SAN JOSE RETAIL VACANCY TO
REMAIN TIGHT IN 2010

SAN JOSE, Calif., Feb. 25, 2010 – The impact of South Bay’s second major downturn in less than a decade will soften local retail operations through much of 2010, but economic stabilization later in the year will flatten the trend, according to the 2010 National Retail Report by Marcus & Millichap, the nation’s largest real estate investment services firm. Job cuts implemented in 2009 by major employers, including Sun Microsystems, Cisco and Hewlett-Packard Co., will weigh on retail sales and force additional stores to go dark early this year, prompting owners to cut rents.

“Many South Bay owners will re-evaluate portfolios this year, potentially divesting underperforming or non-core assets, a trend that may present opportunities for cash-equipped buyers and spur deal flow,” says Steven J. Seligman, vice president and regional manager of Marcus & Millichap’s Palo Alto office.

Following are some of the most significant aspects of the San Jose Retail Research Report:

• After cutting 35,800 positions in 2009, employers are forecast to expand payrolls by 0.5 percent this year, or 4,500 jobs.
• Developers are slated to bring 220,000 square feet of retail space online in 2010, down from 285,000 square feet last year.
• This year, vacancy will rise 50 basis points to 6.7 percent on negative net absorption of 48,000 square feet. In 2009, vacancy increased 230 basis points.
• Asking rents will drop 3.4 percent to $28.80 per square foot in 2010 while effective rents fall 5.5 percent to $24.53 per square foot.

Also included in the report is the firm’s annual National Retail Index (NRI), a snapshot analysis that ranks 44 retail markets based on a series of 12-month forward-looking supply and demand indicators. San Jose moves up one place this year to No. 13. Washington, D.C., claimed the top spot in this year’s National Retail Index (NRI) for the second year in a row due to a low vacancy rate and healthy job growth. Projected job gains boosted San Diego one place to No. 2 and a lack of significant construction in recent years moved San Francisco up one notch to No. 3. Forecasted job growth elevated New York City four places to No. 4 and continued layoffs dropped New Jersey three places to No. 5, despite low vacancy and the state’s relatively steady economy.

For a copy of Marcus & Millichap’s National Retail Report and the complete NRI rankings, visit www.MarcusMillichap.com.

With more than 1,200 investment professionals in offices nationwide, Marcus & Millichap Real Estate Investment Services is the largest firm specializing in commercial real estate investment services in the nation. Marcus & Millichap closed 3,441 transactions in 2009, the highest of any commercial real estate brokerage firm. Founded in 1971, the firm has perfected a powerful system for marketing properties that combines product specialization, local market expertise, the industry’s most comprehensive research, state-of-the-art technology and relationships with the largest pool of qualified investors nationally.

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