JLL’s Craig Killman is attending the ICSC Western Division Conference today in San Diego, and takes a closer look at the Los Angeles retail corridors:
- What types of retail properties are investors seeking in Los Angeles?
The two hottest categories in Los Angeles right now are specialty food-anchored neighborhood centers and high street retail. Major specialty grocers, like Whole Foods and Trader Joe’s, are driving the recovery as the wealthy segment of the trade area continues to grow and increase in net worth. The areas with the lowest retail vacancies continue to be Rodeo Drive, North Beverly, Robertson, Melrose, 3rd Street Promenade and the up and coming Abbott Kenney in Venice. These high street trade areas are all surpassing pre-recession highs for rents and occupancy, and are different in the sense people are looking for an investment that will hold real value down the road – there is a significant amount of international money floating around, so areas remain competitive for quality space.
- How is the local economy impacting the Los Angeles retail market?
As the chasm between the haves and the have not’s widens, the economy will become more and more of an issue. The high-end market is doing well as is the bargain basement value sector, which is being driven by dollar stores, fast fashion and lower-end super markets. California is always going to be a desirable place to live but as the cost of living continues to outpace the rate of inflation and living expenses in the rest of the country, we expect corporations, individuals and families to struggle to maintain their expendable income.
- What shifts or new retail concepts are infiltrating the Los Angeles market?
Retail concepts are looking for smaller footprints that are more efficient in space and design. The major change is in the incorporation of technology into bricks-and-mortar to further integrate digital with the physical spaces in stores. The retailers who take advantage of multi-channel selling, which includes bricks and mortar, digital and mobile, are the ones that are thriving. They are reaching the consumer where they feel comfortable browsing and buying, but most importantly they are creating conduits to reach the powerful buying power that is harnessed in the millennial generation – giving them the ability to converse in real time about products, share experiences, and then purchase. By 2018, Millennials will “out-buy” the Baby Boomers for the first time and successful retailers are meeting that challenge today, head on with virtual dressing rooms, digital sizing, and virtual product walls, and options to purchase online and then pick up in store
- What do you predict 2015 will be like for the Los Angeles retail market?
I’m confident that 2015 will see similar retail growth as we’ve seen in 2014. There is finally ground up development both in the core with vertically integrated mixed-use projects, and in the more affluent suburban markets. Economic changes and growth will not start to slow down until late 2016, early 2017, when supply could once again become depleted based on the history of demand in primary trade areas. That being said there is still a lot of economic growth to be experienced in all markets.