Retail Vacancy Rises in Silicon Valley After Six-Year Low

The South Bay retail market had a tough second quarter.

Silicon Valley retail vacancy increased, and asking rents dropped in April through June, compared to the previous three months, the Mercury News reported, citing Cushman & Wakefield. The exit of several national retailers, such as Bed Bath & Beyond and Barnes & Noble, was partially to blame.

The South Bay saw a retail vacancy rate of 5.2 percent in the second quarter, up from 4.7 percent in the first quarter, when vacancies hit a six-year low in the area. Retail rents fell from about $2.92 per square foot in the first quarter to $2.81 in the second.

Some parts of Silicon Valley and the South Bay fared better than others. The retail vacancy rate in Sunnyvale and Cupertino was 3.1 percent, while North San Jose and Milpitas were at 4.5 percent. Palo Alto, Mountain View and Los Altos had a 5.1 percent vacancy rate, while downtown San Jose, south San Jose, Los Gatos and Campbell registered a 5.4 percent retail vacancy. The markets in the area with the highest retail vacancy rates were Santa Clara with 5.5 percent and Morgan Hill and Gilroy at 7.5 percent.

While the trend might raise some concerns, investors don’t appear to be shaken and are looking toward the long term in the South Bay.

Last December, Arc Capital Partners and Milan Capital Management bought The Plant shopping center in San Jose for $95 million, the Mercury News reported. After that purchase, a supermarket and discount store moved into spaces that had been empty and several new leases at the property were signed.

Elsewhere in the South Bay, retail centers have begun finding more tenants for previously vacant spaces. At Almaden Plaza in south San Jose, for example, the former homes of Bed Bath & Beyond and Barnes & Noble have been filled by Hobby Lobby with a 62,000-square-foot lease and Sports Basement renting 86,000 square feet. — Chris Malone Méndez