughout Southern California.
National retailers continue to mine California's general population for opportunity as well. Among the newest to make an aggressive entry are Lowe's Home Improvement and Kohl's, both of which have major rollouts under way. The former will open 30 to 40 stores in the state over the next two years, while the latter plans to open its first 30 Southern California stores on a single day next March.
Another situation for retailers and developers to monitor in California is the brewing supermarket war. Wal-Mart plans to introduce some 40 Wal-Mart Supercenters in California during the next four to six years. Safeway, Albertsons, Ralphs, Raley's and Trader Joe are all in major expansion mode as well, and several newcomers, including Kroger and WinCo Foods, are eager to join the fray. Boise-based WinCo has five stores in construction, including a 96,000-sq.-ft. Brentwood unit that will be its first in the San Francisco Bay Area.
Smaller-format retailers are also moving en masse into California. For example, Panera Bread Co., a gourmet sandwich chain from the Midwest, plans to open up to 100 cafe-bakeries in the Los Angeles area during the next few years, while Krispy Kreme will add 60 California outlets to its existing 18 by 2005.
Given that Krispy Kreme's first store in California, in La Habra, boasted 2.5 million customers its first year of business in 1999, it's hardly surprising that merchants see gold in them thar hills.
Investors lack opportunities
With all this retail action, it seems like an ideal time to invest in California shopping developments. But investors complain of a shortage of product. With rents high, existing owners have little incentive to sell, particularly since trends promise even better prices ahead.
“Investors see little new supply being developed and an upward pressure on rents,” says Dan Wald, senior vice president of the Investment Services Group at BT Commercial Real Estate in San Francisco. “As a result, there is plenty of capital willing to compete for quality product when it becomes available.”
Etedali of Sperry Van Ness pegs the average cap rate at about 8%, about half a point lower than six months ago. He anticipates further declines based on continued low interest rates and the product's strong performance compared to other types of real estate assets. But while the declines will probably attract additional buyers, he doubts they will induce more owners to sell.
“If you did sell, where would you put your money and do better?” he asks. “When you look at retail, you've got good cash return, strong anchors, long-term leases and tenants who serve day-to-day needs. There's little reason to give it up.”
There have been some major deals in the past year, but many of the largest transactions were part of national portfolio deals, such as Los Angeles-based Westfield America Trust's purchase of the 1.1 million-sq.-ft. Galleria at Roseville in Roseville, Calif., as part of a 12-mall acquisition from Rodamco N.A. Significant individual trades included Santa Monica-based Macerich Co.'s acquisition of the 1 million-sq.-ft. Oaks mall in Thousand Oaks, Calif., from the California State Teachers Retirement System and Trizec Properties. The mall, which generates annual sales of $437 per sq. ft., sold for $152.5 million, or $153 per sq. ft.
Most deals, however, involved local buyers and properties under 200,000 sq. ft., such as a 133,000-sq.-ft. segment of the 282,000-sq.-ft. Clovis Town Center near Fresno that sold for $9.75 million ($73.27 per sq. ft.). The seller was a California partnership, the buyer a Northern California investor. Similarly, the 16-year-old, 38,744-sq.-ft. Park Plaza Retail Center in Sacramento sold for $5.2 million to local store owners.
According to Etedali, grocery-anchored centers are by far the most sought-after product because of their relative immunity to economic fluctuations. Stuart A. Tanz, president and CEO of San Diego-based Pan Pacific Retail Properties Inc., concurs, nothing his company spent $107.7 million since January to acquire five California grocery-anchored centers totaling 827,000 sq. ft.
Infill projects are also in high demand, says Etedali. “As you go to outlying areas where land is plentiful and density is thin, you get less of an interest,” he says.
Northern California
Northern California has borne the brunt of the state's economic pain, with the crash of the dot-com industry and a steep decline in computer and chip sales throwing thousands out of work. EDD estimates the nine-county San Francisco Bay Area lost more than 110,000 jobs between December 2000 and June 2002. Nonetheless, because the San Francisco Bay Area is generally under-retailed, vacancy levels remain below 6% in virtually every submarket, according to Marcus & Milli-chap, with rates as low as 2% and 3% in some communities. The brokerage pegs annual rents at $30 per sq. ft. in San Francisco, $27 in San Jose and $24 in the East Bay. Though it projects a slight rise in vacancies, it says levels will remain among the lowest in the nation.
Though the precipitous post-September 11 drop in tourist and convention business had a negative impact throughout the market, the blow was particularly harsh for San Francisco's Union Square area. Generally regarded as one of the top retail markets in the nation, the district depends on both national and international visitors for a significant portion of its business. According to Seth Nodelman, a broker with the San Francisco office of Cushman & Wakefield, leasing activity around the Square effectively halted in October, not to pick up until late spring. He estimates the district's vacancy rate at close to 9%, the highest in memory.
Even now, he says, so few deals have closed, it is virtually impossible to gauge rent levels, though he doubts today's rates will be anywhere near the highs of 2000, when several tenants signed deals at more than $350 per sq. ft. The average for the area has been about $72 per sq. ft., but unless competition for space picks up, the figure seems likely to drop.
Nodelman, who recently leased space at 1 Union Square to cashmere vendor Loro Piana, expects a partial turnaround by Christmas as retailers recognize a rare opportunity to secure space in a high-profile area that typically is closed out. He says the presence of Macy's, Neiman-Marcus, Saks Fifth Avenue, Tiffany, Cartier, Armani, Gucci and other luxury retailers along with the general allure of San Francisco assures the district's long-term viability. “I doubt you'll see vacancies this high again,” he says.
Outside the city, the market seems to be healing faster, thanks to less reliance on tourism. In fact, according to BT Commercial's Wald, the leasing and sale of retail properties remains a single bright spot in an otherwise gloomy market. Brian Hirahara, a broker with Cumbelich & Associates in Walnut Creek, agrees, pointing to a recent transaction by his firm giving Tiffany & Co. its first East Bay location. The high-end jeweler took 5,000 sq. ft. at The Corners, a 50,000-sq.-ft. project by locally based Lamorinda Development in downtown Walnut Creek.
The deal, Hirahara says, marks another stage in Walnut Creek's evolution as a suburban alternative to Union Square, one of several high-end alternatives to spring up in the 1990s. Thanks to competition among upscale restaurants, downtown Palo Alto boasts monthly rents as high as $4 per sq. ft., while rents at the nearby Stanford Shopping Center start at $6 per sq. ft. Even Silicon Valley is going upscale, with Lladro, Louis Vuitton, Occhiali Da Sole, Tiffany and other luxury retailers moving into Westfield Shoppingtown Valley Fair, where a $165 million makeover will take the San Jose mall to more than 1.5 million sq. ft. Annual sales at both Stanford and Valley Fair top $700 per sq. ft.
While the Bay Area and Silicon Valley deal with the aftermath of the dot-com boom, there is no question about the vitality of the Sacramento area. Local brokers say residential growth in the Sacramento suburbs is so strong that retail developers can't keep up. As a result, properties such as Donahue Schriber's 664,000-sq.-ft. Creekside Town Center and Westfield America's 1.1 million-sq.-ft. Galleria at Roseville, both in Roseville, are 100% leased, while Donahue Schriber reports only 1,250 sq. ft. available of the 868,372 sq. ft. it owns in four centers in Laguna and 2,523 sq. ft. available in its 491,593-sq.-ft. Natomas Marketplace.
The next big thing in the region should be Natomas, a community of 1,000 a mile north of downtown Sacramento that was recently opened for development following several years of environmental wrangling. The population is expected to reach 45,000 by 2025. West Sacramento is also growing, with 12,000 homes planned in the Southport area alone. West Sacramento Land Co. and Santa Monica-based Watt Commercial Properties recently proposed the district's first shopping center, the 275,000-sq.-ft. Southport Town Center, anchored by a 60,000-sq.-ft. Nugget supermarket.
With 7 million sq. ft. of retail added since 1998, including 1.3 million sq. ft. last year, vacancies have hit 7.5%, according to Marcus & Millichap, with the highest vacancies in Sacramento proper. The brokerage firm, which calculates annual rents at $19 per sq. ft., down slightly from 2001, attributes the negative trend to developers' building ahead of the population curve in order to take advantage of lower land costs and retailers' abandonment of outdated projects in central Sacramento.
Southern California
Though the Los Angeles Economic Development Corp. says the five-county Los Angeles area recorded a lower level of major business expansion activity during the first half of 2002 compared to the same period last year, the economy in the southern half of the state remains robust compared to the northern half. A survey conducted by Thomas Staffing in Irvine projected positive growth throughout the region, though this year's growth is projected to be smaller than last year's.
While the Southland, too, has to worry about fallout from government cutbacks, numerous signs point to improving conditions. Among the more encouraging signs is a major boost in trade, with the combined ports of Los Angeles and Long Beach showing a 13% increase in container traffic for the fiscal year ended June 30 and a 19% increase from January through June. Tom Lieser, a senior economist at UCLA's Anderson School, predicts continued economic expansion for Southern California, with increased federal defense spending buoying the region's powerful aerospace industry and increased investment in security benefiting the high-tech sector.
Retail development appears to be in full swing, with close to 9 million sq. ft. of 2002 completions slated for Los Angeles and Orange counties alone. Though most construction decisions were made prior to the economic downturn, the need apparently has not diminished. Marcus & Millichap projects vacancy levels will remain under 6% despite the new construction. It also projects a rent rise of about 2%, reaching $22 per sq. ft. in L.A. and $24 in Orange County.
The region seems to have fully embraced the infill trend, with small and large redevelopment projects in city after city. Most are multi-storied, which would have been inconceivable in the past. But as Goldstein of J.H. Snyder points out, “The consumer in L.A. is basically comfortable now with no parking lot but with stairs. That's not ground-breaking for other parts of the country, but for Southern California, it's new.”
The area also appears ready to embrace outdoor shopping, with the majority of new projects featuring open-air design and a large number of older enclosed malls being reconfigured to emphasize the outdoors. For example, Developers Diversified is transforming Long Beach Plaza, a failed center-city mall, into a 450,000-sq.-ft. open-air center called CityPlace, while Snyder and The Ezralow Co. are spending $150 million to redevelop the 1 million-sq.-ft. Huntington Beach Shopping Center as an outdoor marketplace known as Bella Vista. In early August, Santa Monica's Macerich Co. announced plans to “de-mall” the Macy's-anchored Santa Monica Place and integrate it with the city's wildly successful Third Street Promenade.
Caruso says revival of neighborhood shopping streets will be the next major trend to hit the Southland. He cites Los Feliz, Silverlake and Hancock Park as the types of neighborhoods likely to attract growing retailer interest. “The city has barely begun to explore the revival of street life. It has tremendous potential,” he maintains.
The area's current strength is underscored by the paucity of available investment properties. According to Etedali, barely $250 million of Southland retail property was on offer in August, and most of that was already in escrow. “Owners are making money off their centers and don't want to let go. People who sell are selling only for a real good reason,” he says.
Representing California's contemporary frontier, Riverside and San Bernardino counties are home to 14 of the state's 20 fastest-growing cities. Known as the Inland Empire, it is rapidly shifting from a bedroom suburb for Los Angeles to a fully functioning economic entity of its own. In contrast to the state in general, the region experienced a 3.4% job increase from March 2001 to March 2002.
“This is where the wave is hitting for the next five years,” says Lewis of Lewis Retail Centers. “It's getting a lot of growth, especially around Ontario Airport. This was a commuter market. Now jobs are coming, which creates new demand for services. We're beginning to get a lot of the amenities, a really good quality of life.”
Among the amenities is Victoria Gardens in Rancho Cucamonga, a 1.3 million-sq.-ft., open-air center by Cleveland's Forest City Enterprises and Lewis that will introduce many upscale retailers to the area. Robinsons-May is also making its regional debut there, while Kohl's, Wal-Mart, Home Depot and Lowe's all have multiple stores opening in the region.
Unfortunately, while the population is rising rapidly, the region's income level appears to be dropping. According to the Census Bureau, median household income across much of the Inland Empire fell between 1990 and 2000, dropping 8.3% in Riverside County and 3.6% in San Bernardino County. Median home values also dropped markedly in many areas, while poverty levels rose sharply.
Nonetheless, according to Lewis, the area has long been underserved and retailers are rushing to catch up. “They can come in at the ground floor of the next wave of development, when there's still a lot of land,” he says.
An analysis by Marcus & Millichap, however, suggests developers may be moving slightly too fast, with vacancies projected to climb 1 point to 9% and annual rents to drop $1, to $16 a sq. ft., in 2002. The brokerage tallies 2.3 million sq. ft. of new retail heading for the market through December.
San Diego is also growing rapidly, with nearly 55,000 more people calling San Diego home this year, according to Marcus & Millichap, which ranks the county No.1 nationally for retail real estate investment potential.
The region was another that experienced employment growth, with 25,000 jobs added last year. With some 2.2 million sq. ft. of new retail product slated in 2002, the county is likely to see vacancies rise, though they will probably remain under 6%. TCN Worldwide estimates annual rents at $21 per sq. ft.
A $610 million residential building boom could boost San Diego's downtown population by 25% to 25,000 in two to three years, claims San Diego Metropolitan magazine. Combined with a growing tourist and convention base, the boost promises to make the district a major retail magnet.
Last November's opening of the 370,000-sq.-ft. first phase of the $260 million, 1.4 million-sq.-ft. Shops at Las Americas marks a major attempt to link San Diego with the 2.5 million people living in the Mexican state of Baja California.
Whether the project will increase sales overall or drain customers from other centers is not clear, but the border-spanning location comes with special tax and import breaks that give the project a decided advantage over the competition.
John McCloud is a San Francisco-based writer.
California's population at a glance
- 2001 estimate: 34,501,130
- Population percent change 1990-2000: 13.6% (U.S. as a whole 13.1%)
- Percentage of white persons: 59.5% (U.S. as a whole 75.1%)
- Percentage of Black persons: 6.7% (U.S. as a whole 12.3%)
- Percentage of Asian persons: 10.9% (U.S. as a whole 3.6%)
- Percentage of Hispanic or Latino persons: 32.4% (U.S. as a whole 12.5%)
- Percentage of persons reporting two or more races: 4.7% (U.S. as a whole 2.4%)
- Home ownership rate 2000: 56.9% (U.S. as a whole 66.2%)
- Households with persons under 18 years: 39.7% (U.S. as a whole 36%)
- Median household income, 1997: $39,595 (U.S. as a whole $37,005)
- Persons per household 2000: 2.87
- Retail sales per capita 1997: $8,167 (U.S. as a whole $9,190)
- Unemployment rate June 2002: 6.4%
Sources: U.S. Census Bureau, U.S. Bureau of Economic Analysis
California statistical summary
| Los Angeles | ||||
|---|---|---|---|---|
| 99 | 00 | 01 | 02* | |
| 4.3 | 4.7 | 5.3 | 5.8 | Vacancy rate (%) |
| 20.07 | 21.04 | 21.69 | 22.10 | Annual asking rent ($) |
| 3,631 | 4,636 | 5,261 | 5,500 | Total retail completions (sq. ft.-000s) |
| 1.5 | 1.7 | 0.5 | -0.6 | Employment growth(%) |
| 5.9 | 5.4 | 5.7 | 6.5 | Unemployment rate (%) |
| Oakland | ||||
| 99 | 00 | 01 | 02* | |
| 6.2 | 7.0 | 8.1 | 8.3 | Vacancy rate (%) |
| 21.00 | 23.52 | 23.99 | 24.28 | Annual asking rent ($) |
| 1,370 | 1,900 | 1,485 | 1,830 | Total retail completions (sq. ft.-000s) |
| 3.3 | 3.6 | 1.4 | -0.1 | Employment growth(%) |
| 3.3 | 2.9 | 3.9 | 5.5 | Unemployment rate (%) |
| Orange County | ||||
| 99 | 00 | 01 | 02* | |
| 4.9 | 4.5 | 5.3 | 6.0 | Vacancy rate (%) |
| 21.52 | 22.70 | 23.43 | 23.90 | Annual asking rent ($) |
| 2,585 | 2,317 | 2,262 | 2,900 | Total retail completions (sq. ft.-000s) |
| 3.5 | 3.3 | 2.1 | 0.6 | Employment growth(%) |
| 2.6 | 2.5 | 2.9 | 3.7 | Unemployment rate (%) |
| Riverside/San Berdino | ||||
| 99 | 00 | 01 | 02* | |
| 9.8 | 7.5 | 7.0 | 7.2 | Vacancy rate (%) |
| 15.23 | 15.80 | 16.20 | 16.52 | Annual asking rent ($) |
| 2,068 | 1,904 | 2,521 | 2,300 | Total retail completions (sq. ft.-000s) |
| 6.4 | 5.3 | 4.1 | 2.7 | Employment growth(%) |
| 5.1 | 5.1 | 4.9 | 5.6 | Unemployment rate (%) |
| Sacramento | ||||
| 99 | 00 | 01 | 02* | |
| 6.5 | 5.9 | 7.1 | 7.5 | Vacancy rate (%) |
| 17.09 | 17.79 | 18.42 | 18.88 | Annual asking rent ($) |
| 1,350 | 2,500 | 2,000 | 1,300 | Total retail completions (sq. ft.-000s) |
| 5.2 | 3.5 | 3.2 | 0.8 | Employment growth(%) |
| 4.0 | 4.0 | 4.0 | 4.9 | Unemployment rate (%) |
| San Diego | ||||
| 99 | 00 | 01 | 02* | |
| 6.1 | 4.7 | 5.2 | 5.7 | Vacancy rate (%) |
| 19.24 | 19.86 | 20.56 | 21.11 | Annual asking rent ($) |
| 1,645 | 2,515 | 2,386 | 2,227 | Total retail completions (sq. ft.-000s) |
| 4.3 | 3.5 | 2.3 | 1.3 | Employment growth(%) |
| 3.1 | 3.0 | 3.1 | 3.9 | Unemployment rate (%) |
| San Francisco | ||||
| 99 | 00 | 01 | 02* | |
| 3.5 | 3.8 | 5.4 | 5.8 | Vacancy rate (%) |
| 26.50 | 28.90 | 29.48 | 29.92 | Annual asking rent ($) |
| 688 | 551 | 565 | 515 | Total retail completions (sq. ft.-000s) |
| 2.7 | 4.0 | -1.0 | -2.1 | Employment growth(%) |
| 2.4 | 2.1 | 3.6 | 5.4 | Unemployment rate (%) |
| San Jose | ||||
| 99 | 00 | 01 | 02* | |
| 3.6 | 3.7 | 4.5 | 5.5 | Vacancy rate (%) |
| 24.75 | 26.26 | 26.78 | 27.05 | Annual asking rent ($) |
| 800 | 1,230 | 1,056 | 1,325 | Total retail completions (sq. ft.-000s) |
| 1.6 | 6.0 | -1.3 | -4.2 | Employment growth(%) |
| 3.0 | 2.0 | 4.3 | 7.6 | Unemployment rate (%) |
| Source: Marcus & Millichap * forecast | ||||
California Idols
A closer look at 12 of the state's retail power players
California is the largest retail market in the United States. So, if you can make it here you can make it anywhere.
From Mace to Magic, SCW looks at the decision makers who continue to shape the state's retail landscape.
| Name | Title & Company | Provenance | Specialization | Claim to Fame |
|---|---|---|---|---|
| Rick J. Caruso | Founder & President Caruso Affiliated Holdings | Santa Monica | Lawyer/developer/L.A. Board of Water & Power Commissioner | Took the village concept of development to heart with architecture, landscaping and public amenities at the Commons at Calabasas, Promenade at Westlake and The Grove; maintains commitment to open-air and streetside centers. |
| Roger Chen | Founder & Chairman TAWA Supermarket Companies | Buena Park | Grocer/entrepreneur/developer | Founded TAWA Supermarkets as a single store in 1984 and turned it into the largest ethnic grocery chain on the West Coast, operating 20 99Ranch markets in California alone and owning and operating 10 shopping centers in the state. |
| Jon Jerde | Founder The Jerde Partnership | Venice | Architect | Turned the retail world on its ear with his 1985 design of San Diego's Horton Plaza, kicking off a revolution in entertainment, urban infill and open-air shopping center design; Created more humanistic spaces at Universal CityWalk and City Place at Long Beach. |
| Earvin “Magic” Johnson Jr. | Chairman & CEO Magic Johnson Theatres & Johnson Development Corp. | Beverly Hills | Basketball player/entrepreneur/developer | Parlayed basketball fame into career investing in lower-income, inner-city neighborhoods long ignored by national retailers, joint-developing theaters and centers in those markets; Acquired fabled Fatburger chain with plans to add 100 units in the next five years. |
| Shaul Kuba | Principal & Founder CIM Group | Hollywood | Investor/developer | Oversaw development of street retail properties that have become some of So Cal's most popular destinations, including Ornage County's first revitalization, Birch Street Promenade in Brea; Serves on investment committee for CIM California Urban Real Estate Fund. |
| Joe Levy | Chairman Gottschalk's, Inc. | Fresno | Retailer | Demonstrated that not only mega-chains can make it in today's challenging department store industry by acquiring Harris Department Stores in 1998 and Lamonts in 2000; Positioned Gottschalk's into a major regional force in the West Coast's Class B markets. |
| Jerry Snyder | Founding Partner J.H. Snyder Co. | Los Angeles | Developer | Pioneered neighbor-sensitive commercial projects that blend with the surrounding communities and meet their needs; Selected by Los Angeles City Council to develop the 1.2 million-sq.-ft. NoHo Commons adjacent to a new subway station in North Hollywood. |
| Joseph Syufy & Raymond W. Syufy | President & CEO Century Theatres | San Rafael | Movie theater mavens | Expanded the family business into the largest privately owned U.S. theater chain; built the highest screens-per-location average in the industry while other theater chains faced bankruptcy; launched a new generation of theaters known as CineArts. |
| Stuart Tanz | President & CEO Pan Pacific Retail Properties | Vista | Developer | Steered Pan Pacific through the acquisition of the 50-property Western Properties Trust portfolio, transforming the company into a genuine California super power with a market value of $1.9 billion; Boosted the REIT's occupancy level to an enviable 97%. |
| Mace Siegel | Chairman of the Board The Macerich Co. | Santa Monica | Developer | Founded The Macerich Group, predecessor to The Macerich Co., in 1965. Since then, the company has grown to be the sixth-largest U.S. shopping center owner. Its recent $1.475 billion acquisition of the Westcor portfolio makes the company a West Coast titan. |
| Phil Angelides | California State Treasurer | Sacramento | Politician/developer | Advocated aggressive investment of public monies in lower-income communities and New Urbanist projects after taking office in 1999; spearheaded initiatives by the California State Teachers' Retirement System to channel $400 million into retail infill programs. |
| Jeff Nichols | Real Estate Manager The Home Depot Inc. | Orange | Site Selector | Heads the California real estate department of the largest U.S. home improvement chain. As power center construction continues to drive growth in secondary markets, his site selection and lease negotiation decisions could have a major impact. |
| Project Name/City, State | Developer-Manager/Headquarters | Center Type | Project Type | Current GLA/(Planned Addition) | Completion Date* | Anchors |
|---|---|---|---|---|---|---|
| Valley Plaza Mall Bakersfield | General Growth Properties Chicago | M | RN | 1,157,429 sq. ft. | November 2003 | Gottschalk's, Macy's JCPenney, Robinsons-May |
| Buena Park Mall Buena Park | The Festival Cos. Los Angeles | M | RD | TBA | March 2003 | Sears, Wal-Mart, Kohl's Kirkorian Theatres |
| Camarillo Village Square Camarillo | Donahue Schriber Costa Mesa, Calif. | N | RN | 247,470 sq. ft. | November 2002 | Albertsons Rite-Aid |
| Puente Hills Mall City of Industry | Krausz Cos. Inc. San Francisco | M | RN/RD | 1.2 million sq. ft. | TBA | Robinsons-May, Borders AMC Theaters, CompUSA, Old Navy |
| The Village at Eagle Glen Corona | Empire Commercial Real Estate Ontario, Calif. | N | N | 100,000 sq. ft. | Spring 2003 | Stater Bros. |
| Fresno Fashion Fair Fresno | The Macerich Co. Santa Monica, Calif. | M | RN | 874,316 sq. ft. | Fall 2003 | JCPenney, Macy's Gottschalks |
| CityPlace Long Beach | Developers Diversified Realty Cleveland | MU | RD | 475,000 sq. ft. | TBA | Wal-Mart, Nordstrom Rack, Sav-On Albertsons, Ross Dress For Less |
| The Pike at Rainbow Harbor Long Beach | Developers Diversified Realty Cleveland | E | N | 370,000 sq. ft. | Fall 2003 | Crown Theaters, GameWorks, Carnival Club, California Pizza Kitchen, Gladstone's |
| Sunset & Vine Los Angeles | Bond Capital, HW Marketplace Regent Properties, Los Angeles | MU | RD | 620,000 sq. ft. | 4Q 2003 | Bed Bath & Beyond Borders |
| Baldwin Hills Crenshaw Plaza Los Angeles | Center Trust Inc. Manhattan Beach, Calif. | M | RN/RD | 820,000 sq. ft. | Winter 2003 | Wal-Mart, Sears, Robinsons-May, TJ Maxx, Magic Johnson Theaters, Albertsons |
| Marlton Square Los Angeles | Capital Vision Equities, Keyshawn Capital , L.A. | MU | RD | 140,000 sq. ft. | TBA | TBA |
| Monterey Park Marketplace Los Angeles | Ezralow Retail Properties Tustin, Calif. | P | N | 508,000 sq. ft. | Open | Home Depot, Target Best Buy |
| Crenshaw Plaza Los Angeles | Watter Commercial Properties Santa Monica | C | RD | 137,000 sq. ft. (+150,000 sq. ft.) | Fall 2002 | Ralphs, Rite-Aid |
| Huntington Oaks Shopping Center Monrovia | Bend Properties Irvine, Calif. | P | RN | 329,000 sq. ft. | 2002 | Toys R Us, Marshall's, Mervyn's Bed Bath & Beyond, Chuck E. Cheese |
| Fashion Island Newport Beach | The Irvine Cos. Irvine, Calif. | L | E | 1.2 million sq. ft. (+33,000 sq. ft.) | Open | Neiman-Marcus, Zodiac Macy's, Robinsons-May |
| El Camino North Oceanside | Center Trust Inc. Manhattan Beach, Calif. | C | RD/E | 450,000 sq. ft. (+42,000 sq. ft.) | Spring 2003 | Mervyn's, Stein Mart, Toys R Us, Petco Ross Dress For Less, Big 5 Sporting Goods |
| Del Oro Marketplace Oceanside | College/Oceanside SW Oceanside | S | N | 78,000 sq. ft. | Open | Armstrong Garden Center, Aaron's Rents North County Transit passenger center |
| Victoria Gardens Rancho Cucamonga | Forest City/ Lewis Investment Cleveland/ Upland, Calif. | L | N | 1.3 million sq. ft. | October 2004 | Robinsons-May, Macy's, Rancho Cucamonga Cultural Arts Center |
| Mission Grove Plaza Riverside | Mission Grove Plaza LP Los Angeles | C | E | 400,000 sq. ft. (+200,000 sq. ft.) | Open | Kmart, Ralphs, Stein Mart |
| Park Place Sacramento/ North Natomas | Donahue Schriber Costa Mesa, Calif. | N | N | 110,000 sq. ft. | Fall 2002 | Raley's Market |
| The Shops at Tanforan San Bruno | Wattson Breevast LLC Newport Beach, Calif. | M | RD | 1 million sq. ft. | 2003 | JCPenney, Target Sears |
| The Shops at Las Americas San Diego | Land Grant Development San Diego | L | N | 370,000 sq. ft. | November 2002 | Nike, Gap, Banana Republic Old Navy, Outback Steakhouse |
| Gaslamp Square San Diego | Champion Development Los Angeles | L | N | 81,000 sq. ft. | April 2003 | The Palm Restaurant Oceanaire Restaurant |
| Westfield Shoppingtown Valley Fair San Jose | Westfield Corp. Inc. Los Angeles | M | RD/E | 1.1 million sq. ft. (+400,000 sq. ft.) | March 22 2002 | Nordstrom Macy's |
| Westfield Shoppingtown Oakridge San Jose | Westfield Corp. Inc. Los Angeles | M | RD/E | 799,000 sq. ft. (+300,000 sq. ft.) | Spring 2004 | Macy's Sears |
| Bay Street at Emeryville San Francisco/Emeryville | Madison Marquette Cincinatti | MU | N | 1 million sq. ft. | November 2002 | Barnes & Noble, AMC Theaters, Pottery Barn, Chico's, Apple Computer, Old Navy |
| Campus Marketplace San Marcos | Regency Centers Jacksonville, Fla. | N | N | 148,259 sq. ft. | November 2001 | Ralphs Longs Drugs |
| Cherry Orchard Sunnyvale | The Irvine Co. Irvine, Calif. | L | N | 58,400 sq. ft. | Open | Borders, Starbucks, Sprint PCS C.J. Olson Cherries |
| Eastvale Gateway Phase I Upland | Lewis Retail Centers Upland, Calif. | C | N | 820,000 sq. ft. | Winter 2003 | Home Depot Vons |
| Ventura Gateway Ventura | Robertson Properties Los Angeles | L | N | 276,000 sq. ft. | Spring 2003 | Kohl's, Barnes & Noble Linens N Things |
| Fallbrook Center West Hills | General Growth Properties Chicago | M | RD | 1 million sq. ft. | Complete | Target, Mervyn's, Sports Chalet Burlington Coat Factory |
| The Mall at Yuba City Yuba City | Bend Properties Irvine, Calif. | M | RN | 400,000 sq. ft. | 2002 | Sears, Gottschalks JCPenney, Ross Dress For Less |
| Center Type: S=Strip Center, N=Neighborhood Center, C=Community Center, E=Entertainment center M=Regional/Superregional Mall, P=Power Center, O=Outlet Center, L=Lifestyle Center, F=Fashion/Specialty Center, MU=Mixed-Use Development. Project Type: N=New Project, E=Expansion, RN=Renovation (updating look, refacing, common area or amenities upgrade), RD=Redevelopment (demalling or remerchandising). Completion Date*: Subject to change. Existing/Planned GLA (Expansion GLA): GLA=Gross Leasable Area. TBA=To be announced/unavailable. | ||||||