You'll Never Guess the Top Growth Markets For Retailers

Established retailers are targeting lower-priced markets for expansion, according to a new retail study from JLL. The study spotlights Whittier, Glendale and Downey as the top markets for retailers looking for store expansion opportunities in the last two years, from August 2015 to August 2017. These markets have 34% cheaper rental rates than more popular L.A. submarkets. As a result, chains like Starbucks, Dollar Tree and Yogurtland are expanding in these locations. We sat down with Shauna Mattis, SVP at JLL, to discuss the popularity of these submarkets.

GlobeSt.com: What do Whittier, Downey and Glendale have in common that they are attracting retail tenants? 

Shauna Mattis: All three communities are experiencing significant housing growth which is increasing the density for each market.  This is creating emerging markets within each of the cities.  As the neighborhoods increase in size, the retail needs and demands change, which makes the markets more desirable to retailers.  In addition, all three markets offer lower starting rent options—compared to surrounding markets—without compromising on density or consumer profiles. For example, Glendale's starting rent on average is $30.84 per square foot compared to Pasadena at $34.54 per square foot and Burbank at $39.70 per square foot. Burbank and Pasadena have high barriers to entry and the combination of lower starting rent and new available product is making Glendale a desirable option for all retail categories.

GlobeSt.com: When did this trend towards more suburban markets, like these, begin?

Mattis: As vacancy rates continue to decline throughout Los Angeles County, these markets are becoming more and more attractive and offer retailers stronger options than other tertiary markets outside of Los Angeles. In 2016 Los Angeles County hit the lowest vacancy rate since 2007 at 3.8%. As of 2017, we are still at the second lowest rate with only a .3% increase bringing the current vacancy rate to 4.1%. Retailers continue to feel pressure to open and expand and these suburban options are great alternatives for them to pursue. At the same time, housing in each of these markets has increased significantly since 2010 with Downey increasing by 3.3%, Whittier increasing by 2.7%, and Glendale increasing by 3.3% respectively.  With the combination of lower starting rent and high density, retailers are excited for the opportunities these markets are providing.

GlobeSt.com: What types of retailers are gravitating toward these markets?

Mattis: Discount grocers and discount goods have accounted for a significant amount of new location openings. Another reason the lower starting rental rates offered in these markets make them particularly attractive. Glendale has benefited with new or additional stores such as Adidas, Zara, Dollar Tree, Blaze Pizza and Octopus Restaurant. Whittier has benefited with new or additional stores such as Aldi, Grocery Outlet, BevMo, PetSmart, Panera Bread and Chick-Fil-A.  Downey has benefited with new or additional stores such as TJ Maxx & Home Goods, Bar Louie, Active, Lazy Dog Café and America's Best.

GlobeSt.com: What are the benefits of expanding to these markets, and what should retailers know before expanding to these areas?

Mattis: Benefits vary for each market, however, all three of these trade areas offer great opportunities for retailers based on the benefits already highlighted with the changing demographics resulting in increased population and buying capacity for the trade areas.  One additional advantage Glendale has incorporated to encourage business growth is a low gross receipts tax relative to other Los Angeles markets.  This allows retailers to enjoy a higher profit margin than other trade areas.

Established retailers are targeting lower-priced markets for expansion, according to a new retail study from JLL. The study spotlights Whittier, Glendale and Downey as the top markets for retailers looking for store expansion opportunities in the last two years, from August 2015 to August 2017. These markets have 34% cheaper rental rates than more popular L.A. submarkets. As a result, chains like Starbucks, Dollar Tree and Yogurtland are expanding in these locations. We sat down with Shauna Mattis, SVP at JLL, to discuss the popularity of these submarkets.

GlobeSt.com: What do Whittier, Downey and Glendale have in common that they are attracting retail tenants? 

Shauna Mattis: All three communities are experiencing significant housing growth which is increasing the density for each market.  This is creating emerging markets within each of the cities.  As the neighborhoods increase in size, the retail needs and demands change, which makes the markets more desirable to retailers.  In addition, all three markets offer lower starting rent options—compared to surrounding markets—without compromising on density or consumer profiles. For example, Glendale's starting rent on average is $30.84 per square foot compared to Pasadena at $34.54 per square foot and Burbank at $39.70 per square foot. Burbank and Pasadena have high barriers to entry and the combination of lower starting rent and new available product is making Glendale a desirable option for all retail categories.

GlobeSt.com: When did this trend towards more suburban markets, like these, begin?

Mattis: As vacancy rates continue to decline throughout Los Angeles County, these markets are becoming more and more attractive and offer retailers stronger options than other tertiary markets outside of Los Angeles. In 2016 Los Angeles County hit the lowest vacancy rate since 2007 at 3.8%. As of 2017, we are still at the second lowest rate with only a .3% increase bringing the current vacancy rate to 4.1%. Retailers continue to feel pressure to open and expand and these suburban options are great alternatives for them to pursue. At the same time, housing in each of these markets has increased significantly since 2010 with Downey increasing by 3.3%, Whittier increasing by 2.7%, and Glendale increasing by 3.3% respectively.  With the combination of lower starting rent and high density, retailers are excited for the opportunities these markets are providing.

GlobeSt.com: What types of retailers are gravitating toward these markets?

Mattis: Discount grocers and discount goods have accounted for a significant amount of new location openings. Another reason the lower starting rental rates offered in these markets make them particularly attractive. Glendale has benefited with new or additional stores such as Adidas, Zara, Dollar Tree, Blaze Pizza and Octopus Restaurant. Whittier has benefited with new or additional stores such as Aldi, Grocery Outlet, BevMo, PetSmart, Panera Bread and Chick-Fil-A.  Downey has benefited with new or additional stores such as TJ Maxx & Home Goods, Bar Louie, Active, Lazy Dog Café and America's Best.

GlobeSt.com: What are the benefits of expanding to these markets, and what should retailers know before expanding to these areas?

Mattis: Benefits vary for each market, however, all three of these trade areas offer great opportunities for retailers based on the benefits already highlighted with the changing demographics resulting in increased population and buying capacity for the trade areas.  One additional advantage Glendale has incorporated to encourage business growth is a low gross receipts tax relative to other Los Angeles markets.  This allows retailers to enjoy a higher profit margin than other trade areas.