Fate of local commercial real estate grim

January 29, 2009 6:27:12 PM PST
Another sign of the times as empty storefronts crop up around the Bay Area. Many cities are now struggling to find replacements for those failed businesses.

Oakland and neighboring cities reflect what the economy is doing to retailers -- plenty of empty storefronts keeping demolition crews busy as businesses close.

"What we're definitely going to see is more and more store closures," said retail store consultant Helen Bulwik.

Retail vacancy rates as of last September were 2.8 percent for San Francisco, 4.2 percent for San Jose, and almost 6 percent for Oakland. However, experts think that figure is now closer to 7 percent.

"Refilling that space in the short-term is going to be virtually impossible. Then when you lose a store in a mall area, of course, it affects the other stores, and therefore there could be some additional fallout as a result of that," said Bulwik.

At a real estate conference, the mayor of Emeryville, Richard Kassis, put the loss of two major retailers in his town in dollars.

"It's tough when you lose a Circuit City and a Home Expo, which also affects Oakland. That's about $250,000 in sales taxes to the city of Emeryville alone," said Mayor Kassis.

The problem has hit neighborhood shopping areas like Alameda's Park Street.

"The empty storefronts could become a synergistic thing. That one begets two, begets four, begets eight, and we don't want that to happen," said Robb Ratto of the Park Street Merchants Association.

Oakland has a goal of landing five grocery stores and as many as 70 retailers in the next three to five years.

"We tell our retailers and our merchants to come in, visit us, we're there to help them and work with them," said Aliza Gallo, Oakland business development services manager.

But it's an uphill battle as stores close faster than they can be replaced.

There could be an upside for retailers that can weather the downturn. They could facing less competition, and potentially lower rent.