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Local retailers hanging up more vacancy signs

Increasing retail vacancy rates troubling sign for realtors

Posted: February 5, 2009 11:36 p.m.
Updated: February 6, 2009 4:55 a.m.

For lease signs line up the sidewalk along Smyth Drive in Valencia, Wednesday afternoon.

 

The stifling economy is keeping businesses from relocating to Santa Clarita despite lower lease costs due to increasing retail vacancy rates.

"We've been seeing the vacancy rate increase as has all the Los Angeles area," said Jason Crawford, economic development and marketing manager for the City of Santa Clarita. "We are definitely feeling it, we've got more office space and retail space that is vacant due both to the economy as well as new developments."

Vacancy rates are considered a key economic indicator.

First-quarter 2009 retail vacancy in the city reached 4.6 percent and valley-wide retail vacancy hit 4.8 percent, according to the city's Jan. 14 figures calculated by Maryland-based commercial real estate information company CoStar Group.

"A large part of numbers increasing is because there's been so much activity in retail (development), such as the new Plaza at Golden Valley," Crawford said.

Office Depot closed just after construction of the Plaza was complete.

"Mervyns going out of business was a blow for us and we've also got the former Wickes (Furniture) building in Centre Pointe that is a retail space," Crawford said. "So those are definite drags on the occupancy rates.
But they are also opportunities for us to bring in a strong, better-performing retail anchor."

Because the Santa Clarita market is still comparatively strong, there are many retailers, restaurants and other businesses that want to be here, just not yet, Crawford said.

Their attitude is, "we want to come in to the Santa Clarita market but we don't want to come in 2009," he said.

The expansion of the Westfield Valencia Town Center presses on, according to Westfield spokesperson Katy Dickey.

"Clearly this is a challenging environment but we're working with retailers and pushing forward," Dickie said.
Restaurants, health and fitness centers and stores for women's fashion accessories and kids committed to lease space, Dickie said.

Martin Rodriguez with SCV-Loan Solutions specializes in helping people with commercial or residential investment properties.

While Santa Clarita is still an affluent area, investment opportunities seem to be in other areas, he said.

"I wouldn't recommend Southern California overall," Rodriguez said.

But now could be the time to renegotiate leases, he said.

"I think most people who own commercial land understand this isn't the year to be greedy," Rodriguez said. "This is a year for sustainability. If you have a contract coming due, talk with the landlord to renegotiate the lease. It could be a win for both ways."

Santa Clarita Valley Chamber of Commerce Chairman Bill Kennedy said he has yet to see local businesses express concerns about the vacancies.

He thinks the impact will reveal itself more in three to four months but believes Santa Clarita will hold up better than other cities.

"My sense of things is that Santa Clarita is going to be more immune from a deep cutback than most areas is just because of the types of businesses we have here and the attractiveness of this locale to companies that are thinking of relocating or starting up," Kennedy said.

Crawford said there are "bright spots."

"I'd say the entire slowdown of the economy is affecting sales tax generations, whether it's a Mervyns or Wickes going out of business or less cars being sold, there's definitely an impact on sales tax," he said.

"We're feeling it here at the city and having to plan accordingly, but we're still in a better situation than a lot of communities."

Having an open space like the vacant Mervyns building also allows the city to bring in a "strong, better-performing retail anchor," he said.

Or three.

"In a perfect world we'd have another tenant come into that space," he said. "But more than likely they'll be looking at sub-dividing it into maybe three areas with three different tenants."

There's a lot of the "wait-and-see" approach keeping those prospects from making moves anytime soon, he said. But in the mean time, the city is planning ahead.

"We're trying to plan well while we've got these opportunities," Crawford said.

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