For Retail Tenants, It’s a Landlords’ Market

A good year for landlords, a bad year for tenants. That pretty much sums up the outlook for Orange County’s retail real estate market in the coming year.

“Rents are incredibly high, and vacancy is very low,” said Ian Brown, senior marketing consultant at Grubb & Ellis’ Newport Beach office. He said retailers can expect to pay an eye-popping $4 a square foot for small spaces at top-drawer projects in South County such as Irvine Spectrum Center.

The specific numbers, as compiled by Grubb & Ellis: asking lease rates will jump to $1.69 a square foot per month at neighborhood centers with big anchors, from $1.54 last year. The vacancy rate will fall to 4.5% from 4.8% in ‘97, despite a 33% increase in new retail space to 2 million square feet. That’s the equivalent of adding a mall the size of South Coast Plaza.

Orange County’s growing economy, strong job base and high household incomes bode well for retailers and, consequently, their landlords, said Chris McDougall, the firms’ research services manager. “There will be very few bargains to be had,” he said.

Most of the new space coming on line this year is in four centers:

* CityMills, a $165-million, 800,000-square-foot center anchored by AMC Theaters and a Saks Fifth Avenue outlet store, in Orange.

* Aliso Viejo Town Center, a $75-million, 360,000-square-foot center anchored by Edwards Theatres and Barnes & Noble, in Aliso Viejo.

* Alhambra, the $45-million, 250,000-square-foot second phase of the Irvine Spectrum Center, anchored by Dave & Busters and Cheesecake Grand Cuisine, in Irvine.

* Kaleidoscope, a $55-million, 215,000-square-foot center anchored by Edwards Theatres and Bristol Farms, in Mission Viejo.

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Russ Stanton covers retail businesses and restaurants for The Times. He can be reached at (714) 966-5609 and at russ.stanton@latimes.com.