FULLERTON, CA—When a struggling vacuum-cleaner repair shop is converted into a new, hip restaurant concept, all the surrounding tenants benefit from the influx of customers, CBRE broker James Lehigh tells GlobeSt.com. As we recently reported, Lehigh and Nathan Holthouser recently represented the buyer, local investor McFadden Place LLC, in an approximately $11.8-million 1031 exchange involving Condon Plaza, a mixed-use property in Downtown Fullerton, CA, that currently houses 14 tenants, including ground-floor store-front retailers and second-story office users.

Lehigh characterizes this asset as value-add retail and foresees future rental growth for the property. We spoke with him about what that term means and how these properties can benefit in suburban downtowns, which are growing in popularity.

GlobeSt.com: Please explain what “value-add retail” is and how it differs from regular retail properties.

Lehigh: The term value-add describes a property that may be in need of additional improvements, either physical or operational, that will ultimately allow an owner to command higher rents and attract a stronger tenant base than before. This is a more hands-on strategy, which can lead to a higher return on investment, yet it also carries more risk and demands up-front investments. This stands in contrast to a more “regular” retail property where usually a long-term lease is in place with more stable, bond-like returns.

GlobeSt.com: How can these properties benefit suburban downtowns, which are growing in popularity?

Lehigh: People prefer experiential retail and areas that melt shopping with entertainment and great amenities. When a struggling vacuum cleaner repair shop is converted into a new, hip restaurant concept, all the surrounding tenants benefit from the influx of consumers. In short, these revamped and reimagined storefronts buoy the entire neighborhood. Suburban markets are trying to better compete with the bigger metro areas by attracting successful employers. Exciting retail is an important component to ensure this kind of reimagining is successful.

GlobeSt.com: How do these properties benefit the office market in these suburban areas?

Lehigh: Employers are increasingly looking for live-work-play environments so they can attract and retain the best quality workforce. Having a vibrant downtown is a key component to that. The revitalization of an area is the rising tide that lifts all ships. We've also even seen a lot of creative-office spaces popping up in these emerging environments.

GlobeSt.com: What else should our readers know about this topic?

Lehigh: With many of the negative headlines about retail right now, smart investors view this time as an opportunity to place their money creatively in the type of markets and properties on which our team focuses. We've seen the greatest success in the restoration and repurposing of historical buildings. An old packing house, an abandoned theatre or a dirty, long-standing machine shop can all be tremendous and profitable investments with the right forward-thinking mentality.

Instant Insights /

Value-Add Retail Benefits Everyone

Related Stories

Recommended For You