WESTERN SNAPSHOT, SEPTEMBER 2004

East Bay Retail Market

Retail construction throughout San Francisco’s East Bay continues to be driven by big box tenants. “Investment in retail properties is strong and construction remains active, comprising several freestanding big box developments, new community and neighborhood centers, and infill redevelopment/repositioning opportunities,” says Jeffrey Mishkin, regional manager at Marcus & Millichap.

Jeff Mishkin Regional Manager Marcus & Millichap

The no vote to Measure L, a Contra Costa County referendum that would have limited retail store size to 90,000 square feet or less, was key to the development of planned super centers. Also, due to persistently high vacancies, many office and industrial sites are being re-entitled, creating new retail construction opportunities.

Retail activity in the once overlooked city of Oakland, California, is on the rise again. “The redevelopment of the Eastmont Town Center is significant, considering the low-income demographic of the trade area,” says Mishkin. Elsewhere, Cinema Place in Hayward, California, is acquiring prominent tenants, and Regency Centers is rebuilding and expanding the ailing Alameda Bridgeside shopping center.

Mishkin reports that new retail development remains concentrated along the Interstate 80 corridor, from Emeryville all the way to Solano County, and the Interstate 580 and 680 corridors in towns such as Dublin and Pleasanton. “Rooftops are driving the new construction along with East Bay consumers who continue to maintain healthy spending levels,” he says. “Infill development is a mix of new construction and rehabilitation.” Fruitvale Transit Village, built at a Bay Area Rapid Transit depot, is an example of new construction while Jay-Phares Corp. is redeveloping Foothills Square shopping center into a lifestyle center.

Ross Dress For Less plans to open its discount concept, dd’s Discounts, in three locations between Oakland and San Leandro. The Home Depot has opened its first store in Oakland, marking the debut of its new layout in the East Bay market. Wal-Mart will open its first store in Oakland, and Talbot’s is expanding with the opening of a flagship store in Walnut Creek. Kohl’s is the newest retailer in the East Bay market.

At 8 percent, East Bay’s retail vacancy continues to improve with traditional shopping centers outperforming urban retail properties. Mishkin expects rates in the mid-7 percent range by year’s end. Vacancy is lowest in east Alameda and central Contra Costa counties.

The investment market remains strong and construction active. “[There is] tremendous demand for anything that looks or smells like retail,” says Mishkin. “From an operating standpoint, the retail sector has significantly outperformed other property types.”

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