LOS ANGELES—Retail development is expected to pick up over the next two years, according to Chris Wilson, chairman, and Scott Burns, president, of the Wilson Retail Group, who is one of the exhibitors at the upcoming ICSC Western Division Conference in San Diego October 1-2. There have been several shopping centers to come online in the Los Angeles area in recent months, but Wilson and Burns explain that most of these centers were built on legacy land, not market-rate land; however, it is a good indicator that retail development is picking up.

“A lot of the ground-up shopping centers that we're seeing were built on legacy land, either developed by the same people that owned that land or recovered during the recession at an adjusted land-value basis,” Burns tells GlobeSt.com. “In 2012 and 2013, we we're seeing developments on legacy land with no land value attributable to the land by the legacy builder. Now, we are seeing some land value attributable to it and some development on new land, but not much. What that shows you in that the rents that tenants are paying subject to the anchors have certainly come up from the discount rents that were being written in 2010-2012, but are not supportive of market land value yet. I think in 2015 and 2016 there will be a great deal more of new development on market-value land.”

This is a great sign for retailers of all sizes. Retail vacancy rates in Southern California have decreased substantially over the past five years, and Wilson and Burns estimate that we are now at about 3% or 4% vacancies. While that is good news, it has also left a lot of retailers scrambling to find space. For retailers with more mature portfolios, Burns says, “They know what they want; they have good coverage generally; and they have a laser-like focus on their gaps in their trade area. The sting of the retail market is that vacancy rates have come down so significantly that they are having to get more creative at finding sites.” On the other hand, newer retailers looking to penetrate the market are finding a few more opportunities. “Those retailers are looking for higher profile sites and are trying to take advantage of some of the larger vacancies that are resulting from the changes that are happening in the grocery sector specifically, but also in the downsize of office tenants, like Office Depot and Staples,” Burns notes.

According to Wilson, national retailers in high-density urban markets are looking at mixed-use facilities. “I would say any national retailer of 25,000 square feet or less is likely considering mixed-use projects to penetrate those urban markets,” he says, adding that it isn't only grocery and service driven retailers seeking mixed-use opportunities, but all retail types.

Although ecommerce is typically touted as retail's biggest obstacle, Wilson had an interesting take on its benefits. “Ecommerce is affecting our business and it will continue to affect our business, but in many ways it is a positive thing,” he tells GlobeSt.com. “It creates opportunities for other brick-and-mortar retailers who have not had the opportunity to break into this market.” He explains that there are some retailers that are really thriving in the brick-and-mortar environment, noting experiential retailers, like restaurants, but also dollar stores and pet stores, which are doing very well.