East Bay shopping centers keep vacancies low
Retailers’ sales may be suffering, but that doesn’t mean their landlords are sharing the pain.
Vacancy rates for retail locations in the East Bay remain low despite the slump in consumer spending that has pushed many retailers to declare bankruptcy, close stores or stall expansion.
In fact, some merchants, including Fresh and Easy Neighborhood Markets, Ross Dress for Less, Sports Chalet and Lowe’s Home Improvement, are hunting for new sites and see the down market as great time to invest for the future.
The vacancy rate at power centers — typically outdoor shopping clusters with at least one big-box anchor tenant — is 5 percent in Alameda County and 2.75 percent in Contra Costa County. In 2006, the vacancy rate in Alameda was 3.39 percent and 2.59 percent in Contra Costa.
The rate for the entire Bay Area is 4.39 percent, a slight decrease compared with 4.45 percent in 2006, according to a study by Walnut Creek retail brokerage John Cumbelich and Associates.
In the last two years, total space in power centers jumped by 4 percent in the East Bay to about 17.7 million square feet in 2008 from 16.9 million square feet in 2006, and developers plan to add more than 4 million square feet of retail this year.
“Lowe’s and Target and other retailers are saying ‘What recession? This is a buying opportunity’,” said John Cumbelich, principal of the firm. “Clearly, space is not just being built, but being absorbed.”
Power centers have sprung up in the East Bay for years and at least 12 more have been proposed.
“There’s definitely a slowdown in leasing right now,” said Wayne Macktinger, who handles leasing for the West Coast sites of Taubman Centers Inc., owner of Sunvalley Shopping Center in Concord. “But, if you walk through the top (shopping) centers in Northern California, you’re not going to see a lot of vacancies.”
Just because sales tank doesn’t mean a retailer can break a lease. Tenants often sign onto multi-year deals and have to find ways to pay their rents.
Macktinger said Taubman does not discount rents for struggling tenants, but “we can’t allow stores to open and close at will. … For certain stores, we will do something to keep them open if they are important enough.”
Many retailers, especially discount chains, use slow periods to secure lower rents and better locations, said Deborah Perry, a retail broker with Colliers International in Walnut Creek. Hot East Bay markets like downtown Walnut Creek and Emeryville still have waiting lists of merchants looking for space to move in.
Last week, luxury department store Neiman Marcus, based in Dallas, signed a deal to open a store in Walnut Creek’s Broadway Plaza after years of negotiations with the center’s owner, Santa Monica-based Macerich. The store won’t open for two or three years.
This week, Rhode Island-based CVS Caremark Corp. snapped up Walnut Creek-based Longs Drugs Stores Inc. with a goal of quickly expanding its West Coast presence.
Not all retailers will survive the down cycle. Hayward-based Mervyns recently declared bankruptcy after years of trying to find its niche and compete with powerhouses like JCPenney and Kohl’s. Chains such as Bombay Co., Sharper Image, Linens and Things and Shoe Pavilion have all gone out of business or are on the path to bankruptcy. Others, like Ann Taylor and Starbucks Coffee Co., have closed some outlets.
Jeff Green, a retail real estate consultant with Mill Valley-based Jeff Green Partners, said many retailers are pulling back to analyze their business operations.
“So many retailers were growing so fast,” he said. “Their focus was on new stores and not on what their concept was supposed to be.”