Recession opens door to cheaper retail space

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By Roger Showley

For budding entrepreneurs, this might be the best time in 30 years to move out of the garage and into a retail space to grow the business.

Leasing agents say landlords are desperate for tenants, rental rates are down and prime locations are available all over the county.

The reason? The recession has put many companies out of business and left empty space going begging. That leaves plenty of bargains for retailers, industrialists and others looking for a chance to expand.

Local vacancy rates are up and rentals are down from their peaks in 2007 and 2008 for office, industrial and retail space, said Norm Miller at Co-Star Group, a real estate information tracking company.

Rates, experts say, range from $1.25 per square foot to $4 per square foot for retail space. Office rates are running $2.12 per square foot and the going rate for industrial space is $1.08.

“In 30 years that I’ve been here, there’s probably not been as a good a time,” said Nancy Johnston of Epsteen & Associates, a retail brokerage.

It takes determination to move out of the home office or garage into a commercial space. But you can take baby steps before committing your entire family future on what you think is a good idea.

The only downside to moving out of the home office is financing. With banks skittish about extending credit, you may have to tap your savings and borrow from family, friends and private investors to cover your costs — including for your own tenant improvements, since building owners are short on cash to help you out.

For office users, one option is to move into an executive suite, where individuals rent a bedroom-size space but can hobnob with other entrepreneurs who share conference rooms, phone and office services and can even gather for birthdays, holiday parties and other morale-building networking events.

Every Friday is bagel or doughnut day at Barrister Executives Suites’ three locations in the county. That’s when single-practictioner attorneys, accountants and sales executives leave their laptops and chew the fat with each other.

Shawn J. Lynam, CEO of Hello Eco, said his environmentally oriented office services company can train franchisees at Barrister’s Carmel Valley offices without spending a lot on overhead.

“It might be a long-term situation for us,” he said.

The cost can be as little as $100 a month for a professional-looking office address; $150 to add conference room use; and $500 to occupy a 125-square-foot private office that includes telephone answering service. Tenants sign a month-to-month lease, bring their own or rent furniture and can move in on 24 hours’ notice.

“A lot of people have started their own business after being laid off,” said Deborah Davidson of Barrister Executive Suites Inc. “The trend we’ve been noticing the last year is we’re getting a lot of attorneys that have left large firms and are starting up their own practice.”

She said big companies also are leasing executive office spaces before opening their own locations.

“Before they get permanent space, they’re coming in and joining in an executive suite,” she said.

Adam Robinson of ARK Management said most small businesses with products to sell continue to stay in owners’ garages longer than they might have years ago.

“I think people are really nervous about taking it out to market,” he said.

But sometimes necessity and opportunity are too great to resist.

One of Robinson’s clients, David Raine, owner of DyoCore, is moving his solar- and wind-powered turbine business from his San Marcos garage to a former high-end audio-visual showroom in Vista. The turbines are manufactured in Illinois with expansion plans outlined for Singapore and South Africa.

“I decided it was time,” Raine said. “We have outgrown my house and were looking for training and resale space in San Diego and Vista.”

The A/V company’s failure was Raine’s fortune.

“We ran across this beautiful building with a lot of pre-buildouts,” Raine said. “Unfortunately because of the economy, they’d spent a lot of money on it but went bankrupt and left a beautiful space, all built out and ready for our needs.”

On the retail side, there are few new ideas, according to leasing agents, but spaces are available in big and small shopping centers for new and existing businesses.

Brian Pyke of Duhs Commercial said landlords will deliver space in “broom-swept” condition and the tenants do the rest.

That’s fine with Dana Buffett and her business partner Wes Bowen, who are searching for a second location for their La Mesa bookstore, Book Place. They’re focusing on the Shadowridge area of Vista, close to Buffett’s daughter’s home in Escondido, since she would be managing it.

“Of the shopping centers I’ve seen, there are definitely vacancies,” Buffett said. “Four years ago there were fewer vacancies.”

The only surprise she found was that North County leasing rates are higher than in East County — $1.75 per square foot in Vista compared with her recently reduced rent of $1.25 per square foot in La Mesa — a reminder that location continues to affect pricing, even in a sluggish economy.

But Buffett thinks she’s got a winning formula to compete with the big-box bookstore chains and, no matter where she sets up shop. Customers get a free used book when they buy a new one from her and can exchange used books for others when they come in. And by saving on shipping, the cost can beat Internet prices.

“We have a lot of customers in North County,” she said. “Once a month they’ll come in with a couple of bags of books and trade them in for new or used ones.”

As Brian Quinn, senior vice president at Flock & Avoyer brokerage, said, brick-and-mortar shopping still works in the Internet age.

“People still want to see the merchandise,” he said. “They want to come in. They want the shopping experience.”

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