New Trend: Small, Hip, Urban Retail

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SAN DIEGO—In submarkets like Pacific Beach, investors are beginning to seek smaller retail and restaurant properties with an urban feel that appeals to Millennials, Voit Real Estate Services' SVP's  Kipp Gstettenbauer, CCIM, tells GlobeSt.com exclusively. Gstettenbauer and VP Ryan King recently represented both seller Garnet Ave. Limited Partnership and buyer Dayani Partners in the sale of a 9,157-square-foot retail portfolio at 1036-1038, 1757-1765 and 1775 Garnet in Pacific Beach. The sale, at slightly more than $500 per square foot, included five bungalows adjacent to the iconic PB Fish Shop and an additional parcel several blocks to the west. We spoke with Gstettenbauer about the sale, the PB retail submarket and what investors are looking for in this area.

GlobeSt.com: What is most interesting to you about the Pacific Beach retail submarket?

Gstettenbauer: The biggest thing taking place is that a lot of owners who have owned these properties for generations are finally able to let them go. This property was owned by the same owner since 1946, and before that it was a Los Panchos Taco Shop way back in the day. It's interesting to see a lot of people in that area who are 70 or 80 years old selling these properties. There's a lot of private capital in the marketplace right now looking to be placed.

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The fish shop itself is an older, smaller building—it's not very big, but it serves high-quality fish right out of the Pacific Ocean. It's quick, easy, clean and allows patrons to bring their own beer and wine. We had a lot of potential buyers from Beverly Hills looking to place capital in it, and we had a lot of competing offers for the property.

GlobeSt.com: What other types of retail properties are you seeing in this submarket?

Gstettenbauer: We're representing a strip mall that's a little farther west and in escrow. The owner is out of Pennsylvania and had not paid attention to the property for 30 years, and they don't want to deal with it. There are four or five tenants in there with different problems, and it's not the best use of the property. We can go in and reposition the site completely and create a brand-new project, bring in a lot of new tenants. We will be re-tenanting it and putting it on the market at the end of this year.

If you go into other areas of San Diego like Hillcrest, it's kind of been picked through on the main arterial streets by developers. But there's a lot of opportunity in PB right now. There's only one anchored center-a Vons-anchored center—and the owner has no intent to sell it ever. It will be passed down from generation to generation. You can't replicate anything like it. Right next door, a brand-new, 20,000-square-foot Trader Joe's shopping center is going up. The current location decided to relocate a little bit farther east to be near better shop-space tenants to help draw more people in.

GlobeSt.com: What types of investors are seeking retail properties in Pacific Beach?

Gstettenbauer: The younger generation likes the hip, urban areas, and that's where investors are looking to place their money here. It's not so much the big suburban strip malls as much as it is where the hip new place urbanites are spending their money and hanging out. PB, North Park—younger developers are looking at these markets and want to be here. We're starting to see developers change their minds on a daily basis to go for more small plays like this. They could end up owning the entire block 20 years down the line.