WESTERN SNAPSHOT, JANUARY 2010

SOUTHERN CALIFORNIA RETAIL OUTLOOK

1. MARKET MOVES

Discount retailers such as Ross and T.J. Maxx are making deals, but they are negotiating very hard on just about every deal point. And why not, when the supply/demand ratio is so in favor of the tenant? Chase is aggressively pursuing sites as its weaker rivals are still in crisis mode. What is interesting is that small investment properties, especially single-tenant properties, are selling at relatively low cap rates on a historic basis as buyers chase yield that they can’t find in the bond and stock markets. From a leasing perspective, the majority of new leases are for smaller shop spaces less than 5,000 square feet.

2. MARKET MEASURE 

Job growth drives retailing. The housing sector leads retail. Until these two indicators turn bullish, retail will continue to suffer.

3. THE MARK OF A MARKET 

One of Southern California’s strengths is the diversity of our population. It is incredibly heterogeneous with large immigrant populations from China, Korea, Southeast Asia, India, Persia and the Middle East. What is great about our immigrant population is that many have come to California with capital to invest and come from entrepreneurial cultures. Just like in the 19th and early 20th centuries when European immigrants came to America and became shopkeepers, the immigrants from Asia have spawned new generations of shopkeepers and brought great concepts and traditions with them. How boring would life be like without Korean Barbeque and Pho Soup! It’s one of the many things that makes Southern California such a great place to live, work and raise a family, and it’s why the region will recover and lead the nation in the years ahead.

— Terry Bortnick is a principal at Argent Retail Advisors in Dana Point, California.

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