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S.D. Manages to Avoid Downbeat National Retail Trends

Various U.S. retailers in recent months have announced a total of 6,000 store closings either underway or in the works for 2017.

But while San Diego County has been impacted by a few closures recently — a Macy’s, a Sears and a few Payless Shoesource and Sports Authority stores — local impact from the national carnage remains limited because the region has never really been “over-retailed” relative to demand.

At a recent commercial real estate forum in Mission Valley, experts agreed that the local market in many ways doesn’t follow a national script when it comes to trends in retail and other property segments.

“San Diego generally doesn’t participate in traditional real estate cycles,” said Robert Griswold, president of Griswold Real Estate Management, at the gathering presented by the local chapters of CCIM Institute and the Institute of Real Estate Management.

Retail Arrivals

In the retail segment, which also includes occupiers of restaurant space, San Diego lately seems to have a much steadier stream of arrivals than departures. For instance, in a span of just three days during the last full week of July, new local venues were announced by four national players: Orchard Supply Hardware (San Marcos), fashion retailer DKNY Outlet (Carlsbad), Chipotle Mexican Grill (Imperial Beach) and breakfast-focused restaurant chain Snooze, an A.M. Eatery (La Jolla).

These are on top of several local independent restaurants, along with high-end national furniture retailers and discount sellers of clothing, housewares and groceries that continue to snap up vacated spaces and the few newly built ones.

Forum panelists, gathered by the real estate groups at Town and Country Resort, said continuing changes in consumer preferences will impact how retailers, office developers and apartment operators set up shop. Increasingly, concerns over sustainability and walkability are making one-stop, mixed-use developments much more popular among developers than they were a decade ago, in San Diego and elsewhere.

This explains, for instance, why CBRE Group Inc. is preparing to relocate its San Diego regional operations to the Westfield UTC shopping mall. It accounts for the rising popularity of coworking spaces and office campuses with high levels of on-site amenities, including collaborative areas, fitness centers, stores and dining venues.

Savvy Strategies Needed

Chris Sullivan, a vice president of retail properties at San Diego-based American Assets Trust Inc., was only joking when he opened a small Amazon delivery bag filled with granola bars and other snacks, “in case this luncheon doesn’t go over.” But he and other experts had a serious point to make for owners of brick-and-mortar retail centers looking to maintain high occupancy rates, rents and property values.

Those owners can do just fine, for instance, if they maintain a thoughtful mix of tenants. The mix needs to include retailers that are savvy themselves about incorporating online and mobile-app technology to make sales, as well as tenants like unique restaurants and others providing services not being disrupted so much by e-commerce, like hair salons and dry cleaners.

Transportation Changes

Continuing upheaval in transportation, including the rise of electric vehicles, ride-hailing mobile apps and self-driving cars, also have big potential implications for operators of shopping centers and office parks. Property owners in the long run may need to boost their amenities for electric vehicles, but otherwise might require much fewer overall parking spaces.

Matt Carlson, a senior vice president in CBRE’s San Diego office, said there are scattered signs nationally that developers are updating parking garages with ramps and other elements to make them better connected to their surroundings, in anticipation of one day converting those garages into offices or other usable commercial space.

The continuing cowork trend also translates into less need for office parking. Felena Hanson, co-founder of San Diego-based Hera Hub, noted that cowork offerings have doubled in the local market over the past five years. About 30 percent of the nation’s workers are independent operators — working in places like home offices or cowork spaces rather than traditional commercial offices — and that percentage is expected to reach 50 percent by 2020.

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