SAN FRANCISCO—There are 12 North American retail corridors as identified and defined by JLL's City Retail report, further segmented into existing and emerging corridors. A prime urban corridor is a nationally recognized shopping district distinguished by its mix of high street, national and international tenants. Prime urban corridors emerge organically and are not the product of a single master developer.

Typically named for the most notable retail street within the corridor, the boundaries of these shopping districts were carefully drawn to include the most prominent retail spaces, as well as occurring and potential retail sprawl within these areas of focus. The Bay Area's prime urban corridors are Union Square, the Marina, Fillmore and Hayes Valley in San Francisco, along with University Avenue in Palo Alto. Surprisingly, these last four Bay Area corridors were also deemed affordable by JLL's standards.

“There are two important things to consider with this report on the most affordable retail corridors,” Jeff Badstubner, senior vice president and retail market lead, JLL, tells GlobeSt.com. “First, we are essentially comparing emerging retail corridors on a nationwide basis so the relative affordability of places like the Marina and Hayes Valley need to be viewed in that context. Second, San Francisco's effective ban on 'formula retail'—basically chain stores—has applied a brake to retail development in many parts of the city. What we do see, however, is the emergence of several up-and-coming retail corridors where local shops and retail concepts can take hold and flourish because of increased foot traffic and relatively affordable street-level space.”

The top 10 most affordable prime urban retail corridors in the JLL report (on a per square foot rent basis) are Market East in Philadelphia, Wicker Park in Chicago, the famous Pike Street in Seattle and Fulton Market in Chicago rounding out the top four.

San Francisco's Marina district clocks in at number five. The tenant mix in the Marina has long encompassed a unique assortment of neighborhood retail and restaurants, along with a handful of national chains. Today, more national retailers have entered and pushed some locals out. The corridor has seen a spike in athleisure stores and boutique fitness studios, including lululemon, Athleta, Lucy, Nike and Soul Cycle. Retailers that once sought out space in the Hayes Valley or Fillmore corridors now look to the Marina with its similar demographic base. Available retail spaces are typically small footprints, two- or three-story projects or ground-floor multifamily anchors. The average asking prime retail rent in the Marina is $85 per square foot, with annual rent growth of 7.7%, according to JLL.

University Avenue in Palo Alto ranks number six. Young tech executives have been slowly rooting near downtown while the influx of overseas tech talent has brought more cultural diversity to the region. This tech expansion is changing the retail landscape throughout Palo Alto, pushing out locally owned retail stores and replacing them with non-chain boutiques that cater to the millennial generation, along with a surprising number of home goods stores including Restoration Hardware, West Elm, Rejuvenation and Flor. Most new development has been mixed-use construction as landlords look to create live, work, play environments, attempting to capture the increased daytime pedestrian and commuter traffic. Earlier this year, a development cap was instituted on specific regions of the city, limiting the net new office development to 50,000 square feet annually. New commercial development proposals are being scrutinized by city council and planning officials, making Palo Alto a difficult submarket in which to build.

The high rents in downtown Palo Alto are now as much as $120 per square foot, thanks to office demand. This is up from $65 per square foot four years ago. With market conditions favoring landlords and rents remaining high, stiff retail competition is the name of the game in this corridor. The retail property cost per square foot is among the highest in the Bay Area with many sale transactions landing at more than $1,500 per square foot. Future investment activity will be limited, given that landlords typically hold assets for the long term and are predominantly small private owners. The average asking prime retail rent is $90 per square foot, with annual rent growth of 7.9%, according to JLL.

Back in San Francisco, Hayes Valley hits lucky number seven. Hayes Valley captures the mix of upscale locals and visitors attending performances at nearby venues such as the Symphony Hall and the Performing Arts Center. The SF JAZZ Center opened to much fanfare late 2013, and builds upon the arts culture that defines the eastern edge of this neighborhood. With home values nearly 32% above previous peaks in 2008, the neighborhood is one of the most desirable in San Francisco. National opportunities for investment and new storefronts in Hayes Valley are shrinking, as housing values increase and entertainment venues play host to tourists. The average prime asking retail rent is $90 per square foot, with annual rent growth of 4.7%, according to JLL.

Miami's Design District and Metro Center in Washington, DC make up the eighth and ninth positions.

The number 10 spot is reserved for the Fillmore. It's been eight years since the transformation of the Fillmore corridor started and today, luxury retailers are dominating the retail scene. The average asking prime retail rent is $115 per square foot, with annual rent growth of 13.6%.

Of course, not part of the top 10 by any stretch of the imagination is Union Square, where asking rents are $700 per square foot, with a -2.1% annual rent growth and 4% to 4.5% cap rate range, GlobeSt.com learns.

Miami's Design District and Metro Center in Washington, DC make up the eighth and ninth positions.

Instant Insights /

Surprisingly, Four Retail Centers are Affordable

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