SAN JOSE — The South Bay retail market is showing signs of weakness following the departure of some big box stores, according to a new report.
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Retail vacancy levels were higher and asking rents were lower in Silicon Valley during the April-through-June second quarter compared with the January-through-March first quarter, Cushman & Wakefield, a commercial real estate firm, stated in its latest report on the area’s retail sector.
“The exit of several national retailers” was a key factor that propelled vacancy levels higher, Cushman & Wakefield reported.
According to the report, the South Bay had a retail vacancy rate of 5.2% in the second quarter, up from 4.7% in the first – a six-year low for that benchmark.
The largest retail property purchase in the South Bay during the second quarter involved the long-shuttered Orchard Supply store in south San Jose in July. An affiliate of Dollinger Properties paid $7.3 million for the 5651 Cottle Rd. property.
Here are the second-quarter vacancy rates for the primary retail markets in the South Bay, as reported by Cushman & Wakefield:
— Sunnyvale and Cupertino: 3.1%
— North San Jose and Milpitas: 4.5%
— Palo Alto, Mountain View, and Los Altos: 5.1%
— Downtown San Jose, south San Jose, Los Gatos, and Campbell: 5.4%
— Santa Clara: 5.5%
— Morgan Hill and Gilroy: 7.5%
Monthly retail rents in the South Bay averaged roughly $2.81 a square foot a month during the second quarter, below the first quarter monthly asking rent of $2.92 a month, the Cushman & Wakefield report determined.
Despite some economic uncertainties, investors are showing long-term confidence in the South Bay retail market.
In December 2024, The Plant, a high-profile San Jose shopping center, was bought for $95 million. New leases followed soon after the acquisition with the addition of a supermarket and discount store that filled spaces that had been empty.
Other retail centers in the South Bay have also managed to fill significant retail spaces.
Almaden Plaza in south San Jose lost both Bed Bath and Beyond and Barnes and Noble. The retail mall, however, was able to replace them with Hobby Lobby, which leased 62,000 square feet, and Sports Basement, which rented 86,000 square feet.
The softening retail market in the South Bay comes at a time when the job markets in the Bay Area have wobbled so far in 2025.
