Q&A: PRCP’s Thomas Pasquesi and the State of SoCal Retail
The pandemic and economic volatility has challenged the commercial real estate industry over the last few years, and the retail sector is no exception. Pacific Retail Capital Partners (PRCP) is a Los Angeles-based operating group of more than $3 billion in retail assets, and a company that has a keen interest in market trends. PRCP EVP/Head Investments Thomas Pasquesi has over 24 years of experience and oversees the firm’s sourcing, underwriting and due diligence for acquisitions, dispositions and financing activities. Mr. Pasquesi took some time recently to discuss those SoCal trends with ConnectCRE.
Q: Provide a pulse on the SoCal retail sector. Do malls still have a place in it?
Pasquesi: The Southern California retail sector has been rebounding extremely well since the onset of the pandemic. Enclosed shopping malls were some of the hardest hit assets, but we have seen the resiliency of the Class A malls, which are now back to or exceeding pre-pandemic levels in terms of traffic and sales. That said, this isn’t the case for all the malls in the area. Some of the Class C and D malls are still struggling, and their survival really depends on their willingness to adapt to the changes in consumer behavior and shopping patterns. Grocery-anchored open-air centers are doing well, and really have been for a while, and I expect this trend to continue.
Q: What does the revitalization of Century City mean for the market as a whole?
Pasquesi: Century City is truly a model project. It has its own pocket of office and retail that’s done really well, and it’s a microcosm of proof that if you have a more relevant, inspirational product, it’s where people want to be. It’s the Field of Dreams approach – if you build it, they will come. Combinations of live, work and play are wildly popular, and it’s one of the bright spots for both retail and office. Century City offers a holistic environment for employees who prioritize walkability, cleanliness, safety – these things help bring people back into the office. Those reasons are also why we relocated here from El Segundo.
Q: Talk a little about the market right now and how that is impacting deals.
Pasquesi: There’s been quite a slowdown in transaction volume over the past six to nine months as a result of the restrictive lending environment and rise in interest rates. Those who are selling right now are only doing so if they need liquidity. That said, these headwinds present a unique opportunity for buyers with money to spend. Sellers are dealing with a limited buying pool, so if they do need to sell an asset in order to return capital to their shareholders, they likely aren’t commanding the same type of premium they would during normal market conditions.
Q: What project should readers be keeping an eye on?
Pasquesi: Hollywood Park Project, a 300-acre development surrounding SoFi Stadium. It includes ~800,000 square feet of retail opening later this year. We expect it will be highly successful because it offers the live, work and play environment that is quite popular amongst consumers.
Q: Do you expect the Southern California retail industry to have a strong year in 2023?
Pasquesi: I think the retail industry is poised for a strong year because of the rebound in sales and traffic, plus a reduction in some of the inventory challenges we experienced last year. However, we are closely monitoring inflation and how it will impact our sector and the broader economy, but even if there is a recession, and it’s not too prolonged, most retailers are well positioned to weather that storm with stronger balance sheets than they’ve had in some time.