The new owner of The Esplanade mall in Oxnard is considering razing the building and replacing it with a number of "big box" stores, a property management executive confirmed Thursday.
"The market will dictate whether we tear it down or remodel," said Scott McPherson, vice president and partner of San Francisco-based M & H Property Management. "It can't remain as it is now."
Options include remodeling or rebuilding the mall, McPherson said in a telephone interview from his San Diego office. But, he added, it is still early in the planning process and the company has had only an initial meeting with city officials.
The news came after a real estate forecast conference at which an analyst involved in the sale of the mall said The Esplanade would most likely be torn down.
"It would be more expensive to renovate it than just to shut it down" and start over, said Reed Henkelman, vice president of CB Richard Ellis in Ventura. "They went through the normal process of trying to attract [anchor retailers] and didn't get the activity they were hoping for. Unless something materializes in the next two months, it won't be a mall anymore."
M & H specializes in remodeling neighborhood shopping centers anchored by grocery and drugstores, but also manages malls such as Westgate in San Jose, McPherson said.
The company bought the main portion of the mall at the beginning of the year from its previous owners, the Scheidt family of San Francisco. M & H is still negotiating with Sears to buy its vacant property. Robinsons-May owns the third portion of the mall, which it vacated in the fall.
"We've been really busy. We bought a dozen properties in the last three months," said Doug Lind, vice president of property management with M & H. "We buy as many as we can, and we still haven't sold any yet."
City officials said they expected the mall to be torn down, but said M & H hadn't presented any specific plans.
"It's just not suited for modern-day commercial use," Richard Maggio, Oxnard's community development director, said of the anchorless mall. "But I don't see a big box. I don't see Costco or that kind of thing."
The keen interest in the sagging Esplanade site is indicative of the need for retail space in a tight market. At CB Richard Ellis' forecast meeting, analysts pointed out that retail space is the tightest category of commercial real estate in Ventura County, with vacancy rates at 5.8% after the fourth quarter in a row of decline.
Retail space is tightest in the east county, but is up to 5.5% from 4.3% for the fourth quarter of last year.
"The total county is pretty flat," Henkelman said. "There's a lull in development. We'll be shaken to the roots in the next couple years."
In addition, at the forecast meeting, analysts said that despite higher interest rates and a potential increase in inflation, there hasn't been much slowing in the commercial real estate market and that real estate companies are seeing a strong demand for investment opportunities.
While retail space was extremely tight, industrial and office vacancy rates were largely up over the last year, a fact analysts attributed to specific bumps in the market.
Several buildings became vacant, analysts said, including Thousand Oaks' former Exxon building. This helped nudge up the countywide vacancy rate for the tight office market from 10% last year to 12.4% this year. In the east county, vacancy rates jumped from 8% to 11.3%. In the west county, the number jumped from 12.3% to 13.7%.
However, office space is snapped up as soon as it becomes available, especially in the Conejo Valley, where firms continue moving in from Silicon Valley and the San Fernando Valley, said Tom Dwyer, a senior associate with CB Richard Ellis.
Analysts further see a trend of industrial space increasingly being converted into office space.
"The east county is on fire with absorption [of vacancies]," Dwyer said.
Despite the small vacancy increase, the average industrial tenant is unable to find space, particularly in the Conejo Valley, said Doug Shaw, a vice president with CB Richard Ellis.
"We're seeing restraint by developers who don't want to duplicate [the frenzy] of the late '80s and early '90s," Shaw said, which could be followed by a market glut. "It's slow growth in the industrial market."
In the west county, industrial vacancy rates are at a low 7.7%, with a 10.5% rate in Oxnard. In the east county, the rate is at 11.6%, given a boost by Newbury Park, which has a rate of 20.6%.
"We're seeing a vibrant market across-the-board," said Jerry Pelton, managing director with CB Richard Ellis, who downplayed the almost certain hikes in prices.
"Compared to the prices in the Silicon Valley, this is nothing. We're very competitive, and we offer a nice quality of life."