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Service Businesses Continue to Grow at IE Shopping Centers

DayCreekMarketplace

By Neil Nisperos, Inland Valley Daily Bulletin

As shoppers gravitate toward purchasing more goods online, Inland Empire shopping centers — particularly the older ones — are becoming home to more service-oriented businesses and fewer retailers, according to industry watchers.

With the Inland Empire economy doing well, commercial real estate developers are building new shopping centers throughout the region, and brokers are filling that space at a more rapid clip than recent years.

The vacancy rate in newer shopping center properties is about 5.4 percent, while older properties have an 8.8 percent vacancy rate, according to Brad Umansky, president of Progressive Real Estate Partners, a commercial broker in the region.

“There are parts of the market where absorption (of retail space) is strong … in the high-quality anchored centers that were constructed between 2000 and the present,” Umansky said in an interview Thursday.

Overall, Inland Empire retail vacancy rate is down to 8.2 percent from a high of 9.5 percent in 2012, according to a blog Umansky writes.

Though not as low as 2007’s vacancy rate of 5.4 percent, the Inland Empire saw about 500,000 square feet of net absorption by retailers looking for new space in 2015, Umansky said.

About 870,000 square feet of newly constructed space was delivered throughout the region in 2015, Umanksy wrote in his blog.

Older shopping centers remain challenged as retailers selling goods are increasingly attracted to newer centers, and shoppers are increasingly attracted to online retailers, experts said.

“Anything that doesn’t have an experiential quality to it — to try something on — people are just choosing to do online,” said Jay Prag, professor of economics and finance at the Drucker School of Management at Claremont Graduate University.

Among those building new shopping centers in the Inland Empire is regional real estate expert and developer Randall Lewis, principal of the Lewis Group of Companies, who agreed with Umansky’s assessment.

“There’s probably too much space in the retail sector right now, and what’s happening is there’s a flight to quality where a lot of tenants are choosing to go to the best locations,” Lewis said. “What’s happening is the Internet is having an impact on retail. … It’s significant.

“Those things that are very easy to buy on the Internet, people are choosing, so it’s impacting electronics. It’s impacting books. And it’s impacting to some extent soft goods, like clothes.”

As retailers flee older centers, service-oriented businesses are replacing them, experts said. The number of restaurants and service businesses — such as salons and medical and law offices and fitness centers — at shopping centers is growing, according to the experts.

“The consumer is going to big box and online shopping,” Umansky said Thursday. “It’s causing the retail sector to have to adapt. At some point, we may not call them retail centers. We may just call them service centers.”