California Shopping Center Near Disneyland Sells in Orange County’s Largest Retail Deal in Past Year
Anaheim GardenWalk Shows How Tourism Proximity Can Affect Demand
BY LOU HIRSH (via CoStar)
Anaheim GardenWalk shopping center near Disneyland is 86 percent leased to businesses including music venue House of Blues and restaurant McCormick and Schmicks. Photo: CoStar
The largest retail center sale of the past year in California’s Orange County is located just blocks from the Disneyland theme park, providing a glimpse of how profitable it can be to own commercial real estate near a global tourist attraction.
STC Gardenwalk LLC, an affiliate of Whittier, California-based real estate investor STC Management, bought the 430,000-square-foot upscale Anaheim GardenWalk lifestyle center at 400 W. Disney Way in Anaheim for $80 million from New York-based real estate investment firm Arcturus.
The property, which was built in 2008, is just blocks from Disneyland, Disneyland Resort and the Anaheim Convention Center. The vast majority of the more than 25 million people who visited Anaheim last year stepped into Disneyland at some point, according to city figures. That translates to big business for a shopping center like GardenWalk that is positioned to capture large crowds looking for places to eat, drink and play during their stay, especially following the additions in recent years of entertainment and restaurant tenants including bowling alley Bowlmor Lanes, movie theater AMC Theatres, gym 24 Hour Fitness and music venue House of Blues.
Mike Lyster, chief communications officer for the city of Anaheim, said city leaders are optimistic that GardenWalk’s new owners can build on increases in crowd traffic seen there in the past two to three years.
“Disneyland has been very good at getting people to stop at its stores and hotels, but we think that with 25 million visitors coming to the city already, there’s room for other properties to benefit,” Lyster said.
STC did not return requests for comment about why it’s interested in this property, but many of the types of tenants that occupy the complex are among the best performing in the retail sector now as consumers search for more experiences such as live music. The property also has attracted some businesses from nearby Downtown Disney, the outdoor shopping complex owned and operated by Walt Disney Co.
The property’s position as a prime visitor spot is important as the city prepares to welcome thousands of new visitors with the planned opening of Disneyland’s new Star Wars: Galaxy’s Edge themed attraction this coming summer. Industry data from the Themed Entertainment Association and consulting firm AECOM shows Disneyland was the world’s second-most popular theme park in 2017, with its 18.3 million visitors topped only by the company’s Magic Kingdom at Walt Disney World near Orlando, Florida, which drew 20.5 million.
Many of those people may want to dine and shop at venues outside the Disney grounds, he said.
The GardenWalk center had been only half-occupied for several years after opening during the beginning of the recession, according to news reports. As a result, it struggled to gain retail shopping visitors for much of its history, though restaurants located on its outer perimeter, such as Cheesecake Factory and McCormick and Schmick’s, have generally done well, Lyster said.
Increased Traffic
But Arcturus, which led the joint venture that bought the property for $73 million in 2012, focused on adding new and different types of food and entertainment tenants to attract larger crowds from the theme park and community, and today the center is almost 86 percent leased, according to CoStar. The center overall has experienced a new boost in traffic over the past three years, by the arrivals of tenants such as House of Blues, which relocated from Downtown Disney, and Rumba Room Live, a music venue that relocated from popular outdoor shopping center Universal CityWalk in Los Angeles.
Also, a new J.W. Marriott luxury hotel is under construction on the grounds of GardenWalk, which should further boost the center’s built-in customer base after it opens, Lyster said.
“It’s right at Katella Avenue and Harbor Boulevard — literally across the street from both Disney theme parks (Disneyland and California Adventure),” Lyster said of GardenWalk. “It’s such a valuable piece of real estate, so the city has an interest in making sure it lives up to its potential.”
STC, which stands for Sung Tien Collaboration, owns a number of Southern California small- to mid-sized retail centers, many occupied by mid-market retailers including dry cleaners and discount stores, according to its website. The Anaheim GardenWalk transaction appears to be one of its largest purchases by square footage.
The deal is the largest retail transaction of 2018 for Orange County and for the city of Anaheim, according to CoStar comparable sales data as of Jan. 2, based on confirmed prices.
Figures from CoStar Market Analytics indicate Orange County had $1.1 billion in retail property transactions during 2018, down 16.4 percent from the prior year. That’s even as the region’s retail vacancy rate remained at a tight 3.4 percent and retail rents grew 4.6 percent during the past year, to an average $2.70 per square foot.
Anaheim posted $126 million in retail property deals during the past year, up 129 percent from 2017, according to CoStar.
CoStar data indicates Orange County’s ground-up development has been slowing as builders fill vacated anchor spaces in existing malls. Anaheim itself has just one new-construction retail center in planning, a 176,000-square-foot venue on the city’s less-developed western side.
The Orange County region remains a desired target among retail property investors, with a median household income near $82,000 as of 2017, according to U.S. Census data.
Representatives of the seller and brokers did not immediately return requests for comment.
