San Jose Retail Market Report

Retail landscape stabilizing on back of multifamily growth. Apartment demand will nearly keep pace with elevated openings this year, bolstering the consumer base. Santa Clara leads development, with more than 2,800 rentals underway for this year and beyond, representing 14 percent of existing local inventory. These units will be major entry points for the most expensive housing market in the country, heralding growing consumer spending to come — a boon for area retailers and existing properties, given relatively static local sector stock. While major shopping centers are under proposal here for later in the decade, construction in 2024 is negligible. Retail arrivals for this year are instead heading for Palo Alto and South San Jose. The latter area, housing more than a third of the metro’s retail supply, is well-situated to welcome these openings, with vacancy under the 2019 level. This same dynamic is more apparent in North San Jose, where the local rate fell more than 360 basis points in that span. These factors are helping stabilize metro vacancy and rents, with the stage set for future gains.