For Lease24 March 2009
In the past, I've asserted that San Diego is seriously over-built. Hillcrest, the neighborhood in which I live, has many commercial sites that have been empty for some time. As an œconomist, I naturally wonder why the landlords haven't lowered the rent to a point where some party takes occupancy.
One possibility would be that the landlords were hoping for an up-turn in the economy. The possibility would make them more reluctant to commit to long-term leasing contracts at what would be present market-clearing rates, and might make them reluctant to even rent month-to-month, as there would be difficulties getting short-term renters out as quickly a more desirable renter might want to begin using the site.
Part of what would make it difficult to remove month-to-month renters would be local and state laws and regulations governing evictions. And other interventions in the market could be holding rents and vacancies at unnatural levels. For example, the structure of tax law might make sometimes make it advantageous to leave a property idle.
In any case, the numbers of vacancies, and durations of some of them, would be difficult or impossible to explain based simply on reference to market forces.
308 Washington Street, half-a-block from where I live, was a Hollywood Video rental store when I first moved to Hillcrest. (Most or all of their wares were VHS tapes at that time!) At some point, they hived-off perhaps a fifth of the site for digital electronic game rentals. Eventually, this section became a separate store, 302 Washington Street, and then Hollywood Video vacated that section, which was then rented to a UPS franchise store. Some time in late 2007 or in 2008, Hollywood Video shut down the store at 308 Washington Street. Since then, the building has stood about four-fifths empty, with a large sign advertising its availability.
Finally, yester-day, I saw a crew in the site gutting things in what I take to be the first stage of a renovation.
The last time that someone was poking-around in 308 Washington Street, I asked Scott, who works at the UPS store, lives in the same complex as I, and frequents the same coffee house (Babycakes) if he knew who the party was, and he said that rumor held it to be PetCo, which we agreed would be cool. Last night, Art, who lives in the same complex and works part-time at the coffee house express hope that the new store would be, er, a Denny's Restaurant, and didn't like the idea of a pet supply store there, in spite of being a dog-owner. Art sees PetCo stores as essentially
big boxes like Wal·Mart stores. Well, there's some truth to that. On the other hand, Denny's Restaurants are open all day, almost every day of the year, and can be associated with a lot of traffic. Our immediate neighborhood could become more congested and louder late at night with a Denny's Restaurant. But I don't think them a likely renter there.
[Up-Date (2009:03/26): Scott tells me that word remains that 308 is to be occupied by a PetCo store.]