Sharon Browning, Sperry Commercial
With the scarcity of vacant land in Orange County and the need for antiquated properties to be updated, the trend seems to be redevelopment with an eye on mixed-use retail, including a multi-story residential component. There are currently several new development projects either in the planning or construction phase.
Los Olivos Marketplace – Irvine
The Irvine Company plans to build Los Olivos Marketplace, a new 120,000-square-foot retail center across from its Los Olivos Apartment Community on Irvine Center Drive near the 405 Freeway in Irvine. This development would be situated adjacent to its existing 62,000-square-foot retail center, and just minutes from the firm’s Irvine Spectrum Cente. Whole Foods Market has already signed a lease for 40,000 square feet at the center. It plans to open in spring 2016.
The Source – Buena Park
On a more international scale, M+D Properties is building a 400,000-square-foot, mixed-use center known as The Source in Buena Park. It would include world-class, high-end retailers and restaurants, a 150-room Hyatt Place, a seven-story office building, a 1,200-seat movie theater, and a 54,000-square-foot performing arts center called YG Land, from South Korea-based entertainment company YG Entertainment. The project is expected to be complete early next year.
Pacific City – Huntington Beach
Pacific City on Pacific Coast Highway in downtown Huntington Beach is designed on the Surf City theme. It anticipates 50 retail tenants, 516 luxury apartment homes and a 250-room boutique hotel. Developed by DJM Capital Partners, the 191,000-square-foot project broke ground in 2013 with a tentative opening date of late 2015. DJM also developed the 1-million-square-foot Bella Terra mixed-use center in Huntington Beach.
The Great Park – Irvine
Long time in the planning, The Great Park in Irvine is a planned conversion of a former military base to a mixed-use project that will include residential, office, retail, entertainment, recreational and open spaces.
Orange County has also seen an uptick in commercial real estate investments sales, as evidenced by these recent transactions.
Hobby Lobby – Laguna Niguel
The free-standing, 77,867-square-foot building leased to Hobby Lobby is part of the larger Marketplace at Laguna Niguel. The center is anchored by Vons, Walmart and Sports Chalet. It recently sold for $15.1 million, or $193.92 per square foot. The sale price represents a 5.7 percent cap rate.
MacArthur Plaza – Santa Ana
The 13,468-square-foot MacArthur Plaza retail center recently sold for $10.9 million, or $809 per square foot, which represents a 5.7 percent cap rate. The multi-tenant strip center, located in the desirable South Coast Metro area, includes tenants like Starbucks, Rubio’s, Togo’s and Thai Spice.
Cabrillo Park Center – Santa Ana
Anchored by Superior Grocers, the 73,500-square-foot center recently sold for $12.2 million, or $166.67 per square foot (cap rate undisclosed). Superior Grocers is one of the largest privately owned grocery chains in the Greater Los Angeles metro area with 40 stores throughout Southern California.
The Plaza – Laguna Beach
The sale of The Plaza in Laguna Beach saw the return to 5 percent cap rates for retail properties. Located at 303 Broadway Ave., the 16,747-square-foot, two-story building sold for $8.9 million, or $534.28 per square foot.
Orange County has seen the addition of new retail tenants as well. They include:
Fresh Market – Laguna Hills
This specialty grocer has 158 stores in 26 states. Fresh Market just opened a new 23,900-square-foot store in the newly remodeled Village at Nellie Gail Ranch in Laguna Hills.
Toby Keith’s I Love This Bar & Grill – Anaheim
Restaurants seem to remain hot, as signified by the new country artist concept, Toby Keith’s I Love This Bar & Grill. With 16 locations nationwide and about the same number in the planning stages, the restaurant serves up good food and live country western entertainment. The 20,590-square-foot restaurant is part of the 460,000-square-foot Anaheim Gardenwalk shopping and entertainment center.
Other significant retail deals include:
• Life Time Athletic taking over 150,000 square feet in Laguna Niguel
• Walmart Supercenter leasing 100,800 square feet in Huntington Beach
• Walmart Supercenter opening a 107,000-square-foot store in Garden Grove
• AA Marketplace leasing 80,222 square feet in Garden Grove
• Albertsons moving into 45,278 square feet in Mission Viejo
• HMart leasing 35,000 square feet in Buena Park
• Planet Fitness leasing 20,892 square feet in Buena Park
Orange County retail vacancy decreased from 5.1 percent in the first quarter of 2014 to 4.8 percent in the second quarter of this year, showing a positive net absorption of 663,774 square feet. This compares to the U.S. national retail vacancy at 6.4 percent. Asking rental rates saw an increase to $22.39 per square foot annually, which was a 1.3 percent increase over the first quarter of 2014, which posted an annual rate of $22.11 per square foot.
By Sharon Browning, Senior Vice President of Investment Sales at Sperry Commercial in Irvine, Calif. This article originally appeared in the October 2014 issue of Western Real Estate Business magazine.