WESTERN SNAPSHOT, AUGUST 2009
San Francisco Retail Market
1. MARKET MOVE
San Francisco’s retail market has experienced a mixed response to the economic downturn. Vacancy rates are at sub-3 percent in most retail neighborhood corridors, but major commercial areas are flooded with available space as many national chains have gone dark. With new development projects tabled, large blocks of existing space represent the only opportunity for retailer expansion into the market. Union Square’s former Virgin Records store at Stockton and Market streets is a pivotal site with 52,000 square feet on four floors. A bid from Forever XXI was recently rejected by the ownership.
2. MARKET MEASURE
Second quarter 2009 reflected a 16.5 percent availability rate in the Union Square submarket, up 31 percent from year-end 2008. Average asking rates for ground-floor space increased 9 percent from year-end 2008. Blended asking rates for multi-level space are at $88 per square foot per year on a NNN basis, up 6 percent from year-end 2008. The number of available spaces by size category has also doubled or in some cases more than doubled across the board.
3. THE MARK OF A MARKET
As a leader in innovation and entrepreneurship, San Francisco sees retail demand accelerating from concepts quickly adapting to the new consumer and desiring to pilot in this internationally recognized environment. Existing retailers are seeking smaller footprints or expanding to incorporate even greater experiential branches to their core product, i.e., apparel with home, music offerings, a flower stand, perfumes, cafes, an event center and a beauty salon. New concepts continue to emerge as they always do when unemployment fosters new ideas and career changes. Recovery may come sooner in the San Francisco market as its underlying economic foundation and status as an international icon/retail city remain strong.
— Rhonda Diaz is a vice president at Terranomics Retail Services in San Francisco.
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