Market Stat: Developers Have Pivoted to Repositioning Vacant Space in Lieu of Ground-Up Development
Only 378,000 square feet of retail space is under development in San Diego. This is the lowest figure since the summer of 2013. That amounts to only 0.3% of San Diego’s total retail inventory. This level has remained consistent for nearly a year, according to CoStar data.
So far in 2019, only 26,000 square feet of net new supply has been added in San Diego. The post-recession annual average for net new supply is 315,000 square feet.
The largest delivery was at One Paseo in Del Mar Heights. Kilroy’s project will also include nearly 300,000 square feet of office space and more than 600 apartment units, in addition to the 90,000-square-foot retail footprint.
The demolition of the former Sears at Westfield UTC took a bite out of inventory in 2019. That is the primary reason that net supply in 2019 will tally the lowest total since 2011, a projected 72,000 square feet.
Redevelopment has taken the place of ground-up construction. This is one reason that retail construction may not pick back up in the near term. San Diego, like much of the country, is replete with store closures. this impacts in-line, big-box retailers, and mall anchors, among others.
Some of those big-box store closures have provided opportunities for expansions. Burlington has taken a portion of a shuttered Sears in El Cajon, and former Toys R Us boxes in Oceanside and National City in the past year.
The redevelopment of the shuttered anchor into experiential retail space broke ground earlier this year when Sears closed at Westfield UTC. The Collection at UTC accounts for the plurality of retail space being built in the region. Several tenants, including Equinox and coworking brand Industrious are set to occupy more than 60,000 square feet between them.