CARLSBAD, CA—Retail landlords should focus on food, entertainment and service tenants in order to be successful in 2016, locally based Capstone Advisors' president Alex Zikakis tells GlobeSt.com. The firm recently purchased the Island @ Carlsbad, a 39,992-square-foot retail center here, from Berdan Holdings LLC for $11.8 million. We spoke exclusively with Zikakis about the purchase, the Carlsbad retail market and his expectations for the retail sector next year.

GlobeSt.com: How is the acquisition of the Island @ Carlsbad representative of the types of transactions your firm is doing?

Zikakis: We've really been focused for the last couple of years on acquiring properties in the middle market: $8 million to $20 million in size. We're looking for well-located properties with strong demographics that have the opportunity to be repositioned and optimized. Island is a great example—it's the only retail center near a particular business park, and it has a food-court component. It sold to its previous owner at a high number at the peak of the market and had a difficult time during the recession. It had been owned by a lender for some time and ultimately was sold to someone who didn't focus on retail. We thought this was a great opportunity to buy since it was the only game in town for the nearby business park. It's well located, has a tremendous number of highly educated people who work nearby and stream into it every day for lunch. It has a great layout.

We're going to go in and invest significantly in the repositioning of this center. We're reconfiguring the seating and common area for the food court to make it much more attractive and contemporary. There will be a variety of seating options including community tables, unique seating pods within the overall courtyard area, and it will give people an opportunity to pick out a restaurant and the type of seating environment they want to be in as well. This makes it more fun, creating a strong sense of place where people feel good about hanging out, getting coffee or a smoothie, using the Wi-Fi and enjoying the overall ambiance of the center.

We like these mid-sized assets where we can provide a big push in improving the experience or quality of the center that the traditional buyer may not be able to do. Our target has been to stay with assets that are under the radar for big institutional buyers that normally wouldn't take on something as complicated as this type of repositioning.

GlobeSt.com: What do you like about the Carlsbad retail market?

Zikakis: We own our own office building in Carlsbad, and we are about a half mile from this center. there are great employers in the area including Thermo Fisher, Genoptix, TaylorMade, Callaway, Isis Pharmaceuticals [now Ionis Pharmaceuticals] and us. The employees in the area are highly educated and highly compensated. We think we can to do a better job of curating in really good tenants to this center that are going to provide a better dining experience, as well as improve the physical nature of the center.

GlobeSt.com: What are your expectations for the San Diego retail market in general in 2016?

Zikakis: 2016 is going to be a very good year for San Diego in general. We think that there's going to be continued growth in leasing across the board. There's a lot of leasing that has taken place across the board in this recovery; the big nationals gobbled up space as we came into the recovery. Also, food and restaurant uses have expanded quite strongly in the last year or two. We're starting to see now the emergence of mom-and pop or one-off tenants opening their first stores and even a number of smaller tenants comfortable enough with the economy to open a second or third store. There are independent and unique concepts coming into the marketplace. We are looking for tenants that have a unique and interesting offering, especially when more sales are going to the Internet. Landlords need to continue to focus their tenancy on food, entertainment or a service or on big anchors that draw in consumers. In many of the coastal markets, rental rates have exceeded pre-recession levels. Rents are so high in primary markets we're starting to see leasing finally push back into secondary markets and even tertiary markets as well. We're also going to see more development projects come out of the ground.

GlobeSt.com: What else should our readers know about your firm?

Zikakis: We're definitely focused on acquiring a number of assets in the coming year that can go through repositioning.