Tech Layoffs in San Jose, CA Soften Retailer Demand

PALO ALTO, CA — Weakness in Silicon Valley’s technology sector will continue to ripple through the San Jose retail market this year as ongoing job losses and contracting retailer demand push vacancy higher, according to a second-quarter Retail Research Report by Marcus & Millichap, the nation’s largest real estate investment services firm.

Increased restructuring within companies such as Sun Microsystems and Yahoo, along with the closure of smaller tech-related firms, will weigh on consumer spending, further reducing space requirements for both national and local retailers.

“A wide buyer/seller expectations gap and projections for further operational weakening will slow marketwide trading of San Jose retail properties in 2009,” says Steven Seligman, (top left photo) regional manager of the Palo Alto office of Marcus & Millichap.

“Average cap rates for single-tenant assets are currently in the mid- to high-6 percent range, though some quality properties with long-term leases in place could close in the low-6 percent area.”

Following are some of the most significant aspects of the San Jose Retail Research Report:

· Employers are forecast to trim payrolls by 35,000 positions this year, or 3.9 percent, after eliminating 15,600 jobs in 2008. Ongoing losses in the professional and business services sector, along with weakness within technology-related firms, will drive job losses in 2009.

· Developers are on pace to complete 400,000 square feet of retail space by year end, slightly higher than in 2008, when 350,000 square feet was brought online. Deliveries in 2009 will expand inventory by a modest 0.8 percent.

· Receding demand is expected to result in a 170 basis point climb in vacancy this year to 5.6 percent. In 2008, vacancy increased 70 basis points.

· Rents are projected to soften further in 2009 in response to rising vacancy. Asking rents are forecast to decrease 3.3 percent to $30.48 per square foot, and effective rents should end the year at $27.09 per square foot, a 4.9 percent decline.

For a copy of the complete San Jose Retail Research Report, as well as reports on other markets nationwide, visit our website at http://www.marcusmillichap.com/.

Press Contact: Stacey Corso, Communications Department, (925) 953-1716