“We started out very small,” Larsen said. “As an investment opportunity would arise, we would pick it up. But we only bought one property at a time, so we’ve grown by increments.”
After 16 years, the company owns 45 properties encompassing more than 2.3 million square feet and has 362 tenants. Only General Growth Properties, which owns Tucson and Park Place malls, has more square footage.
  
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Through the economic downturn, Larsen said the company has lost just a few tenants.
“We don’t view the landlord-tenant relationship as an adversary relationship,” he said. “We know that those are our customers and they are what keep us afloat.”
Larsen said there is no way to hide the fact that some tenants have asked for and received concessions.
“But we also ask for something from them, a sort of quid-pro-quo,” he said. “Not necessarily of equal value, but when someone asks us for a year of reduced rent, we might ask them to add three months on to the end of their lease. Not only will we keep the tenant, but may also gain some loyalty from the tenant by being flexible with their needs.”
Baker said the last two years has been good for the company, maintaining an occupancy of about 93 percent.
“This year it dropped a little bit down to 91 percent,” Baker said. “But we’ve also added 67,000 square feet at Marana Marketplace that hasn’t been filled yet. So that affects the number as well.”
As a whole, Larsen said the Tucson retail market as a whole should finish the year with vacancies running about 14 percent.
Baker and Larsen attributed their success in the market to their ability to attract local retailers.
“There was a time that many developers and management firms didn’t want to talk to local retailers, I hate to call them mom and pop stores,” Larsen said. “They only wanted the national retailers and that has come back to bite them because there is so much of the same from one power center to another. Catering to these local retailers is really important and it gives character to our shopping centers and makes them different.”
Right now, Larsen said many local retailers are making decisions and expanding while national retailers are holding off and waiting for decisions to come from outside the market.
Larsen said he doesn’t believe Tucson is as business-unfriendly as some people say.
“When you’re used to what happens in Phoenix, sure we may seem unfriendly,” he said. “But when you look at the results of this recession in Phoenix you have to believe that in Phoenix it was too easy to grow and build. Tucson has a more reasonable approach to growth and because of that we didn’t overbuild like Phoenix did. So I don’t think Tucson is anti-growth, I know they aren’t pro-growth either but they are cautious about it.”
While property owners are feeling pain with the city’s current certificate of occupancy ordinance, Andy Seleznov, who is Larsen Baker’s in-house leasing agent, said the company hasn’t been affected by it.
He said Larsen Baker has had a lease requirement for the tenant to get a certificate of occupany. “If something needs to be brought up to code we will do that, it is our responsibility,” Seleznov said. “I can see where it is a problem for many people out there, but I don’t think it has gravely affected us.”
In the midst of the increased vacancies and bad news in retail and how it affects commercial real estate, Baker remains unfazed.
“This is still a community of more than 1 million people that is growing,” Baker said. “And in the midst of all this there are many tenants that are doing better this year than they were last year.”
Baker and Larsen national retailers are doing well, including Best Buy, which no longer has competition from Circuit City, and Bed, Bath and Beyond, which lost Linens ‘N Things as a competitor. Restaurants including Olive Garden and the Good Egg are also doing well, they said.
“We’re also seeing many of our grocers doing much better this year,” Baker said. “While people may not be eating out as much this year, they still have to eat and many of them are increasing their shopping at grocery stores.”
Looking ahead the two are planning for growth but are also cautious in the short term.
“We need jobs,” Baker said. “We are technically coming out of the recession but it is job growth that is going to make everyone start to feel better about it. The return of jobs will increase consumer sentiment and spending which will give retail a boost. Because we’ve hit that magic million people mark, growth is going to happen here. It is going to be delayed just a little while, but it will come.”
Biz Facts
Larsen Baker LLC
6298 E. Grant Road
www.larsenbaker.com
(520) 296-0200
Owns and manages more than 2.3 million square feet of retail space with 362 tenants, including 42 properties in Tucson.
Contact reporter Joe Pangburn at jpangburn@azbiz.com or (520) 295-4259.
Comments
Commercial Properties wrote on Nov 10, 2009 2:56 AM: