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Market Report

San Francisco Retail Market Report

2019 Outlook

Development Moderates for Third Straight Year; Investors Remain Active in San Francisco

Construction contracts for third straight year; performance most robust in San Mateo County. Fueled by the lowest unemployment rate since the Dot Com era, San Francisco retail assets have undergone a dramatic upswing. Rising incomes and wages have supported a broad scope of retail assets, underpinning a metro vacancy rate below 3.5 percent since 2011. Meanwhile, development has been mostly nonexistent this cycle, with annual deliveries averaging less than 130,000 square feet per annum since the cycle lows in 2010. This year, overall supply growth will fall once more, with minimal space injections outside of the planned repairs and the eventual opening of the Salesforce Transit Center in downtown San Francisco. As a result, average asking rents have pushed higher, particularly in San Mateo County, where extremely limited availability and more affordable prices than the urban core have sponsored dramatic gains that reached the double digits in 2018. Similar conditions will remain in place this year, prompting additional growth, albeit with more dispersion than previous years exhibited.

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