Communities' Brand-Name Buildings - High Rents and High-End Retailers

Recently, an investor purchased Two Rodeo, a collection of high-end stores in Beverly Hills, for more than $200 million. Before that, another investor paid more than $100 million for the land on Wilshire Boulevard formerly the home of Robinsons May. The high price tags of some commercial real estate deals have led many to wonder what is commanding such high prices: the location or the brand already established with the buildings being purchased?

It's a good question with no real definitive answer seeing as how one could be the root of the other.

However, it's no secret, that buildings are becoming more and more part of the hype rather than just location alone when it comes to making an acquisition. This means that the architectural appeal of a building is coming more into play as the exterior of a building is often the means to which a building is branded as high-end. Plus it makes sense: the nicer a building looks on the outside, the more property managers can charge their tenants to rent commercial space or to live there (in the case of an apartment building).

The Grove in Los Angeles County is a good example of this. The Grove is a mixed-use, pedestrian-friendly collection of retail shops. Obviously, tenants that rent space there are paying much higher rents than if they were to find some other, independent location along some random street in Los Angeles and rent out space there. Tenants are in fact paying for the image associated with this development.

Looks are everything and that's not exactly an Earth-shattering statement to make for real estate or any other aspect of life.

Thus, as more development projects come into the pipeline, the greater the importance of architecture is in ensuring the success of any one project.

To look at a case study in Orange County, The Lab retail shops is another good example of why unique architecture and design of buildings can enhance a property's brand. The Lab is supposed to appeal to ultra hip, young shoppers with an eclectic mix of designer wear, a salon, Urban Outfitters and a Buffalo Exchange to name a few stores. A lot of these retailers you can find anywhere else meaning they're pretty generic.

So, what allows for The Lab to brand itself as the urban oasis for suburban, Orange County shoppers? It's the design! The Lab was built in a former warehouse space, so you have the look of exposed pipe and brick, which makes people feel like they are being transported into a different place from the surrounding South Coast metro area. The Lab is in fact only a few miles away from the South Coast Plaza shopping mall. In addition, the way the small shopping center was designed also enhances this brand.

The Lab was designed like a courtyard, so everything is connected to a main gathering space where there are couches and walking areas. All of the stores entrances can be found in this circular area.

The same goes for The Camp across from The Lab which is themed after nature, so the look of the buildings is more log cabin than hipster, trendy. A shopper can find vitamins or flannel shirts anywhere, but the fact that you can find them in a shopping center designed specifically to remind you of nature and camping and biking, makes it that much easier for stores to charge shoppers more and for the property manager to charge stores higher rents.

So, for anyone who says looks don't matter, that's a fallacy - especially in real estate.