Retail Defies The Odds In San Diego
Retail is having a tough go of it in many places, but properties in strong markets like San Diego are as attractive to investors as they have ever been. And as attractive to tenants — and there are quite a few — who are still expanding.
"The San Diego retail property sector is top shelf for investors, so anything in this region gets a good amount of investor attention," NKF Capital Markets Senior Managing Director Rob Ippolito said.
A dense population and strong overall demographics put San Diego on that shelf, Ippolito said.
Metro San Diego has created jobs at a strong pace since the end of the recession. Local unemployment is at an 18-year low — 2.9%, according to the Bureau of Labor Statistics — and population growth is surging. San Diego County’s population has grown by more than 150,000 during the last five years.
Expansion by biotech, information and communication tech firms sustains household formations and strong rental development, underpinning demand for retail space while consumer spending rises, according to Marcus & Millichap's Q2 2018 report on the San Diego retail market.
"As apparel retailers, grocers and personal service companies scramble for a limited stock of vacant space, vacancy reaches an 11-year-low level, supporting stronger-than-average rent growth," the report said.
Retail vacancy in the market is now 3.5%, with only 320K SF of retail space slated for completion this year, compared with 651K SF in 2017.
Recently NKF Capital Markets represented Kimco Realty in the sale of Broadway Plaza, a 356K SF community retail center in Chula Vista.
"Broadway Plaza garnered more than the usual investor attention — more than a dozen strong offers — since it presented a rare opportunity to own an institutional-quality center with high-performing, longtime tenants Costco and Walmart," Ippolito said.
Built in 1984 with the addition of the Walmart building in 2005, Broadway Plaza is on just over 32 acres at 1144 Broadway Ave. at the intersection of Broadway Avenue and Naples Street, just two blocks east of Interstate 5.
The property is fully occupied. Along with Walmart and Costco, tenants include Panda Express, Verizon, Subway, Chase Bank, Petco and GameStop.
Besides Ippolito, NKF Capital Markets Vice Chairman Pete Bethea and Senior Managing Director Glenn Rudy worked on the deal. The buyer, Protea Properties, represented itself.
Retail tenants are also itching to be in strong San Diego retail locations, despite the reported national malaise in the retail sector. In separate deals, Shea Properties has inked leases with the first round of retailers at The Square at Bressi Ranch, an 87K SF neighborhood center at Palomar and El Fuerte in Carlsbad.
The retailers expanding into the property include CVS and BevMo, which sells alcoholic and non-alcoholic beverages, as well as a yet-to-be named local grocery store.
“Our main goal for The Square, like that at all of our neighborhood centers, is to find the right mix of tenants for the community," Shea Properties Senior Vice President of Retail Leasing Kiril McKee said.
Restaurants have also come in force to The Square at Bressi Ranch. They include Mendocino Farms, a fast-casual concept serving sandwiches and salads from a seasonally rotating menu, Panini Kabob Grill, which offers a Mediterranean menu, Richard Walker’s Pancake House, and Casero, a fast-casual Mexican concept.
More unusual retailers new to the property include F45, which offers 45-minute high-intensity circuit training workout classes, and FST Shafts, a showroom for precision-manufactured, high-performance custom golf shafts, with golf simulators and fitting experts.