As 2019 gets underway, the forecast for the Bay Area retail industry is primarily a continuation of what we have experienced in the last few years. Retail has undergone significant change, and the evolution will continue as we see more online businesses turn to brick and mortar, the progress of retail experiences, and more. Read on to see what the retail outlook looks like for this coming year for Fremont and the rest of Silicon Valley.

NON-TRADITIONAL USES. Shopping center spaces have been filled by the rapid expansion of health clubs, the latest fast food and dessert crazes, and non-traditional shopping center uses such as government offices, healthcare, daycare, and entertainment. Expect more of the same, although with the slight caveat of restaurant growth slowing as a result of high fees, higher wage requirements, and the high cost of housing in the Bay Area.

ONLINE TO BRICK AND MORTAR. Look for the trend of higher-end online retailers building brick-and-mortar stores to continue, such as Bonobos, UntuckIt, Warby Parker, Indochino, Allbirds, Peleton, Adore Me, ThredUp, and Everlane. Amazon has another grocery concept coming out (in addition to Amazon Go), along with their bookstore, showing that even the largest online retailer recognizes the importance of having a physical presence in addition to online sales.

EXPERIENTIAL RETAIL. To survive in the face of surging online sales, retailers are learning to compete by offering a more engaging shopping experience to their customers, and better coordination of their online and physical sales to ease customers’ buying experiences. They are using demonstrations, community events, and other techniques to capture customers’ attentions.

MIXED-USE. We can expect an increase in the rate of converting “Class B” and “Class C” regional malls, as well as some smaller power, community and strip mall centers, into mixed-use properties in areas where retail is saturated.

RETAILERS EXPANDING. As always, look for existing retailers not in the Bay Area to enter the region seeking new store locations. Total Wine & More, Sprouts, Joe & the Juice, Fabletics, and Salt & Straw are the most recent examples.

RETAIL APOCALYPSE? Although we continue to read a great deal about the supposed “retail apocalypse,” for the most part, the Bay Area’s retail properties have been protected from any general retail downturn. Very few new retail centers are built in the region in the best of times; due to high land prices and physical constraints, you can usually count them on one hand. As a result, in the inner Bay Area, San Mateo, Santa Clara, Alameda, Marin, and Contra Costa counties, it’s difficult to overbuild. By the same token, don’t expect a large number of new retail centers in the near future as the competition for land leaves stand-alone retail development in the dust.

VACANCY RATES. The 2018 Q4 occupancy rate for Bay Area retail centers held relatively steady at 95.68 percent (per John Cumbelich & Associates) despite the recent Toys “R” Us and Orchard Supply Hardware closures. That means less than 570,000 square feet of retail space is available out of a total of 13.2MSF — that’s a healthy rate. Closed big box stores in the Bay Area are generally quickly snapped up, leaving most centers with little vacancy. I don’t foresee those rates changing significantly in the near future, not even with another downturn in the economy or the continued growth in online sales, which while growing rapidly, remains barely into the double digits in terms of overall retail spending.