Oakland Retail Reaches Record High Occupancy Levels
Brokerage analysts at John Cumbelich & Associates track many Northern California markets and have found that Oakland currently has the highest occupancy rate of any retail market due to the convergence of several unique factors. People from across the Bay Area and beyond have been attracted to Oakland’s impressive job growth and deals on rental housing compared to San Francisco and Silicon Valley. Companies like Uber and Pandora Radio have also cast their lots with the city, setting up headquarters within its borders. Yet despite this ever increasing activity, national retailers have been slow to move in and capitalize on the presence of many high-earning consumers who end up patronizing smaller local shops or malls in nearby cities such as Walnut Creek. This high demand for stores and low supply has elevated the outlook for commercial-retail in Oakland.
The firm’s CEO, John Cumbelich, finds the void of major retailers in Oakland to be conspicuous but with clear causes. Historically, small locally owned shops sprinkled throughout the city have filled in the gaps for shopping options, but with the present strong economic growth, sizable retail districts appear to be forming.
“Oakland is the largest city on the West Coast to not have a regional mall,” said Cumbelich. “Major retailers of many stripes are not well represented in the city. It’s a tremendously dense, space constrained urban market. Where could you even put a mall in Oakland? However, increases in housing inventory and a stronger, more diverse economy has made Oakland a more desirable place. The fundamentals in Oakland are so strong right now with historically high occupancy, climbing rent levels and low interest rates, which has created a lot of momentum.”
Data from Cumbelich’s Oakland Submarkets Retail Overview Q4 2016, show occupancy rates for the Rockbridge, Montclair Village and Grand Lake neighborhoods as being just shy of 100 percent — surpassing the East Bay’s other major retail hubs and beyond. Average rents for those areas range from $36 to $65 per square foot. Although the firm has only been studying the market trends more recently, Cumbelich estimates that there’s about a 15-percent premium on rents compared to five years ago and that occupancy rates in 2012 were closer to 90 percent.
Given Oakland’s diverse and prosperous consumers and the lack of shopping options, it seems that just about any kind of retail establishment could have a chance at success. To date, the food and beverage industry is thriving and has even achieved some renown with several locales making Michael Bauer’s Top 100 lists. In addition to dining, Matt Holmes, principal at Retail West Inc., foresees that apparel and accessories targeting Millennials will do well, but with retail in a declining state across the nation, he doesn’t think Oakland is immune.
“What we believe is that when the Whole Foods went in at 27th Street and Harrison, it made the area feel like an epicenter of activity,” Holmes commented. “It’s becoming en vogue to get close to this center. Nearby on Broadway, developers of The Hive will be submitting their Phase II application this summer. Together all these hotspots are kind of melding together with pedestrian friendly sidewalks and good parking access. It’s like a feast after 20 years and an opportunity to put this all together into one district.”
One potential pitfall of the city’s burgeoning retail districts is overcoming the pre-Recession era stigma of having issues with property crime. Though crime rates are reportedly down in Oakland, some major retailers may still be wary of vandalism that has had a history of occurring parallel to otherwise peaceful protests and assemblies in the city.