The more paychecks that find their ways to Inland Southern Californians' pockets, the more would-be retailers will be willing to put their names on a store lease.
Both of these things appear to be happening in San Bernardino and Riverside counties, but it's still a slow process all around. The vacancy rate for retail properties in the area declined to 11.3 percent in the third quarter from 11.7 percent in the second quarter, according to a recent report by real estate firm Marcus & Millichap.
The report singled out several of the more notable additions to the job market in the Inland area in the last few months, including the 700 new jobs at Amazon.com's San Bernardino's fulfillment center and SolarMax's soon-to-open distribution center and office hub in Riverside, which could ultimately employ 1,000 people. All told, the state has reported that about 17,000 more Inland residents were on payrolls in September than the same month in 2011.
That means more money is circulating and a few retailers, from some of the biggest national chains to neighborhood moms and pops, are coming out of the woodwork.
It is, for most, about the cost of a lease. Rents are continuing to drop, albeit slightly, in the Inland area, and that's still a point of contention for the owner of a strip mall who wants to maximize the value of a property.
"I think there's tenant interest," said Skip Crane, senior vice president in the Ontario office of Newmark Grubb Knight Frank. "It's just a matter of trying to bring the two sides together, when the owner thinks he should get a 2007 (lease) rate as compared to the going rate now."
Activity has been spotted on several fronts. Earlier this week ground was broken on a Wal-Mart Super Center in Ontario, and a 346,000-square foot shopping center, The Desert Plazas, is under construction in Victorville. The Victorville project represented almost three-quarters of all the new retail construction that was in progress when the third quarter ended.
Also, Whole Foods and Nordstrom Rack recently signed leases in the Coachella Valley, in a space once occupied by a Best Buy, Marcus & Millichap reported. The desert area has the highest retail vacancy rate of any of the Inland Empire's submarkets.
The best submarket in the Inland area right now is the most populous and most central one. The vacancy rate for the Riverside-Corona-Moreno Valley area was 8.4 percent in the quarter, and landlords, on the average, lowered the rents they charged by about 35 cents per square foot, or a little more than $500 for a small restaurant in a strip mall.
That's the type of property that is making a comeback, Crane said, and some landlords are willing to negotiate deals with escape clauses.
"They're willing to let the tenant test-drive for nine months or a year, with an opt-out," he said.
There is still a long way to go, brokers say. In 2009, some 2.5 million feet of retail space, more than twice the square footage as the Galleria at Tyler, was abandoned in the Inland Empire. Major chains such as Circuit City and Gottschalks, to numerous small shops, found they could no longer make a go of it.
Even now, a fifth of all the properties sold in the third quarter were due to some sort of foreclosure-related action.
"The last few months we're moving forward with more activity, and it actually started last year," said Fred Encinas, senior vice president with NAI Properties in Ontario.
Encinas said restaurants, including some of the biggest chains, are looking at properties at strip malls if it's a good location, meaning at the end of mall with visibility to traffic or at pads close to the street.
LOCATION IS EVERYTHING
A look at the retail vacancy rates in the Inland Empire's areas:
Riverside-Corona-Moreno Valley: 8.4 percent
Victorville: 9.6 percent
Colton-Redlands-San Bernardino: 10.2 percent
Rancho Cucamonga-Chino: 11.1 percent
Palm Desert: 18.5 percent
Source: Marcus & Millichap
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