Ever since the first quarter of 2002 when the retail vacancy rate was about 5.4 percent, that rate has been in a significant decline. It appears 2005 will be no different.
CB Richard Ellis reports the retail vacancy rate dropped another half percent from the fourth quarter of 2004 to 2.1 percent in the first quarter of 2005. That means 362,000 square feet was absorbed in an area that included all of San Diego County and Temecula and Murrieta in south Riverside County.
The report said retail construction remained steady at 812,000 square feet under way as of the end of the first quarter.
The asking lease rate also has been steadily increasing since the third quarter of 2004 when the rate was about $1.88 per square foot. The average in the region hit $2 per square foot for the first time in the most recent quarter.
The area with the highest average asking lease rate per square foot was the Del Mar/Solana Beach/Rancho Santa Fe submarket at $3.32. The lowest rate was in the Lemon Grove/Spring Valley/Rancho San Diego submarket at a $1.17 per square-foot average.
Some areas posted negative absorption, but even when that was the case, the retail vacancies remained very low.
The Chula Vista/Bonita submarket posted negative absorption of 1,589 square feet, but given that the area has a mere 0.9 percent vacancy rate, that absorption rate doesn't matter much. Chula Vista had one 188,000-square-foot project under construction as the first quarter drew to a close with more projects on the way.
That project is Chula Vista Crossings at the southeast corner of Interstate 805 and Main Street in Chula Vista by Claude Yacoel of Irvine.
It will have a Kohl's department store, Babies R Us, Staples, PetSmart and Pier 1 Imports. Restaurants include Panda Express and Souplantation Crossings is expected to be completed in October.
One sizable project on the drawing board is The Shops at San Miguel Ranch, planned for the southeast corner of Proctor Valley Road and San Miguel Road in Chula Vista. Design drawings by Benson & Bohls Architects are nearly complete.
The Shops would be on a 14-acre site. Plans call for a 103,000-square-foot center to be anchored by a 52,000-square-foot as-yet unnamed market.
After Chula Vista, the submarket that had the next largest amount of retail space under construction was Murrieta in Riverside County with 180,000 square feet under way called the Murrieta Spectrum.
A submarket that includes downtown San Diego, Hillcrest and Old Town has 121,851 square feet under construction. Much, but not all of this space is ground floor retail for the condominium projects that continue to rise downtown.
In the coming months, what had been Bazaar del Mundo in Old Town will be transformed by Delaware North Cos. into Plaza del Pasado.
The former Bazaar del Mundo is headed into what had been the old police headquarters next to Seaport Village.
To the north, Vista, San Marcos and Oceanside were numbers one, two and three, respectively, in terms of the amount of space absorbed during the first quarter of 2005.
Vista, which is home to the new Vista Village Shopping Center in that city's core, had 70,703 square feet of absorption; San Marcos posted 59,647 square feet; and Oceanside showed 49,853 square feet of positive absorption.
The retail submarket that had the highest amount of negative absorption in the first quarter was Santee/Lakeside with 16,993 given back to the market.
As vacancies continued to tighten, investors continued to snatch up well-located retail centers in the first quarter of the year.
The Plaza Las Americas Shopping Center just west of the San Ysidro Border Crossing was sold for $97 million at the beginning of 2005.
The outlet center was purchased by PCCP/SB Las Americas LLC, c/o Nicholas V. Colonna at Pacific Coast Capital Partners LLC in El Segundo.
The completed first phase consists of eight one-story retail buildings, a food court building, and five-pad buildings, all fully leased. Tenants include Banana Republic, Gap, Old Navy, Nike, Nautica, Brooks Brothers, Adidas, Liz Clairborne, Guess?, Levi's, Sketchers, Polo Jeans and others.
The second phase to be built will consist of four buildings and with signed leases for more then 90,000 square feet, including Last Call for Neiman Marcus, Polo and Coach stores.
In March, the 210,926-square-foot Metroplex development at 7340 and 7480 Miramar Road was sold for $44.25 million to a series of five limited liability companies headed by ACF Property Management Inc. of Studio City.
The Metroplex Retail Center was at least 94 percent occupied and houses an array of tenants, including Treasures, Greene Music, Metro Flooring, Rattan Leather and Home Office Plus Inc.