Marcus & Millichap

San Francisco Retail Investment Forecast

San Francisco Metro Area, 2017 Outlook

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Deliveries Rising as Long-Awaited Mall Comes To Market; Exceptionally Tight Conditions Persist

Labor market strength fostering tight retail vacancy. A broad array of industries, supported by a dynamic venture capital landscape, have fostered tremendous job growth over the current business cycle. As payrolls have swelled, consumers have created a virtuous cycle of retail spending, generating demand for new storefronts. When combined with the lack of available space in the metro, vacancy has tumbled toward its lowest level in nearly 15 years. Due to the lengthy approval process, new supply has come on slowly and sporadically, while typically taking the form of single-tenant net-leased product rather than large, multi-tenant projects. This year, the completion of 6X6, the six-story shopping center at Sixth and Market streets, will account for more than four-fifths of completions as the high-end center is finally delivered after several years of construction. While this will considerably boost supply totals, it will not alter the broad market outlook, keeping vacancy extremely tight. As a result, average asking rents will rise for a seventh straight year.

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