SAN DIEGO—Retailers see San Diego as a strong growth market, as reflected in new store openings and total retail vacancies reducing to the lowest level since the recession, Marcus & Millichap's first VP and regional manager John Vorsheck tells Globest.com. With retail conditions in San Diego among the most favorable in the country as developers remain disciplined and demand-side drivers support spending, we spoke exclusively with Vorsheck about the retail sector here and his predictions for the future.

GlobeSt.com: What are the main factors that are contributing to investor confidence in the San Diego retail market?

Vorsheck: San Diego is a popular shopping hub serving both local residents and tourists. Last year, retail sales grew by 3.7%, and they are forecast to grow 4.5% in 2015, significantly faster than the national average, which is 4.2%. Numerous drivers support retail sales growth. New households grew by 1.1% last year, almost triple the national rate of 0.4%. Additionally, the local median household income grew by 3.6% to $63,353, again outpacing the national average. Tourism also supported retail gains, with 4.1% more visitors in 2014 than the prior year, who spent 10.4% more than in 2013. Additionally, lack of alternative investment vehicles and overall improving fundamentals have given buyers confidence in the local market.

Retailers see San Diego as a strong growth market, with new store openings dropping total retail vacancies to 4.3%, the lowest level since the recession. Multi-tenant properties were a major contributor to this improvement, since operations tightened vacancy 210 basis points to 4.8% over the past five years.

Prices have recovered as well, with retail assets trading at cap rates in the mid-5%-to-6% range, matching prices last seen at the peak of the market in 2007. The average price per square foot has steadily risen and is now in alignment with the pre-recession peak.

GlobeSt.com: Do you expect to see more mixed-use projects in the county that incorporate retail, like One Paseo and Caruso Affiliated's proposed Agua Hedionda project?

Vorsheck: These projects align with national trends. A live/work/play lifestyle has increased demand for amenity-rich mixed-use locations, particularly in more urban locations. Outside the urban core, builders are creating master-planned communities and neighborhood hubs that blend a variety of commercial and residential property types to offer an amenity-rich lifestyle.

GlobeSt.com: What trends are you noticing in the multi-tenant retail arena in San Diego?

Vorsheck: Investors are increasingly targeting multi-tenant assets throughout the metro. During the past year, investor activity jumped by more than 50%, led by a dramatic jump in strip-center transactions. Buyers will focus on multi-tenant assets in the popular neighborhoods near Downtown and near tourist attractions along the coast. Through our proprietary marketing system, we are attracting buyers from outside San Diego County and throughout Southern and Northern California, as well as the rest of the country who are interested and actively pursuing properties throughout San Diego County.

GlobeSt.com: What else should our readers know about the San Diego retail market?

Vorsheck: The broad-based economic gains forecast for 2015 should continue to support retail throughout the San Diego region. Small businesses in particular could accelerate their leasing activity, as evidenced by the steady rise of the Small Business Optimism index. Though builders will complete 350,000 square feet of retail space this year, it will be more than offset by strong absorption, resulting in a 60-basis-point decline in vacancy to 3.7%. Tighter operations will support asking rent growth as well, with rents expected to climb 4.4% this year.