53.7 F
San Diego
Thursday, Mar 28, 2024
-Advertisement-

Gerrity Adds a Prime Retail Center to Its ‘Cart’

Investment firm Gerrity Group LLC of Solana Beach recently followed up on last year’s $30 million purchase of an Escondido shopping center, by acquiring Old Grove Marketplace in Oceanside for approximately $19.5 million.

Gerrity Managing Principal Rick Froese says the center fit a relatively rare profile in what has become a tight San Diego County retail market: a well-located, grocery-anchored property actually up for sale.

“You can be up against several bidders in some of these cases,” Froese said, adding that was the case for its purchase of the 81,000-square-foot Old Grove, with tenants including Ralphs and Lowe’s.

“It really depends on the individual market — the strength of the anchors, the location, the general economy of the neighborhood,” Froese said, of the competitive climate for properties.

Only Demand Is Building

Brokerage experts say the local retail real estate market remained among the tightest for U.S. metro areas in the first quarter, thanks to a generally improving economy and relatively little new construction under way or in the pipeline.

CoStar Group reported that San Diego County’s retail vacancy rate stood at 5.1 percent at the end of the first quarter, down from 5.6 percent a year ago.

Recently vacated big boxes aren’t staying empty for long. CoStar noted that Zion Market recently signed a lease to occupy a 94,500-square-foot site on Clairemont Mesa Boulevard in San Diego, where it will replace a Sears store that closed earlier this year.

Other retail tenants moving into large blocks of space so far this year have included Buy Baby Buy, which took 27,500 square feet in Encinitas; Ross Dress for Less, which took a 25,000-square-foot space in San Diego; and Trek Bicycle Superstore, which took 11,500 square feet in San Marcos.

Cautiously Optimistic

Gerrity Group last year purchased Felicita Town Center in Escondido, after forming a new venture with other private investors to acquire and operate centers throughout the western United States. Froese said the company now owns nine shopping centers throughout the West Coast and remains “cautiously optimistic” about the retail climate as its scouts for more buying opportunities.

It will likely have lots of competition among investors, looking to boost returns in the real estate market as other types of investments prove volatile or slow to deliver results.

“Investors are looking to take advantage of this low interest rate environment and purchase shopping centers free of existing debt to maximize leverage,” said Bruce Schiff, a broker in the San Diego office of Cassidy Turley San Diego who represented the seller of the Oceanside center, Sea Breeze Properties LLC.

In that particular transaction, he said, the buyer was willing to take on the property’s debt because of its strong performance — with a 98 percent occupancy rate, according to Froese — and positioning in its market.

John Vorsheck, regional manager in the San Diego office of brokerage firm Marcus & Millichap, said the local region in the first quarter approximately matched the shopping center transaction total for the same period a year ago. There were 15 multitenant properties with a value of at least $1 million sold between January and March.

However, the volume of deals is expected to pick up as the year proceeds. There are currently at least three local multitenant retail property deals of $1 million or more expected to close during the month of May alone.

“These transactions all had somewhere between six and 14 offers,” Vorsheck said. “The interest out there is still very high.”

Alvin Mansour, senior vice president in the local Marcus & Millichap office, said high barriers to entry, limited land availability for large retail centers and other factors are keeping new construction at low levels. One result is that existing centers with good locations and tenant mixes will continue to attract potential investors.

That will likely include pension funds, real estate investment trusts and other players in the world of private equity. With an improving economy, that also could include a revival in the use of commercial mortgage backed securities to invest in retail properties.

“You could see CMBS make a comeback in the market during the fourth quarter of this year,” Mansour said.

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-