Is E-Commerce Impacting Retail Size Needs?

NEWPORT BEACH, CA—What impact is e-commerce having on retail size needs in Orange County? Kurt Strasmann, senior managing director of CBRE, raises this question and tells GlobeSt.com exclusively he hopes to have it answered during the IREM Orange County market forecast panel he is moderating here on Feb. 18. Other panelists include Matt Hammond, director of retail brokerage for Coreland Cos.; Kevin Turner, SVP of Voit Real Estate Services; Bob Patterson, first VP, CBRE; and Stacy Garcia, senior managing director of NGKF.

“Certain segments are very strong, and in other segments it will be interesting to see what type of repositioning there will be for some of the existing large big-box product that e-commerce has taken over,” says Strasmann. “Is there a demand for that size space or are retailers looking for different-size retail outlets as a result of Millennials' buying patterns via e-commerce?”

On the multifamily side, Strasmann says he is looking forward to hearing if the sector is as strong as it has been. “With so much construction, are there enough people to fill the large developments throughout the county? It will be interesting to see what the next 12 to 24 months will bring. Multifamily is certainly the strongest sector.”

On the industrial side, Strasmann says the panelists will explore where pricing and leasing are going given that development is so difficult in infill markets. “Orange County has the second-lowest industrial vacancy in the country. Where is pricing going and which of the sectors of the market will be driving it in 2016?” Also on the industrial side, Strasmann will ask panelists whether users are actually using 36-ft. clear-height properties, which has become the new development standard in this sector.

With some good office development in Orange County outside of the Irvine Co. for the first time in a long time, the panel will explore what type of product they will be developing, says Strasmann. “What type of product will it be: creative office or traditional? How will that take place on some of these sites?”

Strasmann says he doesn't expect interest rates to change much, given the dragging European economy, the depression in the petroleum markets and statements from the Fed that they don't plan to raise interest rates much in the coming year, if at all. “There's enough instability in the world that is going to keep interest rates low for some time. With that in mind, cap rates on quality office and industrial product are at all-time lows. Can it go lower? And if so, have they stabilized cap rates and valuations of property? Where are they seeing rents going?”

As GlobeSt.com reported in January, Strasmann told us exclusively that, encouraged by the Irvine Co.'s Fashion Island and Irvine Spectrum office projects, developers will once again be moving dirt for new Orange County office projects. “In office, we have the best news of all the sectors. We've had a very diversified and strong user demand. Originally, the recovery started with corporate America, and then it moved to regional companies and now it's down to small business.”

Stay tuned for Q&As with the panelists that will help answer these and other questions about the Orange County market.