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Coronavirus economy: Retail vacancies rise in much of Bay Area

Coronavirus economy: Retail vacancies rise in much of Bay
Area 1

The retail property market in the Bay Area has suffered some jolts during the coronavirus outbreak, causing higher vacancies in several markets, but rental rates remain stable, according to a new report by a major real estate company.

Vacancies for retail properties rose during the spring compared with the winter in the East Bay, San Mateo County, and San Francisco, but vacancies shrank in Santa Clara County, a Colliers International report showed.

Asking rents for retail spaces rose in Santa Clara County and the San Mateo County area, but rents fell in San Francisco and the East Bay, retail brokers with Colliers reported.

“Average asking rents in the South Bay reached a record $34.31 a square foot per year,” Colliers stated in the report. “The most in-demand submarkets remain Palo Alto, Mountain View, and Los Altos, where asking rents reached $60.24.”

San Jose’s asking rents were at $32.64 a square foot per year, Colliers determined.

The coronavirus did batter the Silicon Valley economy and a wide array of the region’s merchants.

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“Unfortunately, the damage was deep for many and some stores and restaurants may not make it back,” said Tom Nelson, a vice president and retail broker with the Colliers office in San Jose.

Nelson believes, nevertheless, that Silicon Valley can recover from the economic woes that the deadly virus unleashed.

“Like other disruptions in the past, the retail and dining ecosystem will evolve and the market will rebound in time,” Nelson said.

East Bay retail vacancy levels were at 8.4 percent in the spring, a slight increase from 8.3 percent in the winter.

Asking rents averaged $27.36 a square foot per year in the East Bay, somewhat below the $28.14 rental rates for the winter, Colliers reported.

West Contra Costa County is experiencing the highest vacancy rates in the East Bay, according to Colliers.

“The hottest East Bay submarkets remain Berkeley, Emeryville, and Central Contra Costa,” Colliers stated.

Retail leasing activity in San Mateo County was described by Colliers as “quiet” during the spring. The vacancy rate jumped on the Peninsula, reaching 4.1 percent in the spring, up from 2.8 percent in the winter. Asking rents were at $37.65 in the spring, an increase from $34.93 in the winter, Colliers estimated.

San Francisco’s retail scene has been jolted by an array of factors, including the coronavirus. Retail vacancies are at dramatically high levels in San Francisco, driven partly by the empty 6×6 shopping mall on Market Street.

Vacancy levels in San Francisco were at 14.4 percent in the spring, up from 14 percent in the winter. Springtime asking rents were at $42.38, a decline of more than $2 a square foot from $44.96 in the winter, Colliers reported.

The coronavirus has caused numerous merchants to scramble and intensify their assessments about signing new leases or how much space they need, according to Colliers.

“Tenants, both new and expanding, will become even more selective in their brick and mortar choices relative to square footage needed and anticipated foot traffic while social distancing requirements remain,” said Doug Garcia, Colliers regional research director Northern California.

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