The commercial real estate brokerage JLL reported that the amount of available retail space in San Diego County rose to 6.8 million square feet in the first quarter of 2025, a 9.4% increase from the fourth quarter of 2024.
At 4.8%, the vacancy rate of retail space in the first quarter was the highest it’s been since the first quarter of 2021 when it hit 5%.
“The vacancy rate is still very, very low overall,” said Brian Quinn, a senior vice president of JLL.
“I feel like it’s a case of the haves and the have-nots. The A, A-minus and B-plus centers are getting all of the activity with pretty decent rents,” Quinn said, adding that delays in permitting and construction can mean it takes longer to fill vacant shopping center suites.
“A lot of restaurants are expanding. They are still opening stores and doing everything to get it done, but it just takes a long time,” Quinn said.
The retail property market is likely to tighten because there’s been little new retail development and some existing retail sites are being converted to other uses, primarily residential, according to JLL.
In the first quarter of 2025, developers demolished 162,093 square feet of retail space, more than offsetting the 32,337 square feet of new retail space that was delivered in the quarter, JLL reported.
Hickman of NewMark Merrill said that the uptick in vacancy rates is a little misleading because much of the newly vacated space is former big box stores, such as Big Lots and Bed Bath & Beyond, and Joann Fabrics.
“For the big boxes in reasonably well-located projects, there have actually been a decent amount of replacement tenants out there,” Hickman said.
As a case in point, Hickman said that NewMark Merrill is in the process of negotiating a lease for a new tenant to take over a former big box store in Oceanside. He declined to give details pending a final deal.
Zikakis of Capstone Advisors said that he’s confident that the retail market will remain strong.
“I’m optimistic about where the national economy is going. California definitely has a very dramatic budget shortfall, but overall, I’m very bullish on San Diego. It’s a very desirable place to live. I think consumer demand is going to stay robust, especially for the types of items we sell at these centers,” Zikakis said. “I’m always looking to increase our shopping center portfolio. I continue to be bullish long-term on retail, and I don’t see that changing.”
SDBJ – Ray Huard – 07/17/25