San Diego Big Box Leasing Picks Up
While leasing activity was strong in the first half of the year, new supply coming to the market kept the vacancy rate flat.
“The good news is that from the last survey, which we do every 6 months, we had an additional 15 more boxes,” Reg Kobzi, SVP at CBRE, tells GlobeSt.com. “That is a good sign. However, at the end of the day, we ended up with the same amount of boxes available as we did at the end of last year, so it was kind of a wash. Everything got absorbed in the Central Valley. It is really in the South Bay, North County and East County that still have the most availability for big box.”
The report classifies big box spaces as anything 15,000 square feet or bigger, but there isn’t a trend in terms of the size range that has been most popular. “Sears skews the numbers, because they are big. You can’t really use an average,” says Kobzi. “The good thing is that a lot of retailers with widespread closures are only closing under performing stores. It is not a clean slate.”
This year, however, smaller retailers are shuttering, which has kept the availability of large big box spaces low. “We have more closures announced in the first half of 2019 than all of 2018, but they are all smaller chains, so they are not necessarily the big boxes coming available,” says Kobzi. “Pay-Less Shoes and Party City, for example, have announced closures, but those are not huge locations. There is nothing on the big box front.”
Going forward, the remaining big box spaces might be difficult to lease. One reason is because, while technically vacant, many retailers are still paying rent on vacated locations. “There are spaces available, but they are technically subleased, meaning that the landlord is still getting rent on the space,” says Kobzi. “The tenant didn’t go black; they just closed. So, the rents are still coming in and there is a safety net there.”
Online shopping is also hampering big box leasing activity. “Ecommerce is impacting every category, and we don’t know what the fall out is going to be yet. It is a question mark,” adds Kobzi.
Still, San Diego’s big box market is healthy, particularly compared to other markets in the Southern California region. Kobzi says, “Orange County had 44 boxes absorbed and 40 big boxes, so in the region, we are doing well.”