SHIFT IN SACRAMENTO RETAIL UNDERWAY, MARKET STILL STABLE Retail in Sacramento is continuing its evolution, buoyed by rapid population growth and rising incomes. Often a tale of two markets, Sacramento retail thrives in well-located centers near growing neighborhoods, while older strip malls in struggling areas see rising vacancy. Driving tenant demand in Sacramento are restaurants, discount stores, and bargain grocers. E-commerce has hardly made a dent in brick-and-mortar, in fact, it has actually created a new segment of online retailers opening physical stores. U.S. retail sales rose 6.6 percent year over year in June 2018, signaling elevated consumer confidence. Though scheduled closures of Sears and Toys R Us will likely increase Sacramento’s market vacancy in the second half of 2018, they also provide opportunities for residential redevelopment and offer an avenue for a new kind of experiential, entertainment-based tenant. For example, the closing Sears at Westfield Galleria in Roseville will become a Cinemark movie theater, restaurants, arcade games, and bowling alleys. There is a shift toward more experience-based tenants and mixed-use destinations to draw more foot traffic. The growth of restaurants, despite razor thin profit margins, has been unmistakable. Food and service tenants are driving demand for new retail space as witnessed by the collection of bars and restaurants still slated to open in Downtown Commons and the 700 K block. Smaller grocery concepts like Grocery Outlet and Dollar Tree are both in expansion mode. Though big box closures loom on the horizon and e-commerce continues to eat into total retail sales (9.5% of the total as of Q1 2018), well-located Sacramento retail remains stable with the market seeing rising rents and steady occupancy.
2018 Q2 Sacramento Retail Report
Author: Bob Shanahan
Date Published: 07/31/2018