Affordable Space for Small O.C. Retailers Is Dwindling

Ken Picquelle trusted his instincts when he opened his printing shop 16 years ago in a small Costa Mesa shopping center surrounded by open fields and dirt roads.

“People would tell me, ‘I wouldn’t start a business in this area,’ ” said Picquelle, 54. “It’s not that good.”

But Picquelle had a hunch that the situation would improve. True enough. As the years passed, homes and buildings surrounded the store, and Picquelle’s business steadily improved.

What he failed to foresee was that the progress would cost him dearly. Three years ago, the center was upgraded and Picquelle’s rent doubled to $3,000 a month. Because of the increase, Picquelle moved his business to a smaller shopping center 2 blocks away on West Baker Street. But his rent eventually increased to $3,000 again, and he said he plans to move soon to new quarters where he will pay only $1,100.

Picquelle is not alone. Many independent business owners are finding it increasingly difficult to find affordable retail space in Orange County.

And on Tuesday, real estate experts who prepared a forecast of Orange County’s retail development market said that the trend is expected to continue.

Although the county’s population is growing at an annual rate of only 1.7%, the number of retail businesses will increase by about 5% this year, according to Research Network, a Laguna Hills consulting firm.

That means that as many as 1,000 new retail stores will join a current population of about 23,000 shops, the firm said in a forecast prepared for Burke Commercial Real Estate in Orange.

In 1980, there was one retail store for every 130 people living in the county, said Matthew Disston, a principal with the consulting firm. Last year, the number dropped to one store per 109 people.

From 1980 through 1987, retail sales in the county increased from $8.5 billion to $15 billion.

Because the number of businesses is proliferating at a faster rate than the population of the county, “mom-and-pop” stores such as Picquelle’s will face rising rents and increasing competition for desirable retail space.

“Competition for retail dollars will be stiff as . . . the market becomes increasingly overbuilt and the quality locations are absorbed,” the firm says in its report.

Prime locations include intersections with traffic signals and large shopping centers offering customers easy access to stores.

Not only will small, independently owned businesses face higher rents, said Kenneth E. Hulbert, president of Burke Commercial Real Estate, small businesses don’t have the variety of merchandise or advertising budgets that large mall owners desire to attract customers.

Unlike office buildings, which have a glut of available space and are offering new tenants incentives such as several months of free rent, Hulbert said retail space in good locations remains in big demand.

For developers, the most attractive opportunities involve construction of large retail outlets of 200,000 square feet or more, particularly discount merchandisers such as Price Club. And there is probably enough retail demand to support construction of one more large regional shopping mall, according to the report. The county already has 15 regional malls.

The least attractive sites are the small- and medium-sized shopping plazas occupied by many small retailers, the firm said.

Overall, the Research Network estimated that there is sufficient demand to support development of an additional 16.1 million square feet of retail space, enough to ensure that the county will remain “one of the nation’s fastest developing commercial centers.”

Hulbert suggested that retailers give some thought to alternative locations for new businesses. As an example, he cited a Carl’s Jr. restaurant operated from a trailer parked on the UC Irvine campus and a Burger King restaurant inside the Marine Corps base at Camp Pendleton.

With the help of his son Jim, 21, Picquelle said he will continue operating the printing business much the same he has for the past 16 years. But he said the pending move will “put us out of touch with the customers who’ve been here for 14, 16 years.”

Picquelle said he thinks the problems facing small proprietors will have a negative effect on the small-business sector in Orange County.

“They’re the backbone of the country, and you’re driving them away,” he said.

RETAIL SALES TRENDS IN ORANGE COUNTY

(in billions of dollars)

TOTAL SALES IN COUNTY 1980: $8.45 1987: $15.04

SALES AT MAJOR MALLS 1980: $1.20 1987: $2.06

SOURCE: Burke Information Services and Research Network.