DANA POINT, CA-What appears to be an uptick in retail leasing inSouthern California may bode well for the market, but it also posesquestions for landlords in how aggressive they should be in seekingnew lease terms. Founder Terry Bortnick of locally based ArgentRetail Advisors tells GlobeSt.com that the company has negotiatedmore than 110,000 square feet of retail leases in SouthernCalifornia in recent months in a significant uptick from the sametime last year. However, Bortnick adds, the apparent improvement inmarket conditions—which also includes strong activity by local andregional retail chains—also presents some strategic questions forlandlords as they figure out how to proceed in future leasenegotiations.

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"There is still a large shadow inventory looming," Bortnicksays. He explains that "shadow inventory" is space that is nowoccupied by retailers who have enjoyed lower rents and otherconcessions from landlords who have been intent on keeping theirshopping centers occupied.

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If the market is in fact improving—and signs point to thatbecause some of the vacant retail space is beginning tofill—landlords who provided rent relief and concessions to tenantsto keep their centers full may want to go back to some of thosetenants and renegotiate. Therein lies a dilemma for landlords,Bortnick says. "To go back to those tenants now and try to startmoving rents up presents a real slippery slope because landlordsmay end up putting more space back on the market by doing that," ifthe tenants balk at the proposed rent increases and decide tovacate their spaces he says.

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On the other hand, not to go back and ask for higher rents couldalso be a mistake, Bortnick says. "If landlords push too hard, theymight wind up with vacancies again. But if they don't push, theycould be left with rents that could be higher, or maybe strongertenants with stronger financing."

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And prudent asset management dictates that building ownersshould try to negotiate higher rents when the market improves.Especially, he says, when many tenants have benefited fromconcessions. "If tenants are starting to report higher sales and ifconsumers are starting to buy again, and open up their wallets,then it is only fair that the tenants who got relief during the badtimes should be ready to give something back," he says.

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How the shadow inventory question plays out ultimately willdepend on sales, Bortnick says, but meanwhile, he notes one of themost interesting developments in the market this year is that"seasoned local chains, attracted by good pricing," have been oneof the most active sources of new tenancy for retail space.

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Such chains, with anywhere from a handful to 50 or 60 locations,have been more active locally than national chains, he says. As anexample he cites Mother's Nutritional Centers, which focuses onselling to women's, infants' and children's nutritional programs.He says the lower-priced chain, which operates 65 stores throughoutSouthern California, is one of the leaders in providing food andsundries to low-income families and is especially suited to doingwell in tough times. It is "aggressively expanding to goodlocations that are well priced," Bortnick says.

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Mother's Nutritional Centers is one of the tenants among the110,000 in leases that Argent has negotiated in recent months. Thechain signed for 2,678 square feet at Richance Plaza in Anaheim.Other highlights among the 110,000 square feet of deals included a17,500-square-foot lease by Froogles Discounts at Colton Courtyardin the Inland Empire city of Colton, a 17,500-square-foot lease byBravo Bargain at Palm Court in Fontana, a 23,807-square-foot dealby the AJ Wright division of TJ Maxx at Palm Court, a3,703-square-foot lease by Tarbell Realtors at Plaza Del Lago inMission Viejo and 6,056 square feet by Brandon's Diner at VineyardVillage in Ontario.

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Bortnick points out that the number of deals Argent hasnegotiated is about the same in the Inland Empire and OrangeCounty, but "the square footage has been a lot higher in the InlandEmpire because we happen to have bigger spaces there." Overall, hesays, "The market appears to have bottomed and demand and activityare picking up in general. The tenant base seems more optimistic sofar this year and has less fear than we saw this time last year."Pricing remains a major issue, however, and Bortnick advises:"Landlords who can be aggressive with their pricing certainly standa better chance than those who are holding out for top dollar."

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