IRVINE, CA—As GlobeSt.com reported last week, Coldwell Banker Commercial Alliance has hired veteran retail property professional Dan Squires as SVP. In his new role, Squires will represent clients in the sale and purchase of local, regional and national retail properties. We sat down with Squires to discuss some of the retail trends he foresees for Orange County next year, what the investment market looks like and the types of tenants he is seeing move into the sector.

GlobeSt.com: What trends do you see growing stronger next year in Orange County's retail sector?

Squires: Retail is basically a demographics story. What we're seeing here is the Orange County market has historically enjoyed high incomes, but most recently rent growth in retail is between 2% and 3% per annum, and population growth is north of 3%. A seller has to have a strategic story to tell investors in order to get premium pricing. Demographics is key, and Orange County's demographics are strong.

As far as property types go, the trend is getting away from large, traditional shopping centers and moving toward something we in the trade call community food hubs. There are three specific examples here: the OC Mix in Costa Mesa, the District in Tustin and the Packing House in Anaheim. These are collections of high-end boutiques and food retailers. The reason why it is a big trend is people need a reason to go to a shopping center; otherwise, you can buy things online. These centers create an experience. Once you go inside, it's not like a traditional shopping center. There are open-air corridors where people can mingle and Millennials can chat with their friends.

Another facet of this is that the proliferation of online shopping has affected large-scale shopping centers like the big-box power centers and enclosed shopping malls. These are the most vulnerable, and it's a trend that has been duplicated nationwide. In addition, the local neighborhood shopping center anchored by grocery and drug stores remains strong. You can't get your dry cleaning done online, and there have been multiple failures to get grocery shopping done online. Drugstores are resistant to online sales. Both offer much more than prescriptions and food. You can pick up a greeting card or flowers or a pie or whatever. And single people go to the grocery store trying to attract others. Food is something you have to feel and touch and see. When you buy groceries online, you pay through the nose and it often comes to you rotten.

If you have any doubt about the demise of the regional shopping mall, note that there has not been a single indoor enclosed shopping center built since 2006 in the US. Orange County is typically a trendsetter, and that's what we're seeing here: the community food hub centers and the social aspect to retail. This is going to go across the country.

GlobeSt.com: What types of retail properties are investors most interested in now?

Squires: It depends whether you're talking about institutional or private investors. Most of them, once they hear this demographic story, realize the appeal is more toward community and smaller centers. They're not trying to take down the big boxes, but Best Buy, Penney's and Sears are in trouble, so investors are a little spooked. In my opinion, the market share of retail that's going to do well is in the small to middle-market segment. That's where the returns are going to be, and it's why I joined CBC. The investment market is driven by the return.

Another trend I see is repurposing of old retail centers or properties like the Packing House in Anaheim. It was once an actual packing house for citrus fruit, and now it's hip, upscale and trendy. We're seeing that trend nationwide, as well as the emergence of a lot more mixed use. There are a couple of those large projects slated to come online in Orange County in the next couple of years that contain hotel, retail and office. People want to work, live and shop in the same area. This gives them a sense of neighborhood they don't have any more in the suburbs.

GlobeSt.com: Retail landlords are having great success with service and experiential tenants such as restaurants and gyms. What other tenant trends are you seeing?

Squires: They're primarily food or real specialty-type tenants. Right now, there are a lot of stores that sell nothing but cologne or perfume. Ten years ago, people would have laughed you out of the presentation room if you suggested that for a tenant. But these people are strong, and the margins are high there. There needs to be more of an experience aside from pure shopping. You have to be unique and have an entertainment element. Comedy clubs are also doing well.

GlobeSt.com: What else should readers know about the Orange County retail market?

Squires: The one thing we need to emphasize is that the regional shopping malls are dead. Robin Lewis, an expert in retail who wrote a book called The New Rules of Retail: Competing in the World's Toughest Marketplace, predicts that in the next 10 years, there won't be any more regional malls. Grocery or drug-anchored centers or even small, unanchored strip centers with a local retailer—such as a pizza guy—and a dry cleaner will do well. All retail is not uniform. In the late '90s and early 2000s, everyone thought everything was going to be done online. We've now come to find out that people are willing to drive to go do something and get quality. That's why these local pizza guys are killing online pizza retailers.