A new market report from Marcus & Millichap has some good news for the San Jose retail market. The report predicts retail rents will grow 2.8% this year, after falling .8% in 2020. If the prediction holds, rents will climb to $36.01 per square foot.

The rebound in retail rents is surprising as the report also predicts a 60 basis point increase in the vacancy rate, climbing to 5.1%. It would be the highest vacancy rate in the market since 2013. It would also outpace 2020 vacancy rate growth, which climbed 50 basis points to 4.5%. Single-tenant retail spaces had the most significant increase in vacancy last year, growing 70 basis points, while multi-tenant spaces only saw a 20 basis point bump in vacancy.

Retail near major tech hubs are the most exposed to high vacancy rates. Many large retailers are planning to welcome employees back to the office, but not until later this year. That will leave retailers without customers or foot traffic for most of the year. However, the report expects retail to rebound swiftly once employees are back in the office. Strong consumer spending could also encourage new retail lease transactions, which will support growth.