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Report: Retail Market Elicits Most Confidence

SAN FRANCISCO-Marcus & Millichap reports that in the unstable Bay Area commercial market, investors have the most confidence in the retail sector. A regional manager for M&M says that as other markets decline, retail property looks better and better.

By Michelle Savage | Updated on December 11, 2001

SAN FRANCISCO-A recent report on the San Francisco Bay Area reveals that in comparison to other commercial sectors, the retail market is holding up very well. The report, by Marcus & Millichap Real Estate Investment Brokerage Co., found that “investor interest in retail properties in the Bay Area is strong, due in part to uncertainty in other investment real estate property types. As apartment and office rents continue to adjust downward, retail property has become more attractive to investors. The retail market failed to experience ballooning rents during the past few years. Now it is also side-stepping much of the downdraft in rents as the economy deflates.”

The report states that over the next year, more than three million-sf of new retail product will enter the market. At the same time, construction will decline, as developers and lenders exercise caution in new development.

The report finds construction activity was very high last year as just less than 3.5 million square feet began in the three Metropolitan Statistics Areas (MSAs) combined. Construction commenced on two major multi-use projects in the Oakland MSA, Plaza Escuela in Walnut Creek and Bay Street in Emeryville. These two projects will add a combined 500,000 square feet of retail space to the East Bay market. The remainder of new development in the Oakland MSA is nearly all single-tenant properties. In the San Jose region, construction is now underway on the Santana Row multi-use project, which will bring another 680,000 square feet of retail space to the local market.

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