How the Grocery Landscape Has Changed

Jennings: The outcome of the grocery wars is still uncertain.

SAN DIEGOAlong with consolidations and specialty grocery stores, consumer expectations have changed dramatically in the last decade, Cushman & Wakefields John Jennings and Aaron Hill tell GlobeSt.com exclusively. We spoke with Hill, director of retail services, and Jennings, senior director of retail services, about some of the retail leasing trends they are noticing in the San Diego market.

GlobeSt.com: What trends are you noticing among leasing transactions in San Diego with regard to size and location?

Jennings: Were excited that mom-and-pop-shop leasing is coming back. Last year, we saw core centers come back to occupancy, and were seeing rent growth in core centers for the first time. The mom-and-pop recovery is allowing us to move the needle in B centers that have been sitting in the 7% to 8% vacancy zone. We expect those centers will move up to 4% or 5% vacancy by the end of the year.

As for location, we have core A+ centers in every trade area. Tenants who are expanding are only willing to consider the best location in a marketplace.

GlobeSt.com: What types of tenants are becoming more prevalent in the market?

Hill: The bulk of activity in the market is consistent with the last couple of years. There are a tone of restaurantsneat concepts that are expanding into San Diegoand there has been a lot of activity in the restaurant category in the last couple of years. There was the burger craze, and how the pizza craze and healthy concept Farm to Fork and Urban Plates; Lemonade, which is from L.A.; and Native Foods Caf. There are also a lot of fitness tenants as wellboth boutique fitness and larger playersthat have absorbed a lot of space in shopping centers. Tenants like Orangetheory and CorePower Yoga have expanded aggressively in San Diego over the last couple of years.

GlobeSt.com: How are retailers and retail property owners here dealing with e-commerce?

Jennings: Its hard to put a needle on that. Brick-and-mortar retailers and Internet retailers are demonstrating that they can work together now. The Internet is not going to eliminate retail stores; rather, retailers are using the Internet to advertise their product and allow another avenue for retail sales. Its a supporting element to their business.

A lot of people think that the Internet accounts for 30% to 40% of total retail sales, but that is inaccurate. Its actually in the 6% range, but people cant believe it because they think its so much more. Retailers today have a much more positive point of view about the Internet; they see that it allows them to increase their sales element. This may not work for electronics and bookseven Stapleswhen you have a product that can be bought at Costco and also on the Internet via Amazon. Certain categories will be eliminated, but from a macro perspective, the Internet will be helpful for retailers to reinvent themselves and meet the demands of the consumer, which are harder to meet every year.

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How the Grocery Landscape Has Changed