San Jose Retail Market Report

Bay Area’s strongest retail market getting stronger. Last year’s late jump in San Jose office occupancy strengthened an already well-entrenched retail sector. Submakets home to numerous tech companies, including Mountain View-Los Altos, Palo Alto, Santa Clara and Sunnyvale-Cupertino, saw contracting retail vacancy last year, with rates entering 2025 under 4 percent. High household incomes supported retail services even when work habits were less tied to the office. As those habits become increasingly workplace-centric, demand for retail space is expected to further improve. The main pocket of relatively high vacancy is in South San Jose, where the local rate rose to 5.1 percent last year. Local net absorption, while negative last year, may turn positive amid planned move-ins by Costco, T&T Supermarket, and various restaurants.