With the retrenching of homebuilding companies, which are shelving projects in an attempt to weather the recession, a related industry is taking a big hit, too.
Retailer developers those companies responsible for the power centers that often accompany new subdivisions are finding it a tough go these days.
Take the Plaza at Golden Valley in Santa Clarita, developed by Terramar Retail Centers of Carlsbad.
The shopping center was originally supposed to open in summer 2007, but even when it began its phased opening over a year late in the fall, it did so with notable vacancies. Three tenants pulled out: Shoe Pavilion Inc. and Circuit City Stores Inc., both of which have gone out of business, and Lane Bryant, a unit of beleaguered Charming Shoppes Inc.
The three stores would have occupied a total of about 45,000 square feet at the 617,000-square-foot center in eastern Santa Clarita, right off the Antelope Valley (14) Freeway at Golden Valley Road.
“We of course don’t want to see vacant properties and so of course have been watching it very closely,” said Jason Crawford, Santa Clarita’s economic development manager. “It was definitely not pleasant to see major businesses like Circuit City in this situation.”
That’s not to say the center is vacant. Three of four big boxes are now open at the center with tenants Lowe’s, Kohl’s and Bed Bath & Beyond as well as a small Wells Fargo branch. However, it also has more than 25 empty storefronts. The developer would not disclose the vacancy rate but named seven retailers that have been signed, including a Target to fill the last big box.
The shopping center’s situation is nothing unusual. International Council of Shopping Centers projected late last year that about 148,000 retail stores would be shuttered by the end of 2008, and it expects an additional 73,000 to close in the first six months of this year.
What’s more, there was an 8.4 percent vacancy rate in the third quarter for strip centers and open-air shopping destinations in the top 76 national markets, the highest rate in 15 years, according to a Wall Street Journal story that cited data from commercial real estate research company Reis Inc.
“It would make sense that retail would slow down because retail usually follows rooftops,” said Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate.
Residential fallout
The trouble at Plaza at Golden Valley at least partly stems from delays on two nearby residential project that are supposed to support the retail center.
L.A.-based builder Pardee Homes’ plan to build more than 2,000 homes adjacent to the center has been slowed by the deteriorated conditions of the housing market, said Jim Bizzelle, Pardee vice president of community development for Los Angeles and Ventura counties.
The company has a 498-home project called Golden Valley Ranch, which would be adjacent to the center, and a 1,600-home development called Fair Oaks Ranch, which would be built just east of the Golden Valley Ranch project. While initial infrastructure work is nearly complete for both projects, there is no timeline for the construction of homes.
Alexander Liftis, senior vice president of development for Terramar, said his company planned on opening its project around the same time as the housing development.
“It is clearly impacting our leasing progress because tenants are looking at those homes as their primary customer base,” he said. “But again, the project doesn’t solely rely on those homes; it does rely on a wider area that has existing houses.”
The center, which sits on 50 acres, was desolate on a recent afternoon, with a sparsely occupied central parking lot dotted with freshly planted young trees.
Liftis maintained that once the new stores open, the center will start doing better. The smaller tenants include Panera Bread, Chili’s Grill & Bar, Chipotle, Lockheed Federal Credit Union, Bank of Santa Clarita and T-Mobile store.
“With that lineup we feel we can absorb some of the economic slowdown and come out with a project that serves the community,” Liftis said. “We are trying to build on that momentum by leasing as much space as we can.”
Staff reporter Richard Clough contributed to this article.
