San Diego retail vacancy 2nd lowest in U.S.

San Diego ranks fourth this year in economic and retail real estate fundamentals, according to Marcus & Millichap real estate investment services.

The area is likely to strengthen as jobs grow, construction declines and rents rise.

"San Diego's retail sector will once again outperform other Southern California markets in 2012," the firm said in its 2012 national retail report.

In 2011 San Diego ranked third behind Washington, D.C., and New York. But this year those markets have slipped a few notches on weaker employment growth and been replaced by San Francisco, San Jose and Seattle. The Top 3 benefit from "strong ties to technology and tourism, solid prospects for employment and population gains, and significant improvement in space fundamentals."

The firm's National Retail Index is based on cumulative weighted-average scores covering employment, vacancy, construction and rents.

In its analysis, Marcus & Millichap said San Diego will have the second lowest retail vacancy rate nationally, 4.2 percent, trailing No. 1 San Francisco at 3.1 percent. The national rate is projected 9.2 percent.

Prospects look good this year locally for discounter and grocer expansion in blue-collar neighborhoods. Increased tourist and business travel and office users will mean higher "hospitality-related space demand," from downtown into North County.

Key statistics include:

For investors, the best prospects lie in grocery-anchored centers and corporate-backed, single-tenant assets. Facing rising demand for the best projects, the company predicts growing interest "tertiary areas" with "acceptable" demographics and lease terms.

roger.showley@utsandiego.com; (619) 293-1286; Twitter: rmshowley; Facebook: SDUTshowley

Continued here:
San Diego retail vacancy 2nd lowest in U.S.