Rise in consumer demand bolsters leasing velocity. Retailers in Central Valley have absorbed approximately 6 million square feet of space over the past two years, reducing the regional vacancy rate to a cycle-low level in Fresno, Kern, San Joaquin and Stanislaus counties, the region’s largest markets. Steady, diverse job creation is the paramount force driving retailer expansions, as continual upticks in professional service, logistics and health-related positions have translated to increased earnings. Growing incomes have prompted an increase in household formations by families and individuals seeking an affordable alternative to the Bay Area and Southern California. Population growth heightens consumer spending while elevating demand for necessity and specialty retailers, many of whom are scrambling to expand footprints in an already-tight region. Robust retailer demand moving forward supports a minimal adjustment in average asking rents.
Tight vacancy met with reduced development. This year is marked by a lack of sizable retail deliveries, as completions exceeding 20,000 square feet are sparse. Additionally, most counties welcome less than 100,000 square feet of new supply while stout retailer demand persists, heightening competition for existing space. These factors are starting to encourage a wave of larger-scale shopping center proposals and redevelopment possibilities in the Valley’s largest cities and expanding locales including Tracy, Visalia and Merced.