California Centers

MAY 2018

California Centers Magazine serves retailers, developers, shopping center owners, investment sales brokers and tenant representation firms throughout the state of California.

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Page 18 of 58

14 California Centers Magazine | May 2018 C C T he old, gray box just isn't what it used to be, at least not at many malls and shopping centers across California. The days of "build it and they will come" are dead. The formula for mall success no longer involves a wide rectangu- lar box flanked by two large square boxes. Even the "location, location, location" strategy has some caveats nowadays. One of the biggest changes to the retail environment is the significant decrease in spatial requirements for hard and soft goods. Online order- ing, speedy home delivery and in- store pickup have vastly altered the need for large-format department and big box stores throughout many shopping centers. This trend has brought about the recent or impend- ing downsizing or closures of anchor staple like Sears, Best Buy, Macy's, JC Penney, Toys "R" Us and Men's Wearhouse. Many experts believe we haven't seen the last of this giveback, with Garrick Brown, head of retail re- search for the Americas in Cushman & Wakefield's Sacramento office, as- serting even more big box closures are likely to follow in the near future. "Strategic closures will increase significantly in 2018 — particularly if we see the bankruptcies of Sears and Bon-Ton," Brown notes in his Ten Things to Watch in Retail in 2018 re- port. "On the department store front, those two chains alone could result in the return of over 800 large-format [stores]." CLOSING IN ON OPPORTUNITY These vacancies can be eyesores. They can also trigger a domino effect in which neighboring retailers ex- ercise co-tenancy clauses that allow them to vacate or pull back on rent. This makes it essential for shopping center landlords to closely monitor store and company performances, keep the lines of communication open and mitigate any concerns from fellow tenants early in the process. "Whether it is due to the popularity of online shopping, as in the case of the Toys "R" Us store closures, or due to antiquated business models, as is the case with the wave of department store closures, there is no shortage of AMC Theatres recently announced plans to open at Montclair Place, a 1.2-million- square-foot regional mall in the Inland Empire submarket of Montclair that is currently being transformed by CIM Group. ANCHORING FOR POSITION Anchor vacancies spell opportunity for many California properties, in areas where retail space is in demand. By Nellie Day Oakwood Olympic & Olive is a mixed-use community located in downtown Los Angeles.

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