The overall vacancy rate for San Diego retailers was a “very healthy” 5.0% in the last quarter, down from 6.3% a year ago, according to an analysis of the local market.
The sector showed a strong 342,000 square feet of occupancy growth in the quarter, for a total 885,000-square-feet increase in 2022, Cushman & Wakefield noted in its Marketbeat report.
In addition, there are currently seven projects totaling 334,750 square feet under construction, with the majority in South County.
Cushman & Wakefield Managing Director Phil Lyons, who specializes in San Diego retail real estate, highlighted market trends, including the impact of rising interest rates.
“Well-located centers continue to have pricing power on the leasing front,” Lyons said. “Additionally, tenants continue to report strong sales in the neighborhood shopping center segment.”
Neighborhood centers showed strength, followed by community centers, strip centers. so-called “power centers,” lifestyle centers and regional centers.
The increase in interest rates, though, will affect investments in centers, which was strong in the third quarter.
“Many of these closed transactions had started their sales process in (the) early (second quarter) when interest rates were lower. Moving forward, the increased cost of debt will push cap rates higher on sale transactions in the foreseeable future,” Lyons said.