Retail activity in Marin County remained strong through the first half of 2007, despite a slight increase in vacancy from 3.2% at year-end 2006 to 4.0% at the end of the second quarter of 2007. The annual average asking rental rate has increased by approximately 3% to $32.49 per square foot (NNN) with operating expenses (NNN) also increasing accordingly and consistently with inflation.
Terranomics tracks 46 retail centers throughout Marin County, excluding malls, representing a total GLA (gross leasable area) of approximately 4.7 million square feet. The bulk of the retail center inventory lies within the neighborhood center category, which accounts for 35%, or 1.3 million square feet, of the total GLA. This sector is followed by community and power centers at roughly even amounts of 784,485 square feet and 777,675 square feet, respectively. Total availability across the retail centers, excluding malls, amounted to just 165,962 square feet, made up primarily of shop spaces.
Marin County is welcoming a variety of new retailers and witnessing the expansion to multiple locations for existing retailers. Corte Madera Town Center welcomes the North Bay’s first PF Chang’s China Bistro, scheduled to open in August 2007. Best Buy’s second Marin County store, approximately 32,000 square feet, opened in central San Rafael earlier this year. The former Yardbirds site at 1801 Fourth St. in San Rafael has reopened as the newly branded Home Depot Yardbirds.
Macerich continues to attract high-end retailers through its rebranding efforts at The Village at Corte Madera. New retailers scheduled to open this year include lululemon athletica, True Religion, Blue Mercury, Abercrombie & Fitch, Bare Escentuals, Sole Mio, children’s apparel retailer peek…aren’t you curious, and J Crew’s newly remodeled store. Juicy Couture is scheduled to open just in time for the holiday season. For most of these retailers, these openings represent their first appearance in the Marin County and North Bay market. Macerich intends to continue bringing new and exciting retailers to the center. Watch for new arrivals in Spring 2008 as the Macy’s wing at the south end of the center is reconfigured.
Target has proposed a second Marin County store to be located at the Shoreline Center adjacent to Home Depot in East San Rafael.
In June 2007, Sutter Healthcare purchased the Marin Square Shopping Center and an adjacent parcel with plans to convert the property into a major medical campus. Plans for a hospital remain unclear, but the redevelopment of the center will remove approximately 80,000 square feet of retail inventory from Marin County and the Central Marin submarket.
Grosvenor is proceeding with the development of Hamilton Marketplace, located at the southeast corner of Highway 101 and Ignacio Boulevard in Novato. The project is scheduled to start construction in late 2007 and will be anchored by a 55,000-square-foot Safeway with 40,000 square feet of additional shop space.
Vintage Oaks at Novato has received the necessary entitlements to expand Costco to approximately 150,000 square feet. Construction should start in the third quarter of 2007.
Demolition of the old Pini Mill and former home of CSW/Stuber Stroeh Engineering, at the east end of Grant Avenue in Novato, will make way for the Lalanne Group/Signature Properties‘ mixed-use development. The proposed construction consists of a 53,675-square-foot Whole Foods and 125 condominium units, including some affordable units.
Investment activity
Over the past four years, retail investment activity has been particularly strong in the San Francisco Bay Area. Thirty-five retail centers were sold in 2006, the lowest total for any of the previous four years. In 2005, 59 centers changed hands, 2004 saw 51 centers sold and 2003 sales totaled 50.
The total GLA sold during the last four years, however, tells an entirely different story. The largest annual GLA sale occurred in 2003, with nearly 10 million square feet, compared with 6.3 million square feet sold in 2004 and 6.1 million in 2005. At just 4.1 million square feet, 2006 is significantly off the pace recorded in each of the previous two years in terms of total transactions and GLA. Despite this, demand for anchored and well-located retail properties in Marin County remained strong in 2006 and will continue to do so going forward. The barriers to entry in Marin County continue to fuel low vacancy levels and rising rental rates in retail properties; this, in turn, fuels investor interest. This trend will continue in 2007.
