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

Bay Area job market to top U.S., California

The Bay Area job market should expand more quickly than California and the nation over the next two years, primarily because of solid employment growth in the San Jose and San Francisco area, although the Oakland area should expand as well, a report released Thursday shows.

During 2013 and 2014, job totals in the Bay Area should expand by 7.2 percent, the Bay Area Council’s Economic Institute reported.

The only job losses expected in the Bay Area over the two years will come from local, state and federal government agencies, the report predicted.

Ellis Partners buys East Bay buildings

Ellis Partners has bought two office buildings in Livermore and one in Pleasanton in separate transactions, the realty investor and developer said Thursday.

San Francisco-based Ellis bought a 145,000-square-foot, two-building office campus just north of Interstate 580 on North Canyons Parkway in Livermore. The deal for the two buildings, known as North Canyons Tech Park, was arranged through realty brokerage HFF.

Ellis also bought a 64,000-square-foot office building known as Franklin Corporate Center, located at 5100 Franklin Drive in Pleasanton. The deal was arranged by commercial realty firm Colliers International. Ellis will undertake a major renovation of the Pleasanton building, including new lobbies.

LightSail

captures $37 million in VC cash

Berkeley-based LightSail Energy, a developer of new technologies for energy storage, has landed $37.3 million in Series D venture capital financing.

Investors Bill Gates, Peter Thiel, Khosla Ventures, and Innovacorp were among the notable financiers that participated in the venture funding round.

Founded in 2009, LightSail Energy has developed technologies to make renewable energy such as solar and wind power available at times when the power is needed, rather than only when they are available. LightSail’s storage system enables solar farms to store energy cheaply, then deliver the power when it’s needed.

— Staff

Article source: http://www.insidebayarea.com/business/ci_21960946/biz-buzz

LA Fitness is making its debut in the Bay Area with two health clubs in San Jose that will be the vanguard of up to 30 fitness centers that, combined, would employ hundreds of people.

“We believe in the economic engines of the Bay Area,” said Bill Horner, chief real estate officer with Irvine-based L.A. Fitness International. “We are excited about being there and are looking at projects throughout the Bay Area.”

LA Fitness is planning 20 to 30 health clubs in the nine-county region. Each will have about 40 to 50 employees. So that would work out to roughly 800 to 1,500 employees, depending on the company’s ultimate expansion.

“The Bay Area has a lot of health-conscious and sophisticated consumers,” said Kent DeSpain, a partner with San Francisco-based Retail West, a commercial realty firm that represents LA Fitness in its search for sites to lease.

“We are actively working on deals right now for 10 to 12 locations,” DeSpain said. LA Fitness also is planning centers in the East Bay, although specifics weren’t provided.

The first two centers in San Jose will be about 45,000 square feet each. LA Fitness intends to seek sites to accommodate clubs of very close to the same size as it expands in the Bay Area.

That uniformity is a core element of the company’s philosophy.

“We offer consistency throughout our clubs at a good value,” Horner said. “All of our clubs have a full set of amenities. They have pools, racquetball,

basketball, a great equipment package. We have 50 classes a week.” The company aims for pricing packages that work out to roughly $1 a day.

The first LA Fitness outlet in the Bay Area will be at the northwest corner of Oakland Road and East Brokaw Road in San Jose. The health club will be the anchor tenant for a 100,000-square-foot retail complex, said Damon Scholl, a sales associate with Cornish Carey Newmark Knight Frank, a realty firm.

“Having LA Fitness definitely helps the center,” Scholl said. “The parking lots for their centers are always packed every day.” Scholl added that Five Guys Burgers Fries, Chipotle Mexican Grill and Subway have also signed leases.

The success of the Brokaw North site represents a reversal of the misfortunes the complex had suffered previously. And it’s further evidence of the improving retail landscape in the Bay Area.

The developer, Palo Alto-based Dollinger Properties, had a number of tenants lined up. Then came the market crash of 2008, and the tenants headed for the exits.

“We had a complete disaster previously,” said Dave Dollinger, a principal executive with the development firm. “But now the leasing is going pretty well.”

LA Fitness also has leased a second San Jose site a few miles away, near the Interstate 880-Coleman Road interchange next to the city’s airport. That center, Coleman Landings, is anchored by a Lowe’s home improvement store.

“There is a huge daytime population there from local companies, and they will also cater to the Rose Garden and Naglee Park neighborhoods, as well as people in Santa Clara,” said David Buchholz, a senior vice president with Colliers International, a commercial realty brokerage.

Amid a tough economy, it might seem surprising for a company to be expanding. But for Horner, his company’s push into the Bay Area makes sense.

“LA Fitness is a long-term player,” he said. “There is softness in real estate in the Bay Area. For people like us who have a long view, this is a good time to get properties that might not be available again for a long time at these rates.”

Contact George Avalos at 925-977-8477.

Article source: http://www.mercurynews.com/real-estate/ci_19491313

The Sobrato Organization, an iconic Silicon Valley developer, has sold a portfolio of buildings and land in Fremont, San Jose and Sunnyvale for a reported $80 million, in a deal that suggests investors think the tech sector has bounced back.

All told, 10 properties totaling 675,000 square feet, along with 2.7 acres of land, were involved in the April deal, brokers from CB Richard Ellis, a commercial realty firm, said Wednesday.

“The sale of the portfolio was part of a major diversification strategy that we have,” said Michael Field, director of commercial real estate for Cupertino-based Sobrato.

However, the deal also suggests that investors have become more bullish about the Bay Area economy overall — and Silicon Valley’s prospects in particular.

“People are betting that Silicon Valley is back in a big way,” said Jim Beeger, a senior vice president with Colliers International.

LBA Realty snapped up nine of the 10 properties, including the land. One of the Fremont buildings was sold by Sobrato to West Coast Quartz, which makes silicon and quartz components for semiconductor manufacturers.

Industry insiders think Sobrato obtained a sale price of about $80 million, or about $120 per square foot, for the sale of the 10 properties.

Sobrato and LBA executives didn’t officially discuss the financial details.

With Silicon Valley companies snapping up buildings at a swift pace, LBA has a decent chance to enjoy

appreciation in rental rates in the coming years.

“LBA should see some rent spikes over time,” said Rob Shannon, a senior vice president with CB Richard Ellis. “They bought a very stabilized portfolio. About 75 percent of it has long-term leases in place.”

High-quality tenants such as Asus Computer, Western Digital and Flextronics are among the tenants in the buildings, Shannon said. One building is empty.

The buyers also may be heartened because tech companies appear to still hunger for space.

“Demand is still very strong,” said Joseph Moriarty, a CB Richard Ellis senior vice president. “That helps building values.”

The Sobrato firm, on the heels of this transaction, bought the Fry’s Electronics building in Palo Alto.

“Fry’s will be a building that we will hold for some time,” Field said. “We don’t plan to redevelop it.” The consumer electronics retailer still has several years to go on its lease for the Palo Alto store.

Sobrato further diversified its holdings with a $95 million purchase of a 300,000-square-foot empty office complex in San Francisco’s Mission Bay district. That deal was completed recently.

The LBA-Sobrato deals also extend a period of busy activity for LBA, which has snapped up a number of high-profile complexes.

Among the LBA purchases in recent years was the company’s acquisition of three office towers in the Watergate complex in Emeryville. This past summer, LBA landed a big lease with Clorox, which is moving hundreds of workers a Pleasanton campus that LBA bought a few years ago.

Brokers think LBA is far from finished with its shopping spree.

“LBA is very bullish on the Bay Area,” said Eric Anderson, a vice president with Cornish Carey Commercial, a real estate firm. “They are looking long term. I wouldn’t be surprised if they buy more buildings before long.”

Brokers also think purchases of packages of several buildings in one transaction could be on the rise again. Those deals vanished during the recession.

“Buyers have a lot of money, and they want to put it into commercial real estate,” Beeger said. “In 2010, we literally had one big portfolio sale in Silicon Valley. They were very coming in 2007, and now they are coming back.”

Contact George Avalos at 925-977-8477. Follow him at Twitter.com/george_avalos.

Article source: http://www.mercurynews.com/ci_18089836?source=most_emailed