San Jose Retail Market Report

Standout submarket backed by residential growth. Retail vacancy in San Jose is set to contract in 2023, ending a five-year climb. This turnaround is being led by increasing tenant demand in the metro’s largest submarket by inventory, South San Jose. The first quarter represented the strongest three-month span for net absorption in the area since early 2020, helping reduce the local amount of vacant retail space to below the year-end 2019 level. Leasing in South San Jose includes several restaurants, fitness concepts and other retail services, positioned to meet the demand of a growing, higher density local population. The number of apartments in and around the submarket has risen by 8 percent since 2019 as new households continue to form in the area. A minimal pipeline of active retail projects, in turn, will direct tenant demand to existing floor plans.