Shopping Center Business

MAY 2015

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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318 • SHOPPING CENTER BUSINESS • MAY 2015 Nellie Day Once the sleepy cousin to San Francisco, Silicon Valley has rebounded from bubbles and bursts to its current boomtown status — and its affuent residents know what they want when it comes to retail. Silicon Valley's Retail Boom T here are few terms hotter in to- day's day and age than "technol- ogy." It's the wave of the future, after all, with startups, apps, social media platforms, smart devices, crowdfunding campaigners and venture capitalists all try- ing to cash in on the next big idea. The word seems to draw equal parts attention and admiration whenever it's uttered. Behind many of the latest tech ideas are a slew of employees hard at work (al- though that depends on how you view the latest creative office campus amenities) in a little Northern California world all its own, called Silicon Valley. "Simply put, the success of the tech in- dustry as a whole has put a bulls eye on Silicon Valley," says Kurt Grundman, a retail broker with San Mateo, California- based Lockehouse Retail Group. "Peo- ple are migrating here from all over the world, and the generation of revenue from many of these companies is astronomical. It is a modern-day gold rush." A market with a well-educated, highly paid population may seem like a dream come true for any retailer. That is, until they consider Silicon Valley's high barri- ers to entry, including a lack of space, stiff competition and a workforce known for its particular tastes. Much like the tech in- dustry, those with the secret sauce will find great success. Others may face a difficult path with sky-high rents when consumers know what they want — and it's not you. Reinvention is the n ame of the Game Silicon Valley and its workforce have undergone a major transformation since the Dot-Bomb nearly 15 years ago. This renaissance has not just affected the tech sector and, therefore, office space, but multifamily and retail spaces as well. This transformation is pretty evident when you consider the price points where retail cen- ters are trading today. "Our real estate market has seen a tremendous tightening of space avail- able and significant inflation of the cost per square foot to lease or buy," Grund- man says. "Due to the lack of develop- able land, second- and third-generation shopping centers are rapidly undergoing transformations, integrating multi-faceted components to each new project." Weingarten Realty Investors recently paid a reported $49 million for Cambrian Park Plaza, a 170,000-square-foot center in San Jose that was built in the 1950s. "We are excited about this acquisition," says Drew Alexander, Weingarten's presi- dent and CEO. "The strong demograph- ics and structure of existing leases provides us the opportunity to create meaningful shareholder value as we redevelop this property over the next several years. The infill nature of this location will allow our best-in-class team to create a unique shop- ping experience for the local community." Cambrian Park Plaza serves more than 180,000 people within a three-mile radius who have a median household income of more than $117,000. Just a few months earlier, Federal Realty Investment Trust picked up the 376,000-square-foot San Antonio Shop- ping Center in Mountain View, Califor- nia, for $62.2 million. The city is known as the home of Google and LinkedIn. Other notable employers like Accenture, Genencor, Mercedes-Benz Research & Development, Microsoft, Xerox, Tesla, VMware, Dell, Lockheed Martin, Scher- ing-Plough, Skype, Groupon, Nokia and SAP are located within a five-mile radius of the center. There are 136,879 people within a three-mile radius of the property who boast average household incomes of $141,452. With demographics like these, it's not hard to determine why the REIT deemed San Antonio Shopping Center "poised for value creation and future growth." "From a retail perspective, the de- mographic fundamentals are incredibly The Apple store at Stanford Shopping Center in Palo Alto, California, is one of the retailer's flagship locations, due to its proximity to the brand's headquarters in Cupertino.

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