Recent projects have included a number of retail centers in San Diego. It was interesting to note that Cap Rates on primary retail corners were below 7% at the end of 2009, and generally around 6.5%. Occupied, secondary retail locations are taking the brunt of the blow with rental mark downs of up to 30%, and Cap Rates in the 7.5% to 8.5% range.
Retail OAR Market Array
Age, Occupancy, Location
Capitalization Rate
Newer, Fully Leased, Primary
6%- 6.5%
Newer, Fully Leased, Secondary
7.5%
Subject, Newer, Secondary +
Avg., Fully Leased, Secondary
7.5% - 8.5%
Avg., Vacancy, Secondary
9% - 10%
Older Building, Vacancy, Secondary
10% - 12%
Considerable retail inventory was recently noted in Escondido. Its location on the 78 beltway where so many power centers were built during the boom means older centers in the core must reposition. As the commercial market bottoms some of these older retail buildings will have a Highest and Best Use as apartments.
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