Retail Tenants Want to Grow OC Market Share

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ORANGE COUNTY, CA—There is an intense competitive environment for retail tenants to retain and grow market share within the Orange County region, which is helping to heat up the sector here, Cushman & Wakefield's director, retail services, Southwest US leasing services Chris Walton and associate Kevin Hansen tell GlobeSt.com. We spoke with the pair exclusively about Orange County retail leasing trends and what we should know about this sector.

GlobeSt.com: What are the most-interesting retail leasing trends you're noticing in Orange County?

Walton and Hansen: “A” product in core submarkets continues to receive the majority of national-credit tenant interest and activity. However, as market conditions continue to improve, we are seeing high levels of occupancy in the best-in-class projects, which is forcing tenant interest into stabilized “B” assets.

There is an intense competitive environment for tenants to retain and grow market share within the region. With new brands expanding into the market and increasing the competition for best-in-class real estate, landlords are seeing increased rental rates accompanied by lower concessions. Conversely, landlords in secondary submarkets are competing for opportunistic tenants that are demanding aggressive deal structures due to the risk associated with entering still-recovering markets.

We are finally seeing some new development in the Orange County market, predominantly anchored by specialty grocery stores and drug stores. However, due to the lack of developable land and the infill nature of the geography, redevelopment of existing product is and will continue to be the “new” development.

GlobeSt.com: What are tenants looking for in their space in terms of the type, size and co-tenants?

Walton and Hansen: Tenants are focused on securing high-profile space with excellent visibility, exposure, parking and access. As the e-commerce trend continues to become a greater percentage of overall retail sales, tenants are reducing their footprints for brick-and-mortar store locations. Grocery and drug-anchored shopping centers and big-box-anchored power centers are seeing the most activity in the market since tenants desire to be located near high-traffic-generating tenants such as Whole Foods, CVS, Target, Kohl's, Costco, etc.

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GlobeSt.com: How are tenants and landlords working together to make tenants' business successful in their space?

Walton and Hansen: More than ever, landlords are educating themselves on tenant health ratios as it relates to overall occupancy costs and sales potential. Deals are being structured to help tenants be successful in the long term while allowing landlords to maintain high occupancy levels over extended periods of time.

Merchandising a shopping center is more important than leasing a shopping center. With every one of our clients and shopping centers, we develop a strategic merchandising plan to ensure that we are creating the most-synergistic environment within the project in order to maximize tenant performance and the inherent value of the project.

GlobeSt.com: What else should our readers notice about this sector?

Walton and Hansen: The retail market in Orange County is thriving. Centrally located between San Diego and Los Angeles, Orange County is a target for both new tenants expanding into Southern California and existing tenants growing market share within the region. The outlook for retail in Orange County is positive as we expect to continue to see occupancy levels rise in addition to increased rental rates. We believe there will be a continue focus on urban markets as Millennials seek to live, work, shop and play in close proximity to one another.