2014 Industry Outlook: Brick-and-Mortar’s ‘New Look’ To Carry into New Year


Orangethorpe-QSRs_2The commercial real estate industry regained its footing in 2013 as evident by the 175+ transactions completed by Coreland’s Brokerage team. But deals in this ever-evolving industry have a dramatic new look. Over 87% of Coreland’s 2013 deals fell into the service, food and healthcare categories, making it very clear that commercial real estate has become a destination-focused and service-oriented environment.

Should we expect more of the same in 2014? Following are our some of our top industry observations:

1.       SECONDARY MARKETS MAKE A COMEBACK: “2013 was the end of a two-year transition from defensive to more opportunistic investment strategies. With core market value gains solidified expect investors to return to looking outward at secondary markets and assets. Leasing interest will follow a similar pattern.” –Steven Hogberg, Senior Vice President of Brokerage

2.       SPECIALTY IS THE NAME OF THE GAME: “Expect to see continued growth from specialty grocers, while ‘traditional’ grocers lose market share. Whether organic, ethnic, discount, warehouse or stores featuring wine bars or restaurants, a specialty grocer’s strategic approach also helps attract co-tenants because they know the customer they’re going to get.” –Matt Hammond, Director of Retail Brokerage

3.       LOOK BEYOND THE INTERNET: “We are starting to see more traditional retailers explore new locations, but the focus is still on leasing space to services or products you can’t get on the Internet. Look for centers to focus leasing efforts on developing synergies between service-oriented retailers and health and fitness tenants.” –Ben Terry, Senior Associate, Retail Brokerage

4.       URBAN, NON-SATURATED MARKETS ARE KEY: Popular tenants, such as Waba Grill, Tutti Frutti and G-Burger, will continue to focus on urban locations and young demographics. In addition, younger ethnic consumers are moving away from traditional community areas and spreading out into new Southern California neighborhoods, so look for ethnic retailers to follow.” –Joseph Kim, Senior Associate Retail Brokerage

5.       OFFICE TENANTS POSITIONING FOR GROWTH: “The office market will continue on a positive trend this year with vacancies tightening, rates bumping up and concessions lessening, all directly tied to improving job growth. Expect notable improvement in vacancy figures and an uptick in asking rental rates.” –Timothy Muller, Associate, Office Brokerage

6.       PLAN FOR CONTINUED DOWNSIZING: “Downsizing will continue. While Orange County big box vacancies are sub 5%, shifts in the market will force retail landlords to subdivide space into mid-size box space or small, creative uses.” –John Heard, Associate, Retail Brokerage