San Diego’ market for retail real estate has taken a beating as a result of the COVID-19 pandemic and the outlook is far from great with the county slipping back into the purple zone for the COVID-19 pandemic.
But the news is not all bad.
Even with the pandemic, the real estate brokerage firm CBRE reported that leasing activity was up slightly in the third quarter of 2020.
After reaching its lowest point in 10 years in the second quarter, CBRE reported that leasing activity rebounded a bit in the third quarter, with leasing 44% higher in the third quarter than it was in the second quarter, reaching 439,798 square feet.
“Though far from being back to normal operations, many local retailers have adjusted and gained local support for alternative options to stay open, such as designating outdoor areas for dine-in and increasing delivery and take-out to supplement delivery,” CBRE reported.
Among notable activity, CBRE cited a 27,200 square-foot strip shopping Arroyo Verde Shopping Center that Giltner Realty started building in Oceanside.
The brokerage also noted that Regency Centers was moving ahead with its plans to redevelop the Costa Verde shopping center in UTC into mixed-use project with demolition of the existing center slated to start in the second quarter of 2021.
The redeveloped center will have the same amount of retail and restaurant space as the existing center – 178,000 square feet – but add 400,000 square feet of office space geared toward the life sciences and a 200-room hotel.
“There’s been some success stories in retail,” said Reg Kobzi CBRE senior vice president. “There’s probably 30% of retailers that are doing nice.”
For the most part, they are comprised of small mom-and-pop operations.
Grocery stores and pharmacies also are doing well.
“There’s other parts of the pandemic that might change retail forever, restaurant patio spaces, pick-up delivery and the like,” Kobzi said. “The good thing about retail is it always changes, it’s ever-evolving.”
Vacancy rates for retail space climbed to 8% in the third quarter, up from 6.1%.
Putting those numbers in some perspective, CBRE also reported that retail vacancy rates are in line with what they were in 2015 and 2016 and still far below what they were during the Great Recession.
“Things are obviously slower, given the current state of things, but by and large, the overall numbers look pretty healthy given what we’ve seen in past recessions or even going back a few years,” said Kobzi.
“Our vacancy rates have gone up, but they’re still lower than they were three or four years ago and nowhere near what they were in the recession.”
Still, Kobzi said he expects vacancy rates to continue to climb as the pandemic drags on.