Restaurants Now Rule as Neighborhood Anchors
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TUSTIN, CA—As the retail sector continues to redefine itself post-recession and among the growing presence of e-commerce, various categories within the sector are undergoing radical changes. Among those categories is the neighborhood center, once dominated by big-box retailers and now finding a new face. GlobeSt.com spoke with Matt Hammond, director of retail brokerage for Southern California-based Coreland Cos., who told us exclusively how this category is changing and where its future opportunities lie.
GlobeSt.com: How have neighborhood shopping centers evolved post-recession?
Hammond: Today’s neighborhood center basically starts with everyday needs, things you cannot get on the Internet: a grocery store—and this includes ethnic or specialty grocery stores—drug store, hair salon, dry cleaner, pharmacy, fitness center. If you’re a prospective buyer, you want the center to have a strong grocery store and strong service tenants as opposed to a clothing store or Hallmark store that might not be around in five years—places where customers make weekly trips to buy groceries, get prescriptions filled, get their nails done, and eat.
Speaking of eating, restaurants are becoming more of a community experience in neighborhood centers. Traditional chain restaurants like Chili’s and Applebee’s might be attractive because they havegreat credit; however, many of today’s customers are looking for trendier eateries that offer locally sourced product. While strong financials are still a priority, landlords appreciate these concepts because they offer something unique and different, whether it’s delivering health food or a burger. It used to be that anchor tenants were always your big-box retailers, but now neighborhood centers are being anchored by restaurants, services and gyms.
In fact, that’s another new trend: fitness. Whether it’s in Irvine or Corona del Mar or Tustin, the new neighborhood center caters to the mom who drops the kids off at school, grabs a coffee and runs errands, or goes to the gym then grabs lunch. These customers are looking for a quality yoga or Crossfit studio and healthy restaurant alternatives.
GlobeSt.com: What are some of the most recent trends in regard to the absorption of vacant space?
Hammond: Health and fitness has really been the driver here in regard to the absorption of vacant space, including some of the larger spaces. The gyms and fitness tenants have absorbed much of the vacant drug or grocery stores in class-B or –C shopping centers. While they are typically not an owner’s first choice because they are more expensive to build out, gyms do generate traffic throughout the day and are less threatened by e-commerce.
Also, medical providers are absorbing much of this space. Healthcare services are reaching out into neighborhood centers because they provide a cost-efficient option with strong visibility. It puts these healthcare providers directly in front of their customers and takes the pressure off emergency rooms at local hospitals. We’re talking about a former Blockbuster or Hollywood Video space, or even a former bank being converted into an urgent-care facility, for example. These deals require substantial tenant improvements; however, the tenants also invest a good amount of their own money in the build-out and the leases tend to be for longer terms.
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