San Jose Retail Market Report

Experiential retail leads leasing amid limited development. With local construction remaining the most subdued among major U.S. markets for a second consecutive year and space absorption improving in 2026, vacancy is expected to face further downward pressure. Leasing activity remained steady during the year ended June, supported by long-term commitments of up to 15 years for shopping centers in Milpitas, South San Jose, and Morgan Hill. Activity-oriented concepts, including pickleball courts, bowling alleys, fitness centers, and sporting goods retailers, accounted for many of the larger leases. At the same time, similar tenants also targeted well-located space in Sunnyvale and Santa Clara.