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SAN DIEGO-San Diego’s retail sector outperformed the Southland this year and is among one of the strongest markets in the nation, according to a report released by Marcus & Millichap Real Estate Investment Brokerage Co. The surge has been related to the metro’s diversified and growing economy, which foresees a 2.5% jump in job growth this year. “San Diego’s robust economy and strong retail sector have caught the attention of investors, who have responded by pouring capital into retail property,” says Kent R. Williams, first vice president and regional manager of the firm’s San Diego office. “With completions of new space sharply reduced, vacancy will remain low and prices for retail properties will continue to rise.”Investors and developers remain optimistic, with new retail and multifamily projects popping up daily. Undaunted by the possibility of a downturn in the market, developers are expected to put up 1.1 million sf this year, according to the report. However, completions will be down 45% from the 2 million sf delivered in 2004. “This notion of bubble bursting is on everybody’s mind, but it is not likely to occur here,” Bill Rose, CSM and ICSC – San Diego Program Chair with Marcus & Millichap, tells Globest.com. “For retail investment property types, we think the entire county is gold.”The report predicts approximately 32,000 new jobs will be created in San Diego this year. While the technology and bioscience sectors continue to post strong growth, the leisure and hospitality sector is creating the most employment opportunities, with an increase of 5,800 positions forecast for 2005.Marcus & Millichap’s report states that with for-sale inventory likely to remain limited, prices will continue to rise. Single-tenant prices have increased 19 % over the past year to $270 per sf. Fast-food restaurants command the highest median price at $497 per sf, up $63 from one year earlier. Additionally, retail properties will appreciate as capital pours into the sector. Median prices for multi-tenant properties have increased 17% over the past 12 months to $175 per sf while cap rates have fallen 90 basis points to 7%.”I have never heard an investor say I don’t want San Diego because it’s too pricey. They look at it as a place they want to be due to the fundamentals that are in place,” Rose says.

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