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[caption id="attachment_50700" align="alignleft" width="180" caption="Garrick Brown"][/caption]

NORTH BAY -- Shopping centers in Marin and Napa counties have very little available space overall, moving rents higher. Larger-population Sonoma and Solano counties have vacancy rates two to four times as high, but the markets are expected to stabilize.

Marin County center vacancy was just 3.1 percent at year-end. That's down from 4.0 percent in the third quarter and late 2010, reflecting net occupancy gains of 59,000 square feet in the fourth quarter and 52,000 all year.

Marin vacancy is so low it threatens growth. Larger tenants have few premium options. By now, developers would have been back in action. A number of planned projects are set to start construction in months ahead, but no major new retail centers were under construction in the Bay Area last year. So in 2012, expect vacancy to tighten further and rents to climb quickly.

In the Bay Area, grocers and discounters were among the most active lessees in 2011. That didn’t play out in Marin, thanks to few options for these larger users. Health clubs, banks and salons have been active, but the most active smaller space users, by far, have been restaurant chains -- particularly fast-food and fast-casual concepts.

Neighborhood and community center vacancy in Marin fell 34,000 square feet in 2011 to 5.1 percent. The recent average triple-net annual asking rent of $22.66 per square foot masks a range from $12 to $36, with first-tier centers at the top.

Vacancy at unanchored strip centers, still the most challenged property type, decreased 19,000 square feet to 2.3 percent. There's still little demand from mom-and-pop retailers, a bread-and-butter tenant for such centers.

Regional and power center vacancy was a scant 0.8 percent last year, with just about 17,000 square feet available. Vacancy and space absorption didn't change in 2011, but asking rent increased 5 percent to $37.05 per square foot.

Pricing for even Marin's weakest offerings will stabilize in 2012, and rent growth will accelerate in the face of such low vacancy rates.

Napa Valley center vacancy decreased over six consecutive quarters to an extremely low 2.8 percent in the third quarter then up to 3.1 percent at year-end. Occupancy grew by nearly 56,000 square feet last year, besting the 51,000 square feet absorbed in 2010 and much improved from 100,000 net square feet vacated in 2008 and 2009.

Like in Marin, Napa County centers have reached growth-threatening low vacancy. There were just more than 18,000 square feet of center construction under way at year end at Napa Crossing in American Canyon. At Napa Century Center in south Napa, 43,000 square feet are set to be under way by the second quarter.

Because all but about 3,000 square feet of this new space is already preleased, neither project will significantly impact extremely limited availability. Meanwhile, retail demand ticks up. So, vacancy will tighten further in 2012, and rents will climb quickly.

For like reasons as in Marin, grocers and discounters didn't dominate Napa Valley. Active lessees have been health clubs, banks, salons and restaurants.

Neighborhood and community center vacancy in 2011 fell by 27,000 square feet to 3.4 percent, and average asking rent soared 12 percent to $28.03. Unanchored strip center vacancy slipped by 12,000 square feet to 15.4 percent, and rent only recently began to stabilize at $21.07, up from $16 to $18 for most of 2011, but 9 percent below $23.27 of late 2010.

Regional and power centers were almost totally full -- 0.4 percent vacant in the fourth quarter. Net occupancy increased just 1,000 square feet from 0.6 percent a year before, and asking rent jumped 9 percent to $24.

Vacancy in outlet, lifestyle and theme centers remained flat at just 0.8 percent throughout 2011, with almost no activity. Asking rent rose to $24 from $23 over the year.

Napa Valley center vacancy will continue to decline this year. Lack of available quality space will negatively impact overall deal activity. Still, both occupancy and rents will grow, tempered until development ramps up further.

Among North Bay retail markets, Solano County's is the most challenged. Fourth-quarter center vacancy was 12.7 percent, up from 12.1 percent in the third quarter and 11.3 percent in late 2010. Occupancy declined more than 47,000 square feet during the fourth quarter, pushing negative net absorption for the year to 109,000 square feet.

After a strong first quarter, vacancy increased in 2011 thanks to tepid demand. Deals last year totaled 354,000 square feet, down from 413,000 in 2010 and less than half the 717,000 square feet leased in 2009 at the depths of "the Great Recession." Despite some leasing and expansions, occupancy gains simply couldn't keep pace with new vacancies, fewer as they were compared with 2008 through 2010.

Solano's retail fortunes often are linked to those of Sacramento, rather than of the San Francisco Bay Area. Sacramento had healthy 719,000 square feet of 2011 occupancy growth. Yet, this growth has yet to carry over to Solano.

Center vacancy increased by 56,000 square feet in 2011 to 14.0 percent for neighborhood and community centers; rose 21,000 square feet to 14.6 percent for unanchored strip centers; and increased 32,000 square feet to 9.4 percent for regional and power centers. Vacaville Premium Outlets, the county's only specialty center, was totally full.

Asking rents are $15.38 for neighborhood centers, down 1 percent; $15.92 for strip centers; and $27.84 for regional and power centers.

Top-tier centers are where expanding retailers look first and land the most deals, but this activity isn't spilling over to other properties.

Sonoma County center fourth-quarter vacancy was 6.0 percent, down from 6.9 percent in the third quarter. Occupancy jumped more than 93,000 square feet in 2011, mostly in the fourth quarter, compared with 2010 growth of 119,000 square feet and vacancy around 7 percent.

Unlike properties in other North Bay counties but like those in the rest of the Bay Area, Sonoma County centers enjoyed activity from grocers, dollar stores, health clubs and discounters. In the second half, big deals came from Safeway, Ross Dress for Less and Tractor Supply Co. Earlier in 2011, 24 Hour Fitness, Big Lots, Dollar Tree and Dollar Depot signed leases.

Inline space remains somewhat challenged. Most-active smaller tenants, by far, are still fast-food and fast-casual restaurants. Mom-and-pops remain missing in action.

Vacancy fell by 88,000 square feet in 2011 to 7.1 percent for neighborhood and community centers; rose to 8.5 percent from 7.9 percent for unanchored strip centers; fell to 0.6 percent from 1.6 percent at regional and power centers; and barely increased to 3.2 percent from 3.0 percent for specialty centers.

Average asking rents for neighborhood centers is $18.57 (ranging from $10 and $36), down from $19.13 over 2011. Strip centers average asking is $18.15, down from $21.06.

Retail demand and leasing activity will fully stabilize leasing, and occupancy gains will surpass those of the last two years. New retail is coming at East Washington Place in Petaluma and The Barlow in Sebastopol. Planned projects include Deer Creek Village in Petaluma and a Target store of Coddingtown in Santa Rosa.