Several of our clients are thinking outside of the box by redeveloping properties into higher density projects or obtaining a new mix of tenants that can unlock hidden value. This is why it's becoming more and more important to understand the specific needs in a market. In many urban infill locations in the greater Los Angeles area, we have seen a significant push for mixed-use and medical uses. Additionally, several traditional retail sites have been redeveloped into vertical, mixed-use properties. This allows buyers to pencil a higher price per foot on the land.

In addition, as Millennials continue to gravitate towards these denser urban areas in order to be closer to work and mass transit, retailers are close to follow. They are also willing to pay higher rents, which results in an increase in property value. Recently, we've seen this occurring along new metro stations, specifically in downtown Los Angeles and surrounding areas like Silverlake, as these areas are seeing a growing number of people living and working there. While there was a significant decrease in ground-up development during the recession, we have seen retail and mixed-use development return full swing in these areas of interest. Most of the active retailers building today include restaurants, select grocers and banks, which also lead to an uptake in land sales.

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GlobeSt.com: Why are we seeing an increasing number of older retail and restaurants specifically being redeveloped into other mixed-use and retail uses?

The CBRE Team: Restaurants in Los Angeles have one of the highest parking requirements out of any retail, meaning you'll often find extremely large parking lots and smaller buildings on these properties. In the more urban Los Angeles locations, this excess land makes these properties a much more attractive option to consider as a mixed-use or vertical development if the zoning allows for it. Thus, unless it's a thriving restaurant concept, more and more developers are seeing the option to purchase these locations as an opportunity to redevelop the site into a more profitable building.

For instance, we recently sold a Sizzler restaurant in a prime location in Eagle Rock, which is becoming a more and more desirable residential and retail market. The restaurant was not operating with particularly high sales, but fortunately, it was located on a sizeable lot. The ultimate buyer will likely develop apartments on the site. The same can be said for several other properties we have recently sold, including the Denny's and Norms restaurants located in Santa Monica. Both of these properties were freestanding diners offering minimal rental return on the property value, and they ultimately sold to developers who plan to build mixed-use properties. We currently have another Norms property for sale in West Los Angeles on Pico Boulevard, and we believe the ultimate buyer will also redevelop it into some kind of mixed-use property.

GlobeSt.com: What are your predictions for 2015 retail redevelopment?

The CBRE Team: The market will continue to stay strong as interest rates stay low. While we don't anticipate a tremendous amount of rental growth, except in core high-income areas, values should remain stable due to the lack of supply and the insurmountable liquidity in the market. Passive retail investors still have a preference for credit tenants on long-term leases, and larger parcels in relatively good locations that lay close to urban centers or mass transit will continue to be purchased at premiums and redeveloped into mixed-use properties with vertical components.