Brokers battle high retail vacancy; some good news in late '09
On the heels of two north Petaluma sales totaling 278,000 square feet in late 2009, Charles Stephens of Stephens Properties just put his 85,000-square-foot Petaluma flex-space property at 715 Southpoint Blvd. on the market asking $12.35 million, or about $144 a square foot.
[caption id="attachment_18113" align="alignright" width="354" caption="This 85,000-square-foot property is being offered for $12 million. (Marcus & Millichap photo)"][/caption]
While the sale of the 187,000-square-foot former Cisco Systems campus was sold vacant and the owner of Digilock purchased 91,000 square feet in two buildings for company operations, the two-building Southpoint complex is fully leased, according to the listing agent, Vince Schwab of Marcus & Millichap in San Francisco.
"Seller financing is being offered," he said.
The complex has a nearly 42,000-square-foot office building and almost 44,000-square-foot warehouse.
Retail space vacancy in the North Bay has soared since 2008 as shoppers nationwide have dramatically reined in their spending, according to new brokerage figures.
But "the fourth quarter picked up for many people," said Rhonda Deringer in Keegan & Coppin's Santa Rosa office. "Activity in industrial and retail picked up and maybe some in office space."
For example, Performance Bicycle took over the 9,300-square-foot space left by Shoe Pavilion in Santa Rosa, and a deal is working for the 20,000-square-foot Ethan Allen space. In Novato, Paradise Foods leased 23,000 square feet at Pacheco Plaza after Safeway relocated in the city. In Solano County, Orchard Supply Hardware inked a lease for nearly 44,000 square feet at Fairfield Corners in Fairfield, and Bed Bath & Beyond, 35,000 square feet at Gateway Plaza in Vallejo, which had nearly 22 percent vacancy at year end.
Hardest hit locally have been Sonoma and Solano counties, which also have had high unemployment and home foreclosure rates. Retail vacancy increased in Sonoma County to 13.1 percent of 5.47 million square feet at the end of 2009 from 5.3 percent a year before, representing the highest rate in the Bay Area, according to Terranomics Retail Services. In the same period Solano's rate jumped to 12.3 percent of 6.65 million square feet from 7.2 percent.
Two incentives owners of retail centers are using to attract qualified tenants are low first-year base rental rates and dramatically trimmed net costs commonly added to the rent, according to Ms. Deringer, who is helping to market a dozen centers. Some are offering grocery and other anchor tenants 99 cent-a-square-foot base rent for the first year.
"There's still negotiating on taxes, but on overall maintenance all the owners are trying to cut back to reduce the operating costs because they are losing tenants," she said.
Three of the centers she represents are owned by Kimco Properties, which has reduced its operating expenses by 35 percent to spur leasing. Base retail rental rates commonly are quoted "triple net," or net of property operating expenses, taxes and insurance. State law generally holds property taxes steady until a property changes hands. Retail properties that have sold in recent years at a higher price passed along higher rent bills, more than some tenants were willing or able to pay.