Save the date: RealShare L.A.comes to the Hyatt Regency Century Plaza in Los Angeles, CA on March 27, 2013
LOS ANGELES-Retailers who sell quality goods at cut-rate prices are expected to again help leasing rates at shopping centers this year, experts say, but their aggressive growth could slow in 2014 as the bargain-basement rent prices they need to keep their prices low start to disappear.
Companies ranging from general-merchandiser Dollar Tree Store to discount retailers TJ Maxx and Ross Dress for Less have been expanding rapidly over the past several years, in part because owners of shopping centers that were completed just as the market went bust soon began offering prime retail space at inexpensive prices.
Many discount retailers were also able to swoop-in and takeover space left by higher-end stores that had closed, paying sharply lower rents that allowed them to keep prices for the items they sell low. But with the economy on the mend and rent rates going up, discount retailers are starting to have difficulty finding space to expand.
“This will be another ‘boom year’ for value stores,” Chris Wilson, chairman of Los Angeles-based retail-leasing specialist Wilson Commercial Real Estate, tells GlobeSt.com. “But you might see some tapering-off of their expansion plans in 2014 or the year after, because retail rents are rising.”
Wilson and his firm have helped Virginia-based discounter Dollar Tree Stores expand in dozens of Los Angeles-area markets over the past few years. The firm’s clients also include Wal-Mart and Sears Holdings Corp., parent of the Sears and Kmart retail chains.
Although the economy appears to be rebounding, Wilson says most consumers won’t start shopping again at higher-priced stores if they can get comparable items at discount retailers or big retail chains.
“Shopping center owners will always want tenants like Dollar Tree or other discount stores,” Wilson says. “The foot-traffic they create for surrounding tenants is phenomenal.”