The hardest hit are office spaces for rent. Attributed to the large commercial space available, according to a local broker’s survey, are the recession and pursuit of luxury stores.
By Olivia Damavandi / Assistant Editor
Controversy has erupted over the condition of Malibu’s commercial real estate market, sparked by the results of a survey conducted by local broker Tony Dorn that were released earlier this week.
The survey indicates a significant increase in vacant commercial space, stating overall office vacancy (including sublets) at 16 percent, and overall retail vacancies at 8 percent. In Malibu, office space vacancy has not hit a double-digit percentage since the mid 1990s, and retail vacancy for the past 10 years has not exceeded three percent, Dorn said Tuesday in a telephone interview.
Dorn has been conducting the survey for at least years and updates it twice per year.
The increased vacancies in the office sector have been caused by the recession, which has shrunk businesses and forced them to eliminate any unnecessary expenses, Dorn said. But, he added, the retail occupancy has declined due to some owners of local shopping centers pursuing luxury tenants by asking for $15 per square foot in rent, plus another $3 per square foot for common area maintenance.
“The retail sector may be stable, but the climb to an 8 percent vacancy means we’re headed in the wrong direction,” Dorn said. “The pressure on tenants in Malibu is extraordinary; sales have been going down while rents have been going up.”
Numerous residents have expressed disappointment at the ongoing exodus of local businesses-such as Mexican restaurant Casa Escobar, Pet Headquarters, the Salon at Malibu Creek, The Dume Room and Point Dume Chinese Restaurant, among others-and the continuous influx of luxury retail stores at local shopping centers.
However, some center owners have worked to retain local businesses.
Malibu Lumber Yard owners Richard Weintraub and Richard Sperber made a deal with the city, from whom they rent the mall’s property, to set aside 3,000 square feet to local businesses at a lower rent. The Country Mart has worked with John’s Garden, Bernie Safire and others to help them be able to stay at their locations by reworking space layouts for their businesses, therefore keeping the rent down.
“Most people in my industry would say luxury is dead,” Dorn said. “It’s not economical.”
Other brokers, however, say the results of Dorn’s survey do not project an accurate depiction of the Malibu’s commercial real estate market.
“It looks like there’s vacancy at Malibu Village (formerly known as Cross Creek Shopping Plaza) because what’s happening behind the scenes is we’re having lawyers negotiate grueling leases,” Jay Luchs, who handles leases for Malibu Village and Malibu Lumber Yard, said Tuesday in a telephone interview. “In January we are probably going to announce five new leases.”
After the departure of several former tenants who this year were forced to leave due to increased rent prices, the majority of Malibu Village has remained vacant. In order to attract more tenants, Missoni-the first new tenant signed after the center’s ownership changed-was given more than three months of free rent, Luchs said.
Luchs admitted that luxury tenants were sought to move into Malibu Village in 2007 at the height of the market “when rents were skyrocketing,” but said, “We don’t feel like it has to be luxury anymore, we feel it should be more mainstream and cater to a wider local and tourist clientele.”
At present in Malibu Village, luxury retail brand Missoni will replace the former Ben & Jerry’s ice cream shop, True Religion will move into the former Fast Frames space, and Grom Gelato and a brand name retail store that also sells vintage clothing will divide the space that housed Pet Headquarters.
If all goes as planned, a salad concept will occupy the former Salon at Malibu Creek and the former Pritchett-Rapf office will be replaced with another retail store Luchs said will “put smiles on people’s faces and cater to the local community.” Negotiations are also taking place for another restaurant to occupy the space that housed Casa Escobar, he said.
“Everyone seems to feel like [the commercial real estate market] can’t get worse than it was from September 2008 to September 2009,” Luchs said. “Now we’re at a place again where there are multiple offers for one space. I haven’t had that in a year. I hope and believe we’re slowly coming back.”