San Diego County's retail market was basically flat during the fourth quarter as landlords continue to struggle to hold onto their tenants.
On Jan. 13, Anchor Blue Retail Group announced it would be closing all 117 of its clothing stores across the country, including the seven the firm has remaining in San Diego County. The firm was known as Miller's Outpost prior to the late 1990s.
Firms such as Mervyn's, Linens 'N Things, Circuit City and Hollywood Video are gone. Blockbuster Video is in Chapter 11 bankruptcy and continues to close stores here and elsewhere, but spaces are getting refilled across the county, with such tenants as Best Buy (NYSE: BBY), Sprouts, Kohl's (NYSE: KSS), Dick's Sporting Goods (NYSE: DKS) and Smashburger.
A fourth-quarter CoStar report found the average retail vacancy in the county was unchanged from the third quarter to the fourth quarter at 5.4 percent. While this is still indicative of a healthy market, the vacancy is roughly double that of three years ago.
The total retail inventory in the San Diego County market area amounted to 137.76 million square feet in 12,403 buildings and 1,247 centers as of the end of the fourth quarter 2010, according to CoStar.
While the overall retail vacancy was 5.4 percent, CoStar said the shopping center vacancy was a significantly higher 7.7 percent at the end of last year. The power center vacancy was 6.2 percent, and the fourth-quarter vacancy rate was just 3.7 percent for freestanding general retail properties that aren't in shopping centers.
Specialty centers, which are comprised of outlet centers, airport retail and theme/festival centers, have an average vacancy of 2.9 percent.
The big malls (Westfield has seven of them here) appear to have generally held their own despite the downturn and competition from online retailing. Still, Westfield did decide this isn't the right time to pull the trigger on a major expansion of University Towne Centre.
Overall countywide mall vacancy ended the year at 3.4 percent -- unchanged from the prior quarter.
Overall net absorption was basically flat at 30,196 square feet during the fourth quarter, but that is considerably better than earlier in the recession, when hundreds of thousands of square feet were being returned.
The good news on the overall vacancy front is the total amount of vacant sublease space declined from 607,621 square feet in the first quarter of 2010 to 404,409 square feet at year-end.
The lease rates, which had hit as high as $4-per-square-foot at some of the better locations three years ago, were averaging less than $2 as 2010 drew to a close.
Given the low rents, not much retail space has been built lately. A total of 60.947 square feet was delivered in the fourth quarter and 101,839 square feet was under construction at the end of last year -- but it also shows that some developers have been willing to take the gamble.
Some of the notable 2010 deliveries include: Albertsons, a 55,000-square-foot retail space delivered in the third quarter, and Paseo Carlsbad 1B-2H, a 19,342-square-foot building delivered in the fourth quarter that is now 45 percent full.
Tenants moving into large blocks of space in 2010 included Costco Wholesale (Nasdaq: COST) moving into 110,720 square feet at 7803 Othello Ave; Burlington Coat Factory moving into 83,256 square feet at 555 I St; and Best Buy moving into 32,571 square feet at La Jolla Village Square, all in San Diego.
Other large lease signings occurring in 2010 included the 59,200-square-foot-deal signed by Ralphs at Sports Arena Plaza; and the 44,760-square-foot-lease signed by Dick's Sporting Goods at 1200 Auto Park Way in Escondido.
In the meantime, some retailers have been going away. Tenants moving out of large blocks of space in 2010 included Sam's Club moving out of 129,335 square feet at 1900 University Dr; Saks Fifth Avenue moving out of 80,000 square feet in Fashion Valley; and Ralphs moving out of 37,053 square feet at 901 Euclid Avenue.
Fourth-quarter retail sales activity is still being calculated, but through the first nine months of 2010, the San Diego market saw 25 retail sales transactions with a total volume of $207.36 million. The price per square foot averaged $198.54.
During the like first nine months of 2009, the market posted 16 transactions with a total volume of $97,239,371. The price per square foot averaged $153.59.
One of the largest transactions that has occurred within the last four quarters in the San Diego market is the sale of Del Mar Plaza in Del Mar. The 74,631-square-foot retail center sold on May 3 for $41.6 million, or $557.41 per square foot, to GLL Properties.