Retail vacancy is San Francisco is expected to climb 5.9% in 2021, a 100 basis point increase, while rents are projected to decline 2.4% to $36.96 per square foot, according to a recent market report from Marcus & Millichap
The report, which uses data from Costar and Real Capital Analytics, shows employment in the region is expected to post a 3.9% gain. Marcus & Millichap had previously noted that while many early indicators around how COVID-19 was impacting the Bay Area have been far worse than elsewhere in the US, the employment base remains “relatively healthy,” with the professional and business services sector (including Big Tech) shedding only 5.3% of positions due to the recent economic crisis.
“These high-paying jobs should help accelerate a recovery when the economy reopens and tech workers resume dining and shopping habits,” M&M analysts wrote in that Q4 report. “Most of the tech firms are well capitalized and could recover lost positions quickly when demand permits. Additionally, venture capital will reenter the market after a resolution to the lockdowns and those firms will have access to unemployed tech workers, who were difficult to find prior to the downturn.”
How that will impact retail, which was already sluggish prior to the pandemic remains to be seen. An array of factors have shaken up San Francisco’s retail scene, including COVID, and retail vacancies are at dramatically high levels, driven partly by the empty 6X6 shopping mall on Market Street. This vacancy will be filled in 2021 by an urban concept Ikea.
Construction stock is also predicted to tick up 0.6%, according to the M&M report, with an estimated 394,000 square feet being completed this year. Average cap rates in the region are trending slightly above 5%.