By Joshua Ohl CoStar Analytics July 26, 2021 | 12:15 P.M.
Retailers are back to operating at full capacity as San Diego’s tourist season is heating up. For many retailers, the biggest concern has shifted from ensuring social-distancing protocols to increasing staffing so they can accommodate the uptick in business brought on by the cessation of COVID-related restrictions.
New leasing reached its highest level since 2019 during the second quarter of 2021, although it still fell short of the average quarterly leasing volume from 2016 to 2019 by about 13%, when roughly 780,000 square feet of new leases were inked.
Retailers are still exercising caution with their space needs. The average new lease signed in 2021 is 20% smaller than the average signed in the four years before the pandemic. Those four years also averaged more than 15 new leases annually that were larger than 25,000 square feet, while only a few exceeding that size have been signed in the past five quarters.
But two of those were signed during the second quarter. Target leased 36,000 square feet downtown for its first location there. It will occupy the ground floor of an apartment development, the Radian, in the East Village. Construction started this summer, and the project and accompanying retail space are scheduled to deliver in 2023.
Esporta Fitness leased 35,000 square feet in Vista at a location that was formerly occupied by 24 Hour Fitness, and that was one of several locations that closed due to its bankruptcy.
Chuze Fitness leased 15,000 square feet for a former location at Santa Fe Plaza in Encinitas in the second quarter; Planet Fitness leased a former 24 Hour Fitness space at Rancho San Marcos Village in the first quarter; while Balance Fitness leased half of the 25,000-square-foot former 24 Hour Fitness space at 7680 Girard Ave. in La Jolla at the start of the year.
Chuze Fitness wasn’t the only retail tenant taking down large spaces in Encinitas. Burlington leased 20,000 square feet in a space that was formerly occupied by Staples at El Camino Promenade during the second quarter.
Also, during the second quarter, software startup Flock Freight leased 16,000 square feet at Pacific Station for space that Whole Foods closed in 2017.
The Cardiff and Encinitas retail market just recorded its strongest quarter for leasing volume in more than five years after 100,000 square feet of deals were signed. In fact, Cardiff and Encinitas led all of San Diego in leasing volume during the second quarter, with another north county beach town, Oceanside, the runner-up with 80,000 square feet of new leases.
Cardiff and Encinitas have remained relatively stable amid the pandemic. The vacancy rate at the end of the second quarter was level with the rate at the end of the first quarter of 2020 at 2.9%.
Although rents dipped modestly on a year-over-year basis at the end of the first quarter, rent growth has rounded the corner and returned to positive territory. The beach towns did not experience the multiquarter decline in rents that rippled throughout most of the region over the past year.
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