Northern California Multi-Tenant Market Report
San Francisco Market Overview
San Francisco was largely affected by people leaving the metro when COVID-19 began. Specifically, the Downtown area noted large losses as tech companies relocated to other parts of the metro. While Downtown San Francisco once noted the most retail performance, outer areas now note increases in retail activity. Areas outside of the urban core marked the least amount of changes in vacancy and rent growth.
San Francisco By the Numbers
- Vacancy Rate: 6.6%
- Rent Growth: -2.3%
- Deliveries in SF: 17.8K
- Absorption in SF: 906K
- Sales Volume: $494M
San Francisco Market Performance
Leasing activity has been greatest for freestanding retailers in areas outside of Downtown. For example, the largest lease so far this year occurred in the Brisbane/Daly City submarket. During the second quarter of 2024, Jagalchi Market leased 75,000 square feet at Serramonte Center. This supermarket will have the third-largest amount of square footage leased at the property upon move-in.
There have been 20 sales in the San Francisco market throughout the past 12 months. The average cap rate over the past year, at 5.1%, is an uptick from the five-year average cap rate of 4.9%, which contributed to slow sales activity. The majority of sales here have been for Class B and C properties. Continuing with this trend, the greatest sale during the past 12 months was for a Class B facility. In May 2024, Oceanview Village sold for $37 million, or $199.72 per square foot. The shopping center is home to six tenants, and is anchored by an H Mart.
Sacramento Market Overview
A large number of residents relocating to Sacramento aided the metro in recording positive fundamentals. The increase in the population allowed for the absorption of 520,000 square feet in the past year, as well as a decrease in the vacancy rate. Most of the demand from retailers has been for Sacramento’s suburbs, where 95% of the retail inventory in the market is placed. These outlying areas are also popular locations for new residents.
Sacramento By the Numbers
- Vacancy Rate: 5.9%
- Rent Growth: 0.4%
- Deliveries in SF: 736K
- Absorption in SF: 520K
- Sales Volume: $726M
Sacramento Market Performance
Retailers in Sacramento have found challenges in leasing here, due to the low availability rate of 6.5%. However, more than half of leasing activity has been for spaces that are less than 50,000 square feet. Grocery stores, personal service, and discount retailers were some of the most active tenants for leasing velocity. There were only five leases for spaces larger than 50,000 square feet. One of the largest leases was JCPenney leasing 165,824 square feet at the Westfield Galleria at Roseville.
From the 270 sales noted over the past 12 months, private buyers made up the majority of these transactions. Yet, activity has slowed down since 2022 when the market noted a high point in sales volume. So far this year the largest sale was for a neighborhood center in the Roseville submarket. Campus Oaks Town Center sold for $14 million, or $368.25 per square foot in April 2024.
