Tenant trade

Tenant trade

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0512_Dispatches_Retail_GraphIndeed, some nontraditional tenants, such as the Lloyd Center L.A. Fitness, do benefit the establishment as a whole by producing traffic that would not otherwise exist, says T.J. Drought of Glimcher.

When neighborhood residents come to the gym to work out, he says, “it’s just another time during the week when our shopper is going to be at the Lloyd Center.”

Though Oregon retail centers have had to adjust their leasing strategies, they have fared far better than their counterparts in other parts of the country who have filled vacancies with enterprises like indoor gardens, putting greens, dog runs, aquariums and casinos.

While the average retail vacancy rate in the U.S. peaked at 7.9% during the recession, it only reached 6.7% in Portland, 6.6% in Salem and 5.4% in Eugene, according to CoStar. (The vacancy rate in Atlanta, by contrast, peaked at 10.7%.)

Oregon suffered less in part because its cities’ urban growth boundaries prevented the type of endless, sprawling development that breeds an overabundance of shopping malls. Because of this supply constraint, retail inventory in Portland only grew by 13% over the past decade, compared to 17% nationwide. (Portland is the only Oregon market for which CoStar provides comprehensive coverage.)

“The local government and culture in Portland tends to backlash against large developments such as Super Wal-Mart and Target that the rest of the country loves,” says Carlos Ortea, a CoStar real estate economist. “It’s more of a culture of wanting to have smaller spaces, and less.”

Jesse Tron of the International Council of Shopping Centers says it’s too soon to know whether nontraditional tenants will become long-term fixtures in the shopping centers they are currently inhabiting.

“My guess is that a lot of centers would bring back the more traditional retail tenant,” he says, “but it all depends on if they see added value with nontraditional tenants in the mix.”