San Diego Business Journal

San Diego Retail Property Market Ranks Fourth in U.S.

Wednesday, March 7, 2012

San Diego ranks fourth among U.S. metro areas for retail property investment prospects, according to the latest annual retail real estate ranking by the brokerage firm Marcus & Millichap.

The report, issued March 1 as a guide to prospective property investors, is based on factors such as economic growth and other variables that impact supply and demand. The San Diego region dropped one spot from its 2011 ranking, placing this year behind the retail real estate markets of San Francisco, San Jose and Seattle.

Researchers said retail operations in the San Diego region will strengthen in 2012, as favorable rents encourage retailers to fill sales-coverage gaps in certain trade areas by opening new locations.

Discounters and grocers are expected to undertake expansions in blue-collar neighborhoods, reducing shopping center vacancies in South County. A revival in travel volume and office-using job gains will bolster hospitality-related space demand, aiding absorption of storefronts from downtown San Diego to North County.

The local retail sector is expected to outperform other Southern California markets in 2012. The region finished 2011 with the second-lowest vacancy rate among major U.S. metro areas, at approximately 4.5 percent, and is forecast to finish 2012 at 4.2 percent.

Local asking rents are forecast to rise 0.9 percent this year, and developers will complete 215,000 square feet of new space, down slightly from 234,000 square feet last year.

— Lou Hirsh