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Retail vacancy flat, while submarkets remain busy

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The San Diego retail market did not experience much change in vacancy in the fourth quarter of 2013, according to a CoStar Group report.

The retail vacancy rate went from 4.6 percent in the third quarter to 4.5 percent in the fourth quarter of last year. The retail vacancy had stood at 4.7 percent at the end of 2012, according to CoStar.

By submarket, the year-end retail vacancies ranged from a high of 6.4 percent in the North County to a low of 3.4 percent in the Central San Diego ZIP codes.

Net absorption was 290,996 square feet, and vacant sublease space increased by 20,610 square feet to 234,440 square feet.

While quoted rental rates decreased slightly between the third and the fourth quarters to $21.54 per square foot at year-end, the rate was still higher than the $20.92 figure recorded in the fourth quarter of 2012.

A total of five retail buildings with 142,767 square feet of retail space were delivered to the market in the fourth quarter, with 387,126 square feet still under construction at the end of the quarter.

Major retail deliveries amounted to about 550,000 square feet last year.

Some of these include a Sudberry Properties development of a 153,974-square-foot Lowe's Home Improvement store at 2515 Palomar Airport Road in Carlsbad; the 115,000-square-foot Old Police Headquarters conversion into a retail/entertainment complex at 789 W. Harbor Drive next to Seaport Village by Terramar Retail Centers; and a 92,000-square-foot Walmart (at 1330 E. Grand Ave. in Escondido that Jim Crone developed). The Old Police Headquarters facility was 78 percent leased as of the end of last year.

Notable properties under construction include a 140,000-square-foot expansion of the Outlets at the Border property in San Ysidro that is being developed by The Shamrock Group, LLC; a 98,000-square-foot building at the 253,800-square-foot La Costa Town Square project being developed by Tilton Pacific Corp.; and a 40,000-square-foot building at 680 S. Marshall Ave. in El Cajon that will house a BMW dealership. That property is owned by an entity related to Sunroad Enterprises.

Tenants moving out of large blocks of space in 2013 included Lowe’s from 160,806 square feet at 555 Grand Ave. in Escondido so it could go into its new store; Kmart, which vacated 120,000 square feet at 8730 Rio San Diego Drive in Mission Valley; and Earthgrown Market, which vacated 67,104 square feet at 1816-1824 Oceanside Blvd. in Oceanside.

Tenants moving into large blocks of space in 2013 included Zion Market moving into 94,500 square feet at 7655 Clairemont Mesa Blvd.; LA Fitness moving into 75,322 square feet at 2335 Vista Way in Oceanside; and Woodbridge Interiors moving into 43,522 square feet in the Metroplex Shopping Center at 7480 Miramar Road.

Top retail property sales for 2013 included $48 million for the 54,773-square-foot Gaslamp Square development in downtown San Diego to Clarion Partners; $43.5 million for the 257,685-square-foot San Ysidro Village shopping center acquired by TKG Management; and $41.5 million for the 140,796-square-foot Hawthorne Crossings development in Kearny Mesa by Retail Opportunity Investments Corp. (Nasdaq: ROIC)

The largest lease signings occurring in 2013 included the 67,104-square-foot lease signed by Frazier Farms at 1816 Oceanside Blvd. in Oceanside; the 31,830-square-foot deal signed by Walmart at Mission Square Shopping Center in Oceanside; and the 31,779-square-foot lease signed by C3 Church San Diego at 7620 Balboa Ave. in Kearny Mesa

The amount of vacant sublease space in the San Diego County market has trended down slightly over the past four quarters. At the end of the first quarter 2013, there was 264,956 square feet of vacant sublease spaces. As of last Dec. 31, CoStar reported the sublease vacancy had declined to 234,440 square feet.

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Terramar Retail Centers

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5973 Avenida Encinas, Suite 300
Carlsbad, CA 92008

Related Videos

Old Police Headquarters transforming into retail center

Aug. 29, 2013 -- Reporter Carlos Rico visits the Old Police Headquarters next to Seaport Village as it is being converted into a shopping and dining destination.