SAN DIEGO—Shop owners and other entrepreneurs have better access to investment capital than they had only two years ago, Capstone Advisors' president Alex Zikakis tells GlobeSt.com. The firm recently purchased Rancho Carmel Plaza, a 30,421-square-foot retail center in Carmel Mountain Ranch, for $12.7 million from American Assets Trust that is at 96% leased and plans to enhance the property by upgrading tenant signage and developing the landscape. We spoke exclusively with Zikakis about the retail market in this area of San Diego, plus retail trends he's noticing in general.

GlobeSt.com: How would you characterize the retail market in Carmel Mountain Ranch?

Zikakis: Carmel Mountain Ranch is the premier retail node in Inland North County. The area has extremely strong-performing supermarkets, big-box stores such as Costco, home-improvement stores, clothing and shoe stores, theaters, restaurants and a wide array of service providers. The Carmel Mountain Ranch retail market serves a large and affluent group of residents and businesses in northeast San Diego.

More than 250,000 people live in a 5-mile radius of Rancho Carmel Plaza, the property we just purchased, and the average daytime population is more than 235,000. Rancho Carmel Plaza serves the communities of Carmel Mountain Ranch, Sabre Springs, Poway, Rancho Peñasquitos and Rancho Bernardo.

GlobeSt.com: What trends are you noticing with the retail sector in San Diego in general?

Zikakis:San Diego has great retail fundamentals. San Diego has a growing population; a strong, diversified economy; a population with strong education levels; and heathy household income levels. The retail market in San Diego is in good balance, and retail vacancy levels throughout the better parts of the county are extremely low. The improved economy has benefitted all retail sectors, the banking sector is healthy, and the improved residential market has restored home-equity levels. Shop owners and other entrepreneurs have greater access to investment capital than they had only two years ago. The restaurant and entertainment sectors have expanded significantly and are a real bright spot in the retail environment. 

GlobeSt.com: What types of retail properties are investors seeking in this market?

Zikakis: Everything! Demand has been strong across all sectors of the retail industry. Individual investors have been very aggressively buying any and all single-tenant triple-net-leased properties, and these properties are trading at cap rates that have never been lower. Institutional demand for dominant grocery-anchored centers is extremely fierce, making those that reached for acquisitions of premium centers over the last few years very pleased with their purchases. Now we are seeing very strong demand for B and C properties as well.  The “low-hanging fruit” of value-add opportunities has mostly all been snatched up, and money is flowing strongly into development, which has driven up land values across the board.    

GlobeSt.com: What else should our readers know about the retail market in San Diego?

Zikakis: The retail market in San Diego has been a very well-performing sector, and rents now exceed prior peak market levels for the better centers in strong locations. Values are being driven by a strengthening consumer base and inexpensive debt. Lender demand for San Diego retail assets is strong, with extremely aggressive flows of equity capital into the market. It's a great place to be an owner, if you can find a way to get into the market.