Shopping Center Business is the leading monthly business magazine for the retail real estate industry.
Issue link: http://shoppingcenterbusiness.epubxp.com/i/710880
CALIFORNIA August 2016 • SHOPPING CENTER BUSINESS • 59 with NAI Capital. "Last quarter, there were some deliveries that happened, and there has been a decline in current construction. There is a drop in vacancy, an increase in deliveries and not much new construction coming in, so in other words, I would characterize the market as being in equilibrium." Rick Rivera echoes that sentiment, not- ing that pockets of Southern California — particularly near the coast — offer very lit- tle vacant space. "There are pockets where it is extremely competitive and there are areas that are still struggling," says Rick Rivera of Centers Business Management. "If you're talking about the new Silicon Beach in West Los Angeles — which is Venice, Playa Vista and areas down in Santa Monica — vacancy is very slim, very competitive and very difficult. The rents have risen dramatically over the last three years. Hollywood and West Hollywood also have very minimal vacancy." Low vacancy is driving some retailers and restaurants to buy leases at times in order to break away from the competition. "In Southern California, space is extraor- dinarily limited," says Spilky of Location Matters. "For prime real estate where both restaurants and retailers would be successful, it's very competitive right now. Rents have increased and they continue to increase. There are very, very low vacancy rates for restaurants — it's an extraordi- narily tight market right now. We're seeing restaurants and retailers need to buy leases at times to get really prime real estate." THE ROAD AHEAD "Southern California's retail market is the strongest it has been since 2007," says Umansky. "We are experiencing rent lev- els for new projects exceeding pre-reces- sion highs, vacancy continues to decline moderately, cap rates are at historic lows, and corporate tenants are competing ag- gressively for the best locations." Investors continue to pursue Southern California — and many believe that trend is one that will continue. "I'm very bullish on the core markets in California," says Randy Rivera. "People are always willing to pay a premium in California. Provid- ed interest rates do not dramatically in- crease, I see California as being one of the best markets to continue to invest in. In the last cycle, a lot of people sold their properties in California and then went outside of California to reposition their equities. A lot of those clients are reposi- tioning back into California." Despite the very optimistic views of most, questions still loom about the endurance of the market as it currently stands. "People are still making deals, lenders and interest rates are still low for developers so I think the ingredients are all right to continue to grow," says Kelly Harrison, director of development at Dy- namic Development Co. "I don't know how long it will continue. I have some sense that things are overly inflated at the moment, and I don't know how long that will last." Sandy Sigal of NewMark Merrill Cos. shares this cautiously optimistic view of Southern California moving forward. "The market in California one of the best in the country," says Sigal. "California is unique in what it offers to the retailer, but there's also a lot of competition, so at the end of the day, you either have to avoid the competition or out-position it. I think it's an incredible place to do business, but in the long run, we're overbuilt — I think you're going to see less retail in California. SCB NewMark Merrill Cos. recently opened a movie theater and several new retailers at Janss Marketplace at Thousand Oaks.