San Jose Retail Market Report
Limited New Supply and an Affluent Consumer
Base Help Stabilize Market Conditions
Retail fundamentals tighten. The South Bay’s high-skilled consumer base has underpinned discretionary spending amid widespread inflation, benefiting performance at local retailers. Although headwinds like low office utilization rates continue to hinder mid-day foot traffic, market conditions have begun to turn the corner. After vacancy reached a near decade-high of 5 percent in mid-2022, San Jose posted three straight quarters of positive net absorption. This lowered the rate to 4.6 percent in March, 130 basis points below any other Bay Area metro. Retailers specializing in personal care, fitness, fast food and restaurants have been actively taking space off the market, with tenants like Egghead Cafe, Orange Square, Pizza My Heart and Teazen Tea each committing to multiple new locations in the past year. Leasing demand has been strong in Palo Alto, Sunnyvale-Cupertino, Mountain View-Los Altos and Santa Clara, areas with local vacancy below 4 percent entering April.