Whether it’s existing properties, new development, redevelopment or a repositioning effort, the key to success in San Diego’s retail market is to focus on customer experience. You have to make it attractive for them to come out from behind their computer screens, go outside, get some fresh air, look a total stranger in the eye and be social.
The market is dominated by the coastal areas between Little Italy and Carlsbad. Primary core centers that are well located and occupied with strong daily needs anchors have the most fundamental stability. Secondary centers in beach-area submarkets have some vacancies but are attractive to tenants due to their proximity to the areas with the highest disposable incomes. Investors of tertiary centers, for the most part, are looking for ways to make their centers’ relevant, with forward-thinking owners investing capital to incorporate a mixed-use component like office, hotel or multifamily.
Craig Killman, JLL
Consumers in San Diego want a vibrant, inviting center with a superior customer experience immersed in beautiful landscape under the sun. The key is having a retail environment with premier anchors to get the customer to the center, along with a great mix of tenants and events to keep the customer at the center for a significant period of time. The Forum in Carlsbad and One Paseo in Carmel Valley are great examples of projects that have created a differentiated experience that keep customers happy and coming back.
On the tenant side, it is no surprise that internet-proof tenants, including entertainment, food and beverage, value-oriented, specialty fitness, healthcare, beauty and furniture companies, continue to be the most active in the market. Many are looking to strategically expand their presence throughout the region. Bowlero, REC Room and movie theatres are all in growth mode throughout the region as they look for large spaces where they can complement the tenant mix. For the mid-size spaces, companies like Ross, Marshalls and Home Goods remain active for the right locations. New restaurants, fitness and unique retailer concepts continue to look for the right center fit to complement the larger tenants.
Strategic development continues throughout the San Diego region. Projects like One Paseo, Seabreeze Properties’ planned Merge 56, and Sudberry Properties’ Civita and the Watermark projects showcase the future of retail development in the area. Meanwhile, Seritage Growth Properties’ redevelopment of the former Sears buildings in UTC and El Cajon showcase successful redevelopments in the area.
— By Craig Killman, executive vice president and San Diego retail advisory lead, JLL. This article first appeared in the September 2019 issue of Western Real Estate Business magazine.