Contract rents for new retail space has nearly doubled over the last several years within the Hemet-San Jacinto Valley. For nearly a decade before that however, NNN retail rents in anchored centers were essentially flat and hovered at around $1.00 to $1.50/SF NNN with $0.25/SF CAM's. With the influx of new housing and growing demand, contract rents for new retail centers based on our recent survey, have revealed new leases being executed in the $2.00 to $2.50/SF NNN range with $0.35/SF CAM's. Even higher rents were reported for new retail space with lessor TI allowance and build-outs. Lease terms have typically been 3 to 5+ years.
While the Hemet-San Jacinto Valley was past due for a sizeable rent increase, lease rates appear to have stabilized with only nominal increases reported over the last 6+ months. While occupancy levels still appear above 95% in most centers, new space is taking longer now to lease up according to most brokers and property managers surveyed.
What will be the Valley's next wave? We have plenty of mid-range restaurants now such as Cocos', Polly's Pie, Marie Calendar, Sizzler, Mimis Cafe (under const.), Denny's, Applebee's, Chilies, etc. but we still need a Black Angus, Outback, Friday's, Red Lobster or even a Johnny Carinos. Come on you site selectors, run over those demographics again and look closely at the Valley's median age and disposable income levels. This is not the same little dusty town you once read about 10 or 15 years ago in the WSJ (I still remember that myopic article). We need and want prime USDA steak and fresh sea food! Besides, most of us are getting tired of going over to Temecula for fine dining; not to mention the traffic now on Winchester Road.