Neighborhood Centers Continue to Lead the Pack

Mid Valley Shopping Center is 97% occupied with tenants including Safeway and Ace Hardware.

CARMEL, CA—Despite the strength of the local economy including the tourism industry, retail continued to face challenges in the first quarter of 2018, according to Cushman & Wakefield‘s latest research. Additionally, the closing and downsizing of stores as part of the strategic plan of many retailers after the 2017 holiday season contributed to the increase in vacancy in San Francisco and many parts of the Bay Area during the quarter. That pull-back was partially driven by the need to correct what had been an overexpansion of physical locations and a decision made to grow via e-commerce instead.

Finally, experience-oriented retail continued to outperform traditional merchandising, which has resulted in a pause in leasing activity while landlords and tenants rethink the best way to use space. Food-and-beverage remains one e-commerce-proof retail category and along with boutique fitness, will dominate leasing transactions for the foreseeable future. A continued demand for smaller and neighborhood retail spaces will be the norm.