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Radius: Retail industry slowly recovering; not out of the woods just yet

October 29, 2014
Santa Barbara, California – Released 1/19/2017
By Jim Turner, Senior Associate

Annual retail conference in San Diego paints cautiously optimistic picture.

Radius Commercial Real Estate & Investments recently attended the annual International Council of Shopping Centers (ICSC) Western Division Conference held in San Diego in early October. The commercial real estate brokerage represented Santa Barbara and the South Coast with a full-scale booth and eight brokers at the convention. The event, which focuses primarily on the shopping center industry in the western states, drew numerous national and regional retailers, commercial real estate firms, developers and a wide variety of industry-related vendors.

The convention has long been popular for its ability to bring together real estate professionals and industry leaders for valuable face time. Additionally, it provides an opportunity for developers to present their projects to various retailers, for retailers to discuss the cities in which they are interested in expanding, and for brokers to meet with retailers and developers to offer their services and expertise in their local markets

Some notable takeaways from this year’s 2-day event:

• The lack of retailers present at the event. Of the 272 companies that purchased booths, only 35 or 13% were retailers and restaurant tenants. This may be a sign that fewer retailers are looking to expand in the West, and those that are willing to expand are very cautious of their plans.
• There were 22 cities represented at the conference, mostly from California and a few from neighboring states. These cities sent delegations because they have an interest in attracting more retailers and developments in order to generate more revenue and business to their local municipalities.
• The Santa Barbara appeal. We hosted several potential investors at the Radius booth, many of whom stopped to chat because we were located in Santa Barbara. Given our beautiful natural surroundings and the high barrier to entry for future development, these investors expressed strong interest in purchasing properties in our area (with the added benefit of having a good excuse to visit our town).
• The consensus at the event was that the retail industry has recovered somewhat from the “Great Recession”, but that we may still be a long way from a full recovery. Santa Barbara, due to its unique charm, relatively close proximity to Los Angeles, and strong market fundamentals, may weather the storm better than other surrounding communities.

In a recent article ICSC reported that positive economic signals point to a stronger holiday shopping season as they forecast a 4.0% increase in sales during the November-December holiday shopping period. This would represent the strongest gain in three years. Total holiday shopping sales at shopping centers is estimated to be $488.6 billion.

Additionally, a significant rebound in the U.S. labor market since last spring, along with decreasing unemployment rates and year-over-year gains in personal income, all bode well for consumers and point to a likely solid increase in holiday spending. Despite a setback in September, consumer confidence in the U.S. remains considerably higher than during the same time last year.

“While consumers are expected to remain focused on price this holiday season, the positive momentum of key economic indicators are pointing to consumers who are willing to open their wallets and hit the stores this holiday,” said Jesse Tron, spokesperson for ICSC.

This positive news for the retail industry was evident at the event, demonstrated largely by the increased number of investors who are now interested in purchasing retail properties throughout the country.

We are seeing signs of improvement in our local market as well, as the retail sector continues to improve with a very strong occupancy rate of 98% and average asking lease rates that have continued on an upward trajectory over the last few quarters to $3.73 per square foot gross. We are also seeing continued demand for retail space in the Funk Zone—which has zero vacancy at the moment—and strong leasing activity at the new Hollister Village Plaza, a 76,000 square foot neighborhood shopping center currently being constructed in Goleta.

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