MacLellan: It really depends on the market and its demographics. Many times an ethnic supermarket will come in and fill a demand that was not being met. We are also seeing local specialty grocers come into these spaces that are focused on a high level of service and quality of product. Consumers are looking to provide themselves and their families with natural and organic foods they feel good about even at a higher price point. On the other side of that, discount options are also a strong replacement for vacancy. Smart and Final, dollar stores such as 99 Cent Only, and Walmart Neighborhood Markets are growing in number and competing for space. Finally, for more regional-oriented centers, we have seen soft goods, home goods and other necessity-oriented retailers backfilling these grocery spaces. In certain circumstances where parking is abundant, we are seeing the larger fitness operators, and entertainment-oriented users.

GlobeSt.com: Over the past few months you have sold several properties with vacant anchor space. How do you approach your marketing program?

MacLellan: With the market being as strong as it is, there is a large buyer pool ranging from private family offices to institutional funds including REITs, seeking value-add opportunities. But, these investors aren't going to buy without a sound strategy for how to add value over their holding period. In order to match the seller's pricing needs with the investor's required yield thresholds, we need to provide a strategic vision in a creative, yet data-based way. For example, we often work with architect and construction consultants to visually demonstrate potential redevelopment opportunities inherent in high vacancy centers, and enlist local leasing teams who can provide street-level tenant opportunities and leasing efforts. This and other upfront work is instrumental in orchestrating a successful closing.

GlobeSt.com: Can you provide an example?

MacLellan: Faris Lee recently completed the $29.35 million sale of Rosedale Village, a 222,000-square-foot community center in Bakersfield, CA. It had two dark anchors – Save Mart and Rite Aid. Rite Aid was subleasing to Dollar Tree. Through a high-level advisory approach, our goal was to showcase how to transform a B center with an A location into a first class center matching its excellent location. It is one of only two community centers that serves the northwest trade area of Bakersfield. While Bakersfield is not perceived as a core market, the city actually benefits from a strong oil and energy industry base driving jobs and investment comparable to cities like Austin and Houston. Educating potential investors about the market and the low big-box retail vacancy of just two percent, and employing a strong leasing team and architectural concepts, as well as other key strategies, provided an end result of attracting 12 highly qualified offers. Ultimately, by effectively demonstrating to potential investors how Rosedale Village presented a diamond in the rough value-add opportunity within the Southern California basin, we successfully executed a successful sale transaction.

Visit Faris Lee Investments at ICSC RECON in Las Vegas at Booth C150M.