Retail Vacancy Covid San Francisco by Donna Coquilla
The Bay Area retail real estate market is suffering from a jolt that is leading to high vacancies in several markets, according to a report by Colliers International. Vacancies in retail properties in San Francisco and the East Bay are up from their spring levels, but vacancies in Santa Clara County are shrinking and rental prices remain stable, according to the report. Retail broker Collier’s reported that demand for retail space was rising and rents were falling in both San Jose and San Mateo counties, as well as Oakland and Oakland-Contra Costa County.
The San Francisco retail market is likely to continue to return to normal, with the exception of some restaurants and convenience stores. In June, only 1.5 percent of retail tenants in the Bay Area paid their rent in full, and 2.5 percent in part. The vacancy rate in East Bay retail was 8.4 percent, up from 7.2 percent in May, but still below the 9.7 percent spring rate.
Employers should remember that the residence and residence order is a strict statewide order issued by California Governor Gavin Newsom and the California Department of Housing and Community Development (DHDD). After a brief review of California’s executive order and a subsequent analysis of the impact on the San Francisco housing market, tenants need to act. Some are using a temporary moratorium on evictions announced in March by San Francisco Mayor London Breed and a new statewide moratorium announced the same month by Gov. Gavin Newsom. In a statement after a June 5 meeting between the mayor and Sheriff Paul Miyamoto, he said his deputies would not enforce any planned or imminent eviction that “could come in terms of civil lawsuits,” as the San Diego Union-Tribune reported, and in an interview with the Bay Area News Group published in the San Francisco Examiner.
He recalled trying to persuade a business owner to move to a new location in San Francisco and seemed optimistic that it would return to business as usual.
Specifically, Leitner expects the market to return to where commercial space in San Francisco has been priced for several years, namely at 88 dollars per square meter. Retail vacancies in the country were around 5%, but during the pandemic, vacancies darkened to 84 million square meters, pushing vacancy to 5.6%. While Georgiades stressed that rent reductions have a lower limit, he believes rents for a room in San Francisco could fall, something unimaginable before the pandemic. Affleck said that tech workers are more likely to pay higher rents than they used to in California – San Jose and San Diego for example – than in other parts of the country.
Both office and retail vacancy rates will soar or continue to rise, depending on the pace of economic recovery, but none of the trends seen during the Great Recession can be reversed. He expects office vacancies to fall to around 5.5% and retail vacancies to rise to between 6% and 7%.
Combined with remote work and high unemployment, we are seeing pandemic prices in the San Francisco Bay Area continue to put significant downward pressure on rents. Hansson, who employs 22 commercial real estate agents, says his company supports real estate deals in and around San Diego, Los Angeles and New York City. He was recently invited by the San Francisco Commercial Brokers Association to talk about the state of retail and the city’s lack of cleanliness. Learn more about what you can learn by watching the video below on retail vacancy rates and other retail trends.
In May, the number of vacancies in the San Francisco Bay Area retail sector fell to 3,360, compared with 4,500 in April and 5,000 in March.
San Francisco’s retail market has the second-highest vacancy rate in the Bay Area, behind San Jose, according to the report. The 19 city housing orders are having an impact on urban centers, with San Francisco and Alameda counties leading the way in retail vacancies, while lagging behind home sales. San Francisco retail sales fell 10.6% in May, according to data from the US Bureau of Labor Statistics, and the average vacancy rate for the retail sector as a whole was 9.63%. The average vacancy rate for all other retail sectors in California was 6.10 percent in May, up from 7.5 percent in April and 8.9 percent a year ago.
Vacancy in San Francisco was 14.4 percent this spring, down from 14 percent in the winter, according to U.S. Labor Department data.
San Francisco has certainly had its fair share of problems, but with record unemployment and a sluggish economy, residents are beginning to weigh the cost of staying in San Francisco. The results of the survey itself suggest that many residents want to leave the country, as a recent survey by the Bay Area Chamber of Commerce shows.