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Tuesday, Feb 7, 2023
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Retail Renovation and Repositioning Are On the Rise in Region

Many among the thousands of industry pros attending a major shopping center conference in San Diego were expected to stop by Westfield UTC, the Westfield Group mall that is abuzz with construction as it prepares to welcome a slew of new tenants amid a $180 million renovation.

“We usually get a lot of retail companies coming in for tours during ICSC,”said mall General Manager Ryan Perry, referring to the International Council of Shopping Centers’ annual Western Conference, held recently at the San Diego Convention Center. “There’s probably going to be more than usual this year because of all that’s going on here.”

The Western Conference, which took place recently, is among the largest annual gatherings of the global shopping center trade group, held for several years in San Diego and typically drawing more than 3,500 retail executives, developers, contractors, brokers and government leaders. It is considered a pivotal meeting for center leasing deals in the western U.S., attracting the biggest players in the retail and restaurant industries, along with owners of shopping centers of all sizes, looking to fill spaces.

Among those attending was Jim Connelly, managing principal of Nadel Architects in San Diego. In the past year, the firm has seen a distinct uptick in design work geared to renovations of vacated retail spaces, which haven’t stayed empty for long in San Diego County’s well-located centers.

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Nadel’s recent work included a makeover of a two-level space at The Forum in Carlsbad, vacated by the defunct Borders bookstore chain and now home to clothiers H&M and Urban Outfitters. In southeast San Diego, it redesigned a 64,000-square-foot space, once occupied by retailer Fedco and soon to house three new discount-oriented tenants, including national-chain clothing and dollar stores.

In Poway, Nadel worked on a former Dixieline lumber store location, which has 40,000 square feet soon to be divided up by two national-brand retailers yet to be announced. “Much of this is about big-box spaces being repositioned and renovated for other kinds of uses,” Connelly said.

Experts note that San Diego retains among the lowest retail vacancy rates for major metro areas, as new construction of shopping centers remains scarce and national retail and restaurant chains look to boost their local footprint. But there is a still a wide variance in performance, as some strip centers struggle with vacancies because they rely more on local mom-and-pop businesses to keep spaces filled.

‘Market Is Slightly Better’

“I would say the market is slightly better than last year but not overwhelmingly so,” said David Howard, president of the Carlsbad office of brokerage firm Lee & Associates Commercial Real Estate Inc., which had a contingent at the conference. “The demand for Class A properties continues to remain strong and robust; it’s just a lack of product that slows down the absorption.”

“The B and C market centers still have to keep rates low and sprinkle some free rent to land the less than Class A retailers,” Howard added. Still, he said there are several national firms in the market looking to expand locally, including Ortho Mattress, O’Reilly Auto Parts, Dollar Tree, Sherwin Williams, 99 Cents Only, Wingstop and Sizzler.

In an effort to get shoppers to spend more time on-site, Westfield Group, which owns seven San Diego County malls, and its competitors — including Fashion Valley owner Simon Property Group Inc. — have recently been investing millions toward improving the social atmosphere of their properties. Those efforts in turn have drawn several national and regional merchants, some making their first appearance in the San Diego market.

During a recent media tour of Westfield UTC, company representatives pointed to additions such as a renovated Palm Plaza, now sporting outdoor fire pits, tables with umbrella-mounted heaters, and a high-def jumbo video screen delivering news, weather and community event information.

By mid-November, a new 14-screen luxury Arclight Cinemas will be open for business, joining a relocated Forever 21 and an expanded 24 Hour Fitness.

Around the same time, the mall will see the debut of jeweler Tiffany & Co., clothiers J. Crew and Splendid, and the first county retail store of electric carmaker Tesla Motors.

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