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Sonoma County retail real estate remained stable through 2010 and into 2011. The outlook for this year is relatively positive as more retailers come into the market and absorb vacancies.

After more than three years of real estate turmoil and its especially hard toll on the retail sector, we are seeing a glimmer of hope and encouragement in more activity in the past two quarters.

Retailers are seizing upon reduced rents. Owners seeking to stabilize their properties are filling vacancies and/or retaining tenants. Tenants want exceptional deals, and owners are considering rents absolutely "negotiable."

Pent-up demand seems to have propelled a surge in retail leasing. Activity has been vigorous for spaces and buildings smaller than 5,000 square feet. And owners of well-placed shopping centers are signing leases with local, regional and national retailers. The latter two types of tenants had put off leasing for two years.

Leasing and occupancy in county and North Bay malls, shopping centers and downtowns continue to improve. Economists expect consumer demand to accelerate for the next two years as shoppers open their wallets and the economy adds jobs. That leads to renewed demand for retail space.

With a very low amount of new retail space and a strengthening economy, retail vacancy rates are expected to continue to decline. The countywide rate has remained in the 8 percent range for the past three quarters, down from around mid-9 percent a year ago.

Santa Rosa's fourth-quarter vacancy rate was 7.5 percent, down from 9 percent a year prior. Petaluma and Rohnert Park maintained 12 percent to 13 percent through 2010. Elsewhere, the average rate was 4 percent.

Significant vacancies are being filled. In the former Home Base and Thrifty spaces at Stony Point Plaza in Santa Rosa, Goodwill Industries leased 28,000 square feet; Ross Dress for Less, the same amount; Fallas Paredes, 24,000 square feet; and Anna’s Linens, 8,000 square feet.

Forever 21 leased the first floor of the former Mervyn’s store in Santa Rosa Plaza, and Whole Foods Market the former Lucky’s market in Coddingtown.

In Rohnert Park, Escape Entertainment leased the 45,000-square-foot former Levitz furniture store for a paintball-focused recreation venue. At North Bay Center, 24 Hour Fitness is transforming 44,000 square feet of former Rite Aid drugstore space. Beverly’s Fabrics & Crafts leased the 18,000-square-foot former Hub’s Gym on Redwood Drive.

The Sleep Train is expanding around the bay and leased the former Silverscreen Video space in Petaluma's Plaza South.

New space is coming. Wal-Mart will be adding 35,256 square feet in Rohnert Park for a Supercenter. Target committed to the anchor space in Regency Centers' 380,000-square-foot East Washington Place power center project in Petaluma and plans to open in mid-2012.

However, vexing vacancies remain: the closed Gottschalks store and several spaces in Coddingtown, one-half of the former Mervyn’s store in Santa Rosa Plaza, several empties in Rohnert Park Expressway Mall and Southwest Shopping Center in Rohnert Park, recently shuttered Pacific Market in Rohnert Park's Mountain Shadows Plaza, the former Mervyn’s in Petaluma's Washington Square, the former Shoe Pavilion building at Petaluma's Redwood Gateway Center and the former Yardbirds/Home Depot building and availabilities in the Petaluma Village Premium Outlets mall.

Yet advanced negotiations are under way with national retailers to fill these vacancies.