|Long Beach Retail Corridors See More Activity, But Market Still Weak|
Article Provided by:
Long Beach Retail Corridors See More Activity, But Market Still Weak
National Chains Show Interest In Vacant Space While Small Retailers Still Struggling; New Restaurant For daVinci Space
By Sean Belk - Staff Writer
March 27, 2012 - Commercial real estate brokers and property owners say they are more upbeat about the local retail market, as activity has perked up in recent months and businesses have shown an interest in space at corridors throughout Long Beach.
But, the retail sector still suffers from a glut of inventory caused by the economic downturn and shift to Internet shopping that forced local stores to close and national retailers to shutter brick-and-mortar locations.
As retail sales have improved and banks have eased up on the flow of capital, real estate experts say interest has mostly come from national chains looking to take up prime vacant spots and retailers attracted to bargain rates. For the most part, small independent retailers are still struggling to turn a profit in today’s economic climate.
“The phone traffic and the amount of inquiries via the Internet has gone up from a year ago, probably at least 25 percent,” said Doug Shea, commercial broker and principal of INCO Commercial. “But the calls are more national. The small business, mom and pops are still hurting . . . National retailers may be seeing something else, but there’s still a lack of confidence in the market.”
In Long Beach, vacancies and asking rates at retail corridors and shopping centers vary, depending mostly on the location, with higher retail occupancy seen in more sought-after areas of East Long Beach, he said. Storefronts along the perimeter of The Marketplace on Pacific Coast Highway and 2nd Street are currently leasing at a premium, with a new Corner Bakery expected to move in, Shea said. However, there are still interior spaces that remain empty. Overall, he said the 18.5-acre center is about 20 percent vacant.
Along East Anaheim Street, at a business district between Pacific Coast Highway and Junipero Avenue, about a dozen new businesses moved into the area in recent months, with another half dozen expected to open soon, said Rod Wilson, president of the East Anaheim Street Business Alliance.
“We are starting to see a real turn around in real estate in East Long Beach,” he said. “We also see more foot traffic and people taking a moment to stop, shop and dine in an area that people previously ignored, [driving] down Anaheim Street to get somewhere else in the city.”
At 2nd Street in Belmont Shore, vacancies are filling up quickly, said Frank Colonna, a local realtor and president of the Belmont Shore Business Association. Lease activity is often “cyclical,” but he said small business operators have been more aggressively pursuing the high-demand space.
According to Shea, property owners on 2nd Street charge the highest rental rates in Long Beach, some topping $4 per square foot, including triple net costs, due to the street’s high foot traffic. Other areas, such as Bixby Knolls, however, have rental rates as low as 75 cents per square foot, he said.
Colonna said turnover in the Belmont Shore area is short, with some tenants leasing property before others move out. Some are coming from outlying areas, such as Manhattan Beach, Whittier or Torrance, he said. With roughly 240 businesses, 2nd Street currently has a less than 3 percent vacancy rate, Colonna said. “We’re very fortunate,” he said. “As far as retail on a main street; on a public thoroughfare, our track record has been very good . . . We are attractive to people from all around.”
About five miles away, on the south side of the Long Beach Airport, a new restaurant is moving into the top floor of the commercial complex known as Daugherty Sky Harbor at 2801 E. Spring St, replacing the former Italian eatery Restaurante daVinci that closed in 2010.
La Lune Palace, a Cambodian restaurant, is expected to move by May into the space that overlooks the airport, according to restaurant owner Sean Saing. The operation also recently opened a new restaurant called Cyclo Noodle at the shopping center at the southwest corner of Ximeno Avenue and Pacific Coast Highway, anchored by Big 5 Sporting Goods and Staples, he said.
Saing said he decided to relocate to the airport after the family-owned restaurant, which had been a staple of Long Beach’s “Cambodia Town” for many years at Atlantic Avenue and Anaheim Street, burned down last year. The restaurant specializes in Southeast Asian food and caters weddings and special events, he said.
A few retail corridors, however, still have a big hole to fill, after the recession left large chunks of space that often take longer to replenish.
A combined 50,000 square feet of retail space is temporarily being subleased by Crown Books at The Pike at Rainbow Harbor in downtown and at the Los Altos MarketCenter in East Long Beach after Borders shuttered its locations last year. Property owners of both centers are currently marketing the space for new tenants, but haven’t sealed transactions yet.
The Pike, the 369,000-square-foot retail property owned by Ohio-based Developers Diversified Realty, is about 22 percent vacant, with roughly 82,000 square feet of available retail space, including the 21,000-square-foot former Borders building, according to the company’s property listing.
At downtown’s CityPlace Shopping Center, owned by Shooshani Developers, LLC, there are currently 13 retail store vacancies, according to the CityPlace Web site. The vacancies range in size from 657 square feet to 4,913 square feet.
The Los Altos center, owned by Atlanta-based Cousins Properties, currently has more than 7,000 square feet of available space, in addition to the 30,000-square-foot former Borders building, according to the property owner’s listing. The most recent tenants there are LA Fitness and TJ Maxx, next to a longtime Sears department store. Nearby, a vacant property previously owned by Best Place Café on the west side of Bellflower Boulevard at Abbeyfield Street is now on the market, Shea said.
Along the retail corridor known as Retro Row on 4th Street, there hasn’t been much change in occupancy recently other than the addition of The Port, a small clothing store that relocated from Broadway, according to Noel Aguirre, commercial real estate broker for Lee & Associates.
The retail strip of mostly antique shops and restaurants has remained relatively stable, with a grass roots effort to bring in new businesses and expand retail further along the street, heading west toward downtown, he said. However, Aguirre said some transactions are harder to close than others, as some retailers still have preconceived expectations of lower rents.
A 5,571-square-foot, two-story Art Deco-style building, constructed in the 1930s at the corner of 4th Street and Cherry Avenue, has been vacant for two years, Aguirre noted. “There has definitely been more activity overall in the landscape in Long Beach, but there are still some challenges with pricing,” he said.
Although there has been positive absorption in the retail market in the last year, he said vacancies caused by big-box retailers scaling back operations continues to put downward pressure on rental rates and sales prices. However, he said the available space has brought in “new concepts” for retail.
In the Bixby Knolls area, more tenants are moving in than moving out compared to past years, according to Paul Forman, a commercial real estate broker and property owner of Forman Associates, Inc. He said redevelopment funding has “transformed” the area through tenant improvements and events, spearheaded by Blair Cohn, president of the Bixby Knolls Business Improvement Association.
Recently, a handful of new retailers have moved in, including a skin care and waxing service, known as Essencial Studio at 3550 Long Beach Blvd., along with an animal dermatology clinic and a music store along Atlantic Avenue. Forman said a new wine bar and cooking school are also expected to open later this year.
“As far as the temperature of retail, there’s more of a buzz up here,” he said. “We’ve had positive absorption. From my perspective, as a landlord and a broker, things have never seemed better, despite this economy . . . I’m very optimistic.”
In the downtown area, new restaurants at The Promenade are continuing to do well, said Brian Russell, real estate broker for Coldwell Banker Commercial Blair Westmac, who is marketing retail space for concessions and a convenience store at the new Governor George Deukmejian Courthouse, now under construction. While restaurants and grocery stores are seeing more profits, he said tenants relying on “discretionary” sales, such as dry cleaners, are still finding it tough to stay in business.
Overall, Russell said lease rates should remain stable this year, while retailers should continue to expand as more capital flows to the business sector. “We’re still kind of bouncing along the bottom, but I don’t think we’re going any farther down,” he said. “I don’t think there are any more rate concessions to give or any downward pressure in lease rates . . . The good news there is tenants are starting to look at three- and five-year deals.”
Although the market is more hopeful, Tom Merrick, a commercial broker and owner of T.F. Merrick Co., said it’s still tough for small retail operators to remain profitable. He said rental rates are still down anywhere from 30 to 40 percent in some areas and property owners are forced to still offer concessions, such as free rent. Some small retailers are finding ways to save money, either by sharing space with other tenants or turning to the Internet for sales, Merrick said.
“The problem is the average American just doesn’t have the buying power that they had before . . . in the homes and refinancing,” he said. “And they’re finding other [funding] sources to carry themselves.”
The next new retail to be developed is about 10,000 square feet of space at two pads near a proposed 159-room Courtyard by Marriott hotel to be built on a 4.5-acre site at Douglas Park near the Long Beach Airport. Orange County developer Nexus Companies, which is developing the property on Lakewood Boulevard and Cover Street, closed escrow this month to purchase the land from Boeing.
Cory Alder, president of Nexus Companies, said the new development, which is already fully entitled by the city, should break ground in late April or early May. “We think Douglas Park is a great master-planned development and Long Beach airport continues to get better,” he said. “We’re big believers in the area and we’re excited to get started and help the airport grow.”
Just north of the property at the corner of Lakewood Boulevard and Carson Street, a 26-acre retail center development is planned for construction through a partnership between Torrance-based developer Mar Ventures, Comstock Crosser & Associates and Continental Development. However, the project has yet to break ground and e-mail requests for further information were not answered.