By Kate Snyder
As 2022 ended, vacancy rates in every retail submarket in the Bay Area crept higher, according to John Cumbelich & Associates’ fourth quarter report on the Northern California flagship power center inventory. Data highlighted in the report argues that nearly half a million square feet of vacant space in the East Bay submarket alone will dampen new development.
The group’s recent Bay Area Regional Shopping Center Quarterly Report shows that the overall occupancy level in northern California dropped in the fourth quarter of 2022, from 92.9 percent to 92.4 percent. The resulting uptick in vacancy represented a net gain of 75,803 square feet of empty space, as available inventory expanded from 919,909 square feet to 995,712 square feet.
According to the report, out of a survey of 25 flagship assets, the four worst performing centers in the region represented approximately 36 percent of all vacancies. The region’s largest vacancy totals at the end of the year were The Plant in San Jose with 131,281 square feet of vacancy, the South Shore Center in Alameda with 80,927 empty square feet, the Pacific Commons in Fremont with 73,289 square feet of vacant space and the Hacienda Crossings in Dublin with 70,334 square feet of vacant space.
At the other end of the spectrum, the four best performing assets – totaling 1.7 million square feet – had a combined vacancy total of just 14,135 square feet.. Top performers included the Santa Rosa Marketplace with zero vacant space, the South Napa Marketplace with 1,771 available square feet, the Village Oaks in San Jose with 4,327 square feet of vacant space and the Lone Tree Plaza in Brentwood with 8,037 square feet of vacant space.
“Anchored by Target, Costco, Sports Basement, PetSmart and Best Buy, the 541,693 square foot Santa Rosa Marketplace again leads the charge with a 100 percent occupancy rate,” the report states. “The Lone Tree Plaza project represents an unusual success story through the unfolding post-COVD paradigm, as leases with Sportsman’s Warehouse and Marshalls have lowered vacancy rates from double digits to [1.7 percent].”
In the North Bay, inventory totals about 2.7 million square feet, and the available square footage was recorded at 97,419, making an occupancy rate of 96.4 percent. Out of the East Bay’s 5.2 million square feet in total inventory, about 493,241 square feet of space is available for an occupancy rate of 90.5 percent. On the peninsula, the occupancy rate stands at 93.9 percent with 214,751 square feet available out of an inventory of 3.6 million square feet. In the South Bay, the available square footage is approximately 190,301 square feet out of a total inventory of 1.7 million square feet, putting the occupancy rate at 88.6 percent.
“Generally speaking, the North Bay continues to shine with several high occupancy level assets, while the East Bay has suffered the most, with vacancy rates double the pre-COVID 2018-2019 timeframe,” the report states. “With limited demand from larger conventional anchors, Power Drive Thru brands such as Chick-fil-A, Raising Cane’s, Dutch Bros and In-N-Out have stepped into the void as the most dynamic catalyst anchors for new retail development. Despite increasing interest rates, these users have also continued to achieve strong CAP rates upon sales, allowing developers to successfully underwrite new retail developments.”