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Friday, Oct 7, 2022

Retail Developer Paragon Bets on Grocery-Anchored Centers

Despite Covid-19, Paragon Commercial Group is still betting big on retail developments. 

A site that was recently redeveloped by the El Segundo-based retail developer is now home to the first Amazon Fresh grocery store.
Previously the property, at the Warner Center in Woodland Hills, had been anchored by a Toys R Us store. 

Jim Dillavou, co-founder and principal at Paragon, said the company saw an opportunity in continuing on its current path, developing and redeveloping retail centers that are anchored by grocery stores and focused on daily needs trips.

“We think these market conditions favor our business model,” Dillavou said.
When Paragon acquired the Woodland Hills site in 2013, it was filled with older retailers. 

Dillavou said the property’s location near two Westfield malls and the lack of a grocery store in the area made it a great play for the company.

He added that he knew Toys R Us “wasn’t long for the retail world,” and that realization opened up possibilities.

“We bought it with a very specific building plan in mind to turn it into a grocery-
anchored center long term,” he said.

Being able to add a turn signal that allowed people to make a left-hand turn into the center was important as well, Dillavou said.

Paragon sold some of the land to a developer who is almost finished building a multifamily project next door.

Dillavou said Amazon.com Inc. got in touch with Paragon about opening in the center.

He said Paragon is not under contract for additional Amazon Fresh locations but would gladly work with the company again.

And despite the mantra that retail is dying, Dillavou said the company is still busy.

“We’re busier now than we have been since we started the company in 2009,” he said. “There’s a pretty simple reason for that. Retail is undergoing an evolution.”

The Covid-19 pandemic, he said, is expediting trends that were already starting to take place.

“Retail is more challenged, but we don’t get involved in malls, lifestyle centers, power centers. We have a niche we focus on and try to be centered on, and that niche has been the bright side in the retail world,” Dillavou said.

In addition to the Woodland Hills project, Paragon is completing a development in Burbank that will be anchored by an Aldi grocery store. It’s also working on a small-format Target in Westchester at a former Office Depot location. And the company is working to acquire three additional centers with redevelopment plans.

Dillavou added that Covid-19 could benefit some high-quality, daily needs tenants.
“This friction is creating vacancy and availability and opportunity” for them to expand, he said.

Still, Dillavou said the Covid-19 pandemic has affected how Paragon evaluates opportunities.

“Every time something happens, we add additional evaluation criteria,” he said. “The pandemic was obviously something that no one saw coming. … We now have a lot of data on that and know which retailers succeeded and why they succeeded.”

Paragon, which was born during the Great Recession, is focused on California but is also developing properties in the greater Seattle and Portland markets.

Dillavou said many cities have moved quickly to respond to retailers’ needs, issuing permits faster and allowing for outdoor dining. Dillavou said he hopes this continues as things move forward.

“We all know that we can do this much quicker and we can adapt,” he said. “That has set a really neat new baseline going forward.”

For the rest of the year, Dillavou said, Paragon will start construction on four or five grocery-anchored centers.

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans covers real estate for the Los Angeles Business Journal. A USC grad, Madans has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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