The Bay Area is enjoying its strongest surge of retail expansion in years, fresh evidence that the wounds inflicted by the Great Recession are healing.

Developers are building retail projects at a brisk clip, demand for retail space has surged and vacancy rates have dwindled, and merchants are scouting for sites to open stores, according to realty experts who track the retail sector.

“This is definitely the strongest market for retail in the Bay Area since the downturn, no question about that,” said Garrick Brown, director of research with Terranomics, a realty brokerage that specializes in retail properties and tenants. “There is a lot of demand all over the Bay Area for retail space.”

At the end of June, the nine-county Bay Area had about 1.3 million square feet of retail sites in the pipeline — defined as actually under construction or about to launch construction — according to Terranomics. That is up from 1.1 million in mid-2012 — and well ahead of the 150,000 square feet in the retail pipeline in mid-2009, which was the year after the worst of the financial crisis of 2008, Terranomics experts said.

“We are leasing everything we can touch,” said David Taxin, a partner with Meacham/Oppenheimer, a commercial realty brokerage. “I’ve been doing this for a long time and this is definitely the strongest demand by retailers in years.”

All of this stems from the perceived economic strength of the region.

“You have the demographics and the economy, job creation and the relatively low unemployment rate,” Brown said. “That’s what retailers are looking for. They want a sure thing, and the Bay Area nails it on all fronts.”

In another sign of the health of the market, vacancy rates are declining steadily for retail spaces in the Bay Area. At the worst part of the current cycle, vacancy rates peaked at above 7 percent during 2010. Now the rate in the nine-county region is 5.8 percent, according to Terranomics.

In some spots, the demand is even higher. San Mateo County, San Francisco and Marin County are all regions where demand outstrips supply.

“On the Peninsula and in San Francisco, there is really nowhere to build, and the development process is very difficult, even if there are places to build,” Brown said. “The East Bay and Santa Clara County are the most welcoming for retail development.”

In Santa Clara County, the largest retail center now under construction is Village Oaks in South San Jose, a 320,000-square-foot complex that will be anchored by Target and Safeway. In the East Bay, the biggest retail projects under construction are a 140,000-square-foot Target store at Alameda Landing Shopping Center in Alameda, and an 80,000-square-foot Foods Co store in Oakland’s Foothill Square. San Francisco’s largest project is the 270,000-square-foot Market Street Place.

Retailers as big and familiar as Target, Safeway and Whole Foods are on the hunt for new space. But they are joined by a wide range of other stores, from Walmart and its neighborhood markets to Jamba Juice and Five Guys.

“We are ramping up our real estate efforts again in the Bay Area,” said Adam Smith, executive coordinator for store development with Whole Foods. “We are back where we were in the early 2000s, actively pursuing sites and leases.”

During those peak years, Whole Foods opened about five stores a year in the Bay Area. That’s down to about two stores a year. Whole Foods has 30 stores here.

Calling it “a great market for us,” Smith noted “the Bay Area is the birthplace of the natural and organic food movement.”

Whole Foods just opened its first store in Fremont, and is building a store near downtown San Jose at The Alameda and Stockton Avenue that should open during the second half of 2014. It also recently disclosed plans to open a new store in Dublin and its second store in Walnut Creek.

Target has been active with store openings in San Jose and the East Bay, and it is even finding sites in crowded San Francisco.

“The Bay Area is a region Target has an eye on,” said Matias Cavallin, a Target spokesman. “The economy here is really allowing us to gear up for more store openings.” Target has 54 stores in the Bay Area.

Bay Area cities welcome the heightened activity, because the increase in retail sales helps fill municipal coffers.

“During the downturn, when taxes were lean, we really felt the pinch,” said John Lang, chief economist with San Jose’s Economic Development Department. Now, he said, “retail sales are growing, and we are seeing a growth in tax revenue.”

During the 12 months ending in June, San Jose generated roughly $13 billion in taxable sales, up 3.4 percent from the same period that ended in June 2012. It also was 21 percent above the $11.03 billion in taxable sales during the trough of the retail downturn, the 12 months ending in June 2010.

Some of the shoppers at the opening of the new Whole Foods in Fremont appeared to be confident about their own economic circumstances.

“Over the last year, the economy has improved a lot,” said Jessica Thompson, of Union City. “I feel better about spending money.”

Contact George Avalos at 408-859-5167 or 408-373-3556. Follow him at Twitter.com/georgeavalos.

Article source: http://www.mercurynews.com/business/ci_24193668/bay-area-retail-development-surges

The prognosis: Expect a disappointingly slow, but steady, recovery, led by the San Francisco Bay Area’s high-tech sector.

That was the conclusion offered by Garrick Brown, an economic researcher at Cassidy Turley who spoke before the Woodland Chamber of Commerce during the group’s monthly luncheon on Thursday.

Brown, who specializes in commercial real estate, told the crowd, “If you track commercial real estate, you know exactly what’s going on where.”

What’s going on is a “retread” of last summer, he said, characterized by an apparent paralysis and “freeze on the economy.”

Brown, speaking before about three dozen people at the Yolo Fliers Club, went on to describe the factors involved, and pointed to some hopeful signs along the way.

The main causes for the current economic slowdown, Brown said, are energy costs, this summer’s heat wave, problems with the European economy and the slow growth of “emerging economies.”

As for energy, “Gas seems to like being $4 (a gallon). It just does,” Brown said.

He went on to speak about how the heatwave and drought in the Midwest has led to price increases in commodities.

That in turn affects prices in stores and restaurants, hurting both retailers and consumers.

The other factors are global in scope, affecting exporters, travelers and “banks and their willingness to lend,”

he said.

U.S. debt also remains an issue, he noted, as does political uncertainty and dysfunction.

As a result of all these problems, Brown said, the current fiscal quarter was the worst since the recovery began.

Positive signs

“We’re at bottom, we’re not getting any worse. But are we really getting better?” Brown asked.

His answer was mixed.

On the one hand, Brown believes “pent-up demand” will lead to new real estate growth, especially in single-family homes and rentals. He noted that in San Francisco these days, a tiny 600-square-foot apartment can go for $2,600 a month — a number that drew shocked gasps from attendees.

Also, Brown said, 3.1 million jobs have been created since January 2011 — including 21,800 locally — with almost every sector growing.

On the other hand, the only sector not growing is government jobs, which Brown said is in “full-brown retraction mode.”

And that happens to be the biggest sector in Sacramento, with 27 percent of the workforce in the public sector. As a result, the region is lagging behind others across the nation.

“We are recovering, but it’s turtle’s pace,” Brown said.

Going forward

Brown said he isn’t worried about the most dire economic forecasts, thanks to government stimulus and the Fed keeping interest rates low.

“The market has generally responded very well to that,” he said.

Instead, he said, “We’re essentially looking at more of the same” — steady, but very slow, economic growth.

He encouraged business leaders to diversify the local economy as much as possible, and noted that the Bay Area’s sustained growth — San Jose and San Francisco are currently the top two local economies in the country — could work to our advantage.

One reason why is that as real estate prices continue to rise there, people move out to Sacramento and Yolo counties for more affordable living.

“We have become the escape valve for the Bay Area,” Brown said.

That’s especially relevant given the youth of the high-tech workforce, with most of the engineers at Google, Apple and Facebook in their 20s and 30s. As they grow older, he predicted, many will get married, have kids and move to the suburbs.

“There’s going to be a point where they want good schools, safe streets and square footage,” Brown said.

And that’s where Woodland can take advantage — so long as the city is able to provide attractive places for Bay Area emigres to settle down.

Follow Don Frances at twitter.com/donjfran

Article source: http://www.dailydemocrat.com/news/ci_21502445/researcher-woodland-chamber-expect-slow-but-steady-economic