Oakland’s Retail Submarkets’ Stability Reflects Uncommon History
Several Oakland retail submarkets are well on their way to recovery from the coronavirus pandemic based on a Q4 2020 report from John Cumbelich & Associates and past trends.
Following drops in performance in 2020, occupancy levels in the Grand Lake and Rockridge submarkets increased last quarter and both experienced positive net absorption. Occupancy levels in Grand Lake, Rockridge and Montclair were all above 90%, at 94%, 96% and 91%, respectively. While these levels would be considered healthy for most retail markets during more prosperous times, these submarkets have seen occupancy levels exceeding 99% in recent years.
“Historically, it's the best market on the planet,” CEO John Cumbelich said. “Historically, those Oakland submarkets have achieved 97, 98, 99% occupancy. I mean, there's no place on the face of the earth that consistently over time outperforms these Oakland submarkets.”
Oakland has hardly been immune to either the rise in e-commerce or the onset of the pandemic. However, the historical development of the city’s retail sector has granted some protection against market fluctuations.
Oakland 2.0, a blog post authored by Cumbelich, chronicles Oakland’s rise as a major retail center in the post-World War II era when downtowns served as prime shopping destinations. Unlike many other cities that subsequently saw the growth of suburban life and the development of regional shopping malls, Oakland lost many of its department store anchors and bypassed decades of the influx of new national retailers seeking other markets such as nearby Walnut Creek.
Instead, Oakland experienced an organic progression of local, small-scale retailers that lined its streets in various clusters around the city, according to Cumbelich.
“Cities all over the country are struggling with what to do to repurpose old dying malls. Well guess what, Oakland doesn't have that problem,” Cumbelich said, explaining that today as in recent decades, much of Oakland’s retail consists of smaller spaces not anchored by major stores with “bite-sized” rent obligations.
“Entrepreneurs are less likely to see the whole thing come crashing down than if you have a giant obligation,” Cumbelich said.
Like many other retail markets, Walnut Creek has been burned by e-commerce and severely set back by the pandemic. Overall Q4 2020 vacancy in the city reached 11.6%, with eight consecutive quarters of negative net absorption. For spaces under 10K SF, the vacancy was 20.8% last quarter. Vacancy in the Main Street Plaza area was 27.6%. While the Cumbelich report didn’t cite any significant Walnut Creek deals, several new retail leases were signed in Oakland, mostly eateries.
Although Oakland’s submarkets of Grand Lake, Rockridge and Montclair show promising vital signs, it isn’t necessarily reflective of the city as a whole. A Q4 2020 report from Cushman & Wakefield showed Oakland's overall retail vacancy at 15.6%, much higher than the East Bay overall at 6.2%.
The top-performing East Bay submarkets were the south Interstate 80 corridor with a vacancy rate of 3.3% and the Interstate 580 corridor, which includes Grand Lake, with the highest positive net absorption at 21K SF. The largest Q4 transaction occurred in the Interstate 680 corridor with the 1.2M SF Sunvalley Shopping Center sale.