Discount-furniture retailers like Aki-Home, which recently opened a location in Ontario, California, are benefitting from economic conditions in the market. | Images courtesy a representative of CBRE

Why Discount-Furniture Retailers are Thriving in SoCal

Carrie Rossenfeld Retail

Value furniture retailers like Jerome’s and Bob’s Discount Furniture have been expanding their presence in the Greater Los Angeles/Orange County/Inland Empire region, with many considering taking space left behind by big-box retailers like Kmart and Toys “R” Us, according to a recent report authored by CBRE’s Petra Durnin, director of research in SoCal/Hawaii. The furniture retailers make ideal tenants to backfill up to 50,000 square feet of space in these vacant big boxes, the report says.

Economic conditions throughout the country are having a positive impact on the business of furniture retailers as a whole, CBRE says. According to the report, “With the recession well in the past, furniture retailers are once again on the upswing, with sales growing 4.4 percent in the U.S. over the previous year. Furniture retailers act as an economic barometer, typically the first to suffer during a downturn and the first to recover when consumer confidence returns.”

And, the report says, wholesale, discount, and rent-to-own furniture stories “have gained considerable traction in SoCal, so much that they outnumber mid- to high-range stores three to one.” With homeownership rates decreasing and thrifty millennials starting families, these outlets are growing in popularity, CBRE says.

Jeff Moore

SoCal Real Estate spoke with Jeff Moore, senior managing director at CBRE, about the discount-furniture phenomenon in this region and where he sees it heading.

SoCal Real Estate: What has led to the rise of discount furniture stores in the SoCal market?
One is value retailing. Consumers want value, and value retailing is a very strong category. Two, a lot of people are renting now, which is a big factor. And, all the big boxes that have become available over the last 3-5 years have created opportunities within really good locations and good real estate opportunities. Landlords have to fill those boxes, and furniture stores have been able to do that. Furniture is attractive to landlords: it’s not parking intensive like restaurants and gyms and there’s not a high-TI component to it. Plus, it’s experiential: families will go into a furniture store and sit on the couch and imagine what it would be like to have it in their home. These stores bring a lot to shopping center.

In which submarkets and locations do these retailers fare best here?
The furniture tenants like to be on or near a freeway in a really good location. They are historically a destination; people will drive a little for a furniture store.

Where do you see this trend heading, and what factors will continue to influence it?
As long as the economy is good — and it’s still strong now, with low unemployment and job growth —people are moving around. They’re buying furniture and refreshing their homes. I think the furniture trend will continue with the growth of the economy; it’s got runway. It will also continue to be active because of the available locations: tenants can get into better options than they did five-plus years ago because of the disruption caused by bankruptcy among mid-size box tenants. The furniture stores are able to upgrade their profile, which is good for the industry, and that will continue. So long as the economy is good and boxes are available, this category will continue to grow.

What other emerging retail trends are you noticing in the SoCal market?
Fitness, furniture, food and beverage, and entertainment are all strong. We’re seeing a lot of more local tenants rather than national brands. And the experience category is big. We’re also seeing a trend for consumers to move toward unique, local, interesting retail concepts. And there’s more technology —technology is really becoming more integral with retail in a lot of ways: shopping-center owners have reader boards and parking apps; they’re encouraging consumers to go to Open Table to make reservations online. There’s a move to mass mobile data, demographic traffic counts, and tracking cell phones. Technology is moving heavily into how retailers and investors are changing with the evolution of real estate.