LAEDC STUDY CREDITS POPULATION AND HOUSING BOOM" WITH RETAIL SALES UPSWING –FUTURE CALLED BRUTAL WAR ZONE"

The annual retail study by Chief Economist Jack Kyser, LAEDC shows the economy is improving, but the real turnaround is next year and in 2005.

Hot spots for retail development include: Downtown Los Angeles, Long Beach, the Coachella Valley, Inland Empire, Riverside-San Bernardino area edges Orange Co. in 2004 and LA Co. tops them all.

   Los Angeles, CA — Southern California consumers are keeping cash registers ringing and retail sales growing at a healthy rate according to a new LAEDC Retail Study released today (September 29, 2003).

   Southern California's consumers have done their bit to keep the local economy going," said Chief Economist Jack Kyser, Los Angeles County Economic Development Corporation (LAEDC). Taxable retail sales are forecast to increase by 6.4 percent in 2003 to $149.1 billion, according to the survey. However, major changes are underway in the local retail scene, and more can be expected through 2005."
   
   In 2005, Kyser predicts that the taxable retail sales in the five-county area should total $171.0 billion, compared with $140.1 billion in 2002. Fueling this growth will be continued population gains as well as development of new retail concepts." However, the survey characterized the local retail scene as a "brutal war zone, and the fights will be more intense in the coming years."

   Among the major changes in retailing locally has been the consumers focus on value or high-end merchandise, the entrance of new players such as Kohl's, the looming development of SuperCenters by Wal-Mart, and consumer "boredom" with what's available in the stores.

   This has caused major problems for middle-range or ‘me-too retailers," Kyser said. A special twist to the Southern California situation is the rapidly changing demographics. Another aspect to retailing in the region is that local governments favor such development due to the sales tax generation, but there is also agreement that the region is ‘over-retailed, especially with strip retail that suffers from high tenant turn-over. However, new retail centers continue to be developed."

Some other findings from the LAEDC profile:

   The Riverside-San Bernardino area will edge ahead of Orange County in retail sales volume in 2004, with a total of $34.2 billion, compared to $33.4 billion in Orange County. The Inland Empire has both a fast growing population as well as land available for retail development.

Los Angeles County is still number one in retail followed by SB, OC and Ventura Counties.
   Los Angeles County will continue to be the region's retail elephant, with an estimated 2005 sales volume of $89.6 billion, compared with $74.9 billion in 2002. In second place will be the Riverside-San Bernardino area with a 2005 sales volume of $37.5 billion compared with $28.3 billion in 2002. In third place will be Orange County with 2005 sales estimated at $35.6 billion, compared with $29.7 billion in 2002. Ventura County should have retail sales of $8.3 billion in 2005 compared with $7.2 billion in 2002.

The LAEDC survey also contained some predictions as to what might happen through 2005:
•   Wal-Mart will bring its hotly contested SuperCenter to the Los Angeles area, but won't be able to develop as many as the company would like. This reflects both community opposition as well as problems in finding sites.

•   A few retailers will continue to find success with private label brands or more exclusive designer agreements. Some Los Angeles-based apparel firms have made this type of connection.

•   More store closings or "pruning" by major retail chains can be expected, especially in middle-range retailing. This will reflect continued pressure from Wal-Mart, Target and Kohl's, with the latter trying to find more sites in the urban core of Los Angeles. These closures will be bad news for both mall owners as well as cities.

•   Developers will continue to explore new retail concepts, while owners of major retail malls will do makeovers in order to stay competitive.

•   There will be no real effort to address the oversupply of retailing in the region, which will hurt older retail centers.

•   The LAEDC survey also singled out some areas in Southern California that will be hot spots for retail development:

•   The Coachella Valley which is becoming a year-round residential location, and has the capacity to absorb more retail.

•   The western end of the Inland Empire, which is continuing to see high rates of residential and population growth.

"The downtown areas of Los Angeles and Long Beach, where development of new residential space or conversion of older office buildings to housing is continuing apace," explained Kyser. There are no ‘nimbys to deal with and a growing demand for more retail."

Finally, the LAEDC survey noted that Santa Monica will have to continue fight vigorously to keep chain retailers off the Third Street Promenade.