Retail Continues to Shift As California Reopens 5.01.21
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May 2021 Number 138 ® Retail Continues to Shift as California Reopens CC RETAIL CONTINUES TO SHIFT AS CALIFORNIA REOPENS For some shopping center landlords, new concepts and renovations hold the key to future success. For others, bringing in more of what customers like is the answer. In either case, oftentimes lease negotiations are as creative as the retail transformations. By Nellie Day he past year has brought about challenges, closures and, most Tof all, change to the state’s brick and mortar landscape. Now, as the world begins to move past the pan- demic, shopping center owners must assess where the damage — and op- portunities — lie. First, the bad news. COVID-19 pre- cautions accelerated the downfall of many retailers and stores that were struggling before the pandemic. It also sped up the adoption of online shop- ping as many California consumers were left with little choice in a restric- tion heavy state. The result is vacant storefronts, ranging from grotesque- ly large department store spaces to restaurants that just couldn’t survive without diners. Tawa Supermarket is opening its new hybrid concept for 99 Ranch Market at Westfi eld In January, Coresight predicted Oakridge Mall in San Jose in late summer. This will be 99 Ranch Market’s fi rst new 10,000 U.S. stores could close this year, concept store to open in California and its fi rst site inside a mall. a 14 percent increase from 2020 clo- sures. Retailers that are able to hang GREETING A NEW CONSUMER the recession portends less individual on a bit longer should hopefully see Though California’s broad reopen- consumption,” the survey explains. brighter days as California loosens its ing is good news, shopping center “To be sure, some activities will be restrictions. Gov. Newsom has said he owners and retailers undoubtedly coming back, particularly personal plans to “fully reopen” California on have questions about what — and services and experiential retail.” June 15 if COVID trends hold steady. who — awaits the new retail environ- Taiwanese American grocer 99 “There is a subdued but growing ment. After all, they have vacancies to Ranch Market is one retailer trying to optimism that most retail formats in fi ll and, in many ways, a new consum- cater to the new consumer by provid- good locations will come back nicely er to welcome back — an oxymoron in ing an experiential atmosphere. The due to the pent up demand in the mar- and of itself. Buena Park-based chain created a hy- ketplace,” says Jim Terrell, principal The Allen Matkins/UCLA Ander- brid concept that is part grocery store at B. Riley Real Estate, an affi liate of son Forecast Commercial Real Estate and part dining destination, with en- Los Angeles based B. Riley Financial. Survey for winter 2021 notes that re- hanced in store and takeout options, “That said, retail continues to endure tailers are not only dealing with a new interior designs and convenient margin compression and permanent shopper who has gotten used to the services like curbside pickup. This shopping shifts to the internet. The internet, but one who has re-evaluat- new concept will open at Westfi eld U.S. is still overstored per capita, and ed their household income over the Oakridge Mall in San Jose in late sum- we expect to continue to see retail past 15 months. mer. space coming back to market, particu- “Increases in the savings rate on “One of the challenges for grocers larly in the department store segment.” the part of households in response to is to know how the store can offer an 6 California Centers Magazine | May 2021 CC experience that enriches customers’ “We will continue…to try to gain shopping experiences,” says Jill Lin, prime locations in cities and suburbs, marketing and creative manager for ample space for parking that could Tawa Supermarket, which owns 99 boost ecommerce development and Ranch Market. “If we can adopt an in- deliver a great experience to custom- novative concept to the business that ers,” she continues. “Being near syn- makes shopping more of an experi- ergistic retailers is always an advan- ence, why not?” tage as you can join forces to drive The Oakridge location will be 99 traffic and sales. We believe the estab- Ranch Market’s first new concept lished foot traffic and synergies from store to open in California and its first surrounding stores, the movie theater site inside a mall. The new concept (Century 20 Oakridge and XD) and will be situated in the mall’s north- restaurants in Westfield Oakridge will west corridor, which has undergone a be beneficial for our business.” reinvention as of late. Colin Shaughnessy, executive vice A former Sears space is now occu- president of U.S. leasing for URW, pied by Living Spaces, while a Sears which owns Westfield Oakridge, ex- Auto Center has new life as a Sleep pects to see this type of reinvention URW is bringing non-traditional tenants Number. 99 Ranch Market will occu- continue as shopping center owners like fertility and family building clinic py a space between Living Spaces and look to lure customers back to the KindBody to Westfield Century City as Macy’s that previously served as in stores. the shopping center owner looks to cater line retail for mall tenants that were “We are seeing an abundance of to consumers’ daily needs. relocated to accommodate the new innovative uses from ghost kitchens, store. dynamic food halls, street food con- cid, an electric car showroom, at West- Though Lin notes the hybrid con- cepts to fresh food marketplaces,” field Valley Fair in Santa Clara, as well cept won’t be integrated into existing he notes. “Our customers crave new as fertility and family building clinic stores due to limited space, the grocer and seamless experiences that cater to KindBody and co-working facility is looking to expand, diversify and their daily needs.” BumoWork at Westfield Century City. target prime locations, which may in- With that in mind, URW is bringing clude shopping centers, if they offer a number of new and non traditional Adding More Of What Works the right mix of tenants. tenants to its centers. This includes Lu- While diversification is always inte- gral to retail, Ivan Gold, of counsel at Allen Matkins in San Francisco, adds that a few well known categories and brands are still on the hunt for vacant spaces. “Big box discount retailers like TJ Maxx, HomeGoods, Ross and Burl- ington, and dollar stores like Dollar Tree, Dollar General and Family Dol- lar, will continue to open new stores,” he says. These expansions make sense, as they accommodate the treasure hunt- er and bargain consumers that have become cost conscious since the pan- demic. John Shaefer, executive vice president of JLL in San Rafael, has seen these expansions as well, along with a few surprises. “One category I didn’t expect to see The new 99 Ranch Market concept will be part grocery store and part dining destination, with enhanced in-store and takeout options, new interior designs and expand are fitness users based on cur- convenient services like curbside pickup. rent occupancy restrictions,” he says. “Crunch, 24 Hour Fitness, LA Fitness 8 California Centers Magazine | May 2021 CC and independent fitness operators have all been on the hunt over the past few months.” Crunch opened its newest location, a 37,000 square foot facility on the corner of Capitol Avenue and McKee Road in San Jose in March. Other fran- chises, including OrangeTheory Fit- ness and Club Pilates, have remained active, opening new U.S. locations throughout the pandemic. “Retailers like grocers, fitness and big box are out there, and they want to be in these shopping centers,” says Stephen Logan, vice president of de- velopment for Merlone Geier in San Diego. “What landlords have to do is put together a place that has a long fu- Lucid has opened an electric car showroom at Westfield Valley Fair in Santa Clara as ture. Shopping centers need to be an URW reinvents its shopping centers through a mix of traditional and non-traditional area for the community.” retailers that create new and seamless experiences for customers. Playing the long game often in- volves a little reimagination. For Mer- seen that exterior access is huge,” Lo- outlet — and was slated to become lone Geier’s Northgate Mall in San gan says. “Not only because it’s what a Costco — until a community sur- Rafael, this meant converting an in- retailers want, but having a space vey revealed residents favored larger door mall into a mixed-use, open air where you have to enter from the inte- changes to the shopping center, which shopping experience. Phase I of the rior of a mall is frowned upon.” included a housing aspect. transformation includes removing Merlone Geier also plans to reno- “When COVID the 250,000 square foot mall’s interior vate and expand the current Centu- hit, we realized we roof to give each retailer exterior ac- ry movie theater to include an Imax had to look at the cess. The rest of the interior mall will theater, add more retail, restaurant mall, our capital be converted to outdoor facing retail and outdoor spaces and create 896 situation and our with a couple of larger boxes. apartment units where a Sears build- revitalization plans “As we’ve watched everything open ing currently stands. The vacant space differently,” Logan up throughout the pandemic, we’ve had been partially occupied by an RH explains. “We de- cided adding hous- ing and updating Stephen Logan the retail was a Vice President of great way to move Development forward on a long Merlone Geier term basis.” The first phase of redevelopment is scheduled to get un- derway in 2024.