Originally published Recent Retail Deals Point to Strong San Diego Market on by https://www.sdbj.com/real-estate/recent-retail-deals-point-to-strong-san-diego-market/?utm_source=rss&utm_medium=rss&utm_campaign=recent-retail-deals-point-to-strong-san-diego-market at San Diego Business Journal
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SAN DIEGO COUNTY – An Escondido shopping center is getting a new look in a $1 million renovation and a San Marcos center was recently sold.
The two deals come amid a retail property market that remains strong despite a slight uptick in vacancy that brokers and landlords say is temporary, caused by the high-profile bankruptcy of a handful of national retail chains.
“In general, across San Diego, we’re seeing the market hang in there pretty well,” said John Hickman, managing director of NewMark Merrill, which manages or owns 32 shopping centers in San Diego County.
“San Diego, by and large, outperforms a lot of other markets in terms of occupancy and rent growth,” Hickman said. “If you look at your typical center around San Diego, it’s generally fully leased, and the rents are generally at a pretty high level.”
Among the latest indicators of the strength of the San Diego retail property market, Capstone Advisors, based in Carlsbad, has updated and modernized its Mission Escondido shopping center at 201-205 W. Mission Ave. to keep it competitive, according to Alex Zikakis, CEO and president of Capstone Advisors.
As of July, Mission Escondido was fully leased to 14 tenants, including Dongbu Korean BBQ, Prism Jiu Jitsu and Swan Hair Salon.
When Capstone Advisors acquired the 41,530-square-foot center in 2011, it was 70% leased but has since been consistently well occupied following an initial renovation, Zikakis said.
“It was in rough shape when we bought it. We took it through a pretty good cleanup,” Zikakis said. “We wanted to make sure that we were keeping the property up to a nice condition.”
In the latest renovation, Capstone replaced the roof, changed the color palette of the center from red and cream to more contemporary whites and grays, installed new signs for all the tenants, installed Tesla electric vehicle charging stations, and replaced the landscaping with drought-tolerant plants.
‘You continually have to invest in your properties. That’s true for pretty much all property types, but that’s certainly true for retail. You don’t want to get to the point where everything is kind of tired and you’re losing tenants,” Zikakis said. “We prefer to do it early so the center always looks nice rather than letting it get run down then chasing it back up.”
Strong Performer
In another strong indication of the market’s strength, Brixton Capital, based in Solana Beach, recently acquired the 60,000-square-foor Civic Center Plaza on a 6-acre site at 125-157 Twin Oaks Valley Road near California State University San Marcos, San Marcos City Hall and Palomar College.
“It’s a city within our own backyard, and we understand the dynamics of its retail real estate very well,” said Marc Brutten, founder and chairman of Brixton Capital.
With LA Fitness as its anchor tenant, Civic Center Plaza’s other tenants include FedEx, Subwan, Robek’s, PizzaNova and Ryan Bros Coffee.
“With a lease in place until 2037 with our anchor tenant and in incredible location, we expect Civic Center Plaza to be a strong performer in our retail portfolio,” said Rob Taylor, Brixton Capital president and chief investment officer.
“In keeping with the current tenant mix and the demographics of the surrounding area, we will target service-oriented, food and beverage, and health and wellness tenants to fill space that may become available,” Taylor said.
Brixton Capital earlier this year acquired the Petaluma Safeway center in Petaluma and the Elk Grove CVS center in Elk Grove.
Tightening Market
The commercial real estate brokerage JLL reported that the amount of available retail space in San Diego County rose to 6.8 million square feet in the first quarter of 2025, a 9.4% increase from the fourth quarter of 2024.
At 4.8%, the vacancy rate of retail space in the first quarter was the highest it’s been since the first quarter of 2021 when it hit 5%.
“The vacancy rate is still very, very low overall,” said Brian Quinn, a senior vice president of JLL.
“I feel like it’s a case of the haves and the have-nots. The A, A-minus and B-plus centers are getting all of the activity with pretty decent rents,” Quinn said, adding that delays in permitting and construction can mean it takes longer to fill vacant shopping center suites.
“A lot of restaurants are expanding. They are still opening stores and doing everything to get it done, but it just takes a long time,” Quinn said.
The retail property market is likely to tighten because there’s been little new retail development and some existing retail sites are being converted to other uses, primarily residential, according to JLL.
In the first quarter of 2025, developers demolished 162,093 square feet of retail space, more than offsetting the 32,337 square feet of new retail space that was delivered in the quarter, JLL reported.
Hickman of NewMark Merrill said that the uptick in vacancy rates is a little misleading because much of the newly vacated space is former big box stores, such as Big Lots and Bed Bath & Beyond, and Joann Fabrics.
“For the big boxes in reasonably well-located projects, there have actually been a decent amount of replacement tenants out there,” Hickman said.
As a case in point, Hickman said that NewMark Merrill is in the process of negotiating a lease for a new tenant to take over a former big box store in Oceanside. He declined to give details pending a final deal.
Zikakis of Capstone Advisors said that he’s confident that the retail market will remain strong.
“I’m optimistic about where the national economy is going. California definitely has a very dramatic budget shortfall, but overall, I’m very bullish on San Diego. It’s a very desirable place to live. I think consumer demand is going to stay robust, especially for the types of items we sell at these centers,” Zikakis said. “I’m always looking to increase our shopping center portfolio. I continue to be bullish long-term on retail, and I don’t see that changing.”
Brixton Capital
FOUNDED: 2012
HEADQUARTERS: Solana Beach
CHAIRMAN: Marc Brutten
WEBSITE: www.brixtoncapital.com
EMPLOYEES: 42
CONTACT: 858-683-7100
NOTABLE: Brixton owns and manages a portfolio of multifamily and retail assets totaling about $2 billion
Capstone Advisors
FOUNDED: 1996
HEADQUARTERS: Carlsbad
CEO: Alex Zikakis
BUSINESS: real estate investment
EMPLOYEES: 15
WEBSITE: www.capstoneadvisors.com
CONTACT: 760-804-6900
NOTABLE: Capstone Advisors has invested and developed a variety of commercial property types, as well as been an active investor in residential land development, home building and resort development.
A native of New England, Ray Huard has been a reporter at newspapers in California, Florida and New England, including The (Jacksonville) Florida Times-Union, the Miami Herald, the Palm Beach Post in West Palm Beach, the San Diego Union-Tribune, the North County Times, and the San Diego Business Journal. He has covered a wide variety of beats including real estate, politics, science, the environment, state and city government and courts.
Originally published San Diego Business Journal