Economy: Income Growth Accelerates
The economic fundamentals for the San Francisco/North Bay region have generally been improving recently, supported by robust income growth and a tighter labor market. Median household income rose 6.4% year-over-year (YOY) to $134,300. The unemployment rate declined to 4.1% from 4.4% a year earlier. However, population decline remained a persistent headwind, with the region’s population falling 0.3% YOY.
Supply & Demand: Positive Net Absorption
At the end of the third quarter of 2026, the San Francisco/North Bay shopping center inventory totaled 38.2 million square feet (msf). No new retail space was delivered during the quarter, while approximately 106,500 square feet (sf) remained under construction.
Leasing activity accelerated, generating 224,400 sf of positive net absorption. Year-to-date (YTD) net absorption was in the black at 44,600 sf. Five of the six counties recorded positive absorption, led by Sonoma County (91,400 sf) and San Francisco County (65,500 sf), followed by San Mateo County (31,800 sf), Marin County (23,200 sf) and Napa County (20,400 sf). Solano County was the exception posting negative absorption of 7,800 sf.
The shopping center vacancy rate fell 60 basis points (bps) from last quarter’s figure to 5.7% and was down 10 bps from 5.8% one year ago. Napa County recorded the lowest vacancy at 2.6%, followed by Marin County (4.0%), San Mateo County (4.3%) and Sonoma County (5.2%). Vacancy stood at 8.6% in Solano County, while San Francisco County remained the most challenged market, with a vacancy rate of 12.1%.
According to Real Capital Analytics, 20 retail properties totaling 259,800 sf traded during the third quarter, with total investment sales reaching $177.9 million.
Pricing: Average Asking Rent Declines
The average asking rent for the region was $25.42 per square foot (psf) on an annual triple-net basis, down 0.5% from $25.55 psf in the previous quarter. Asking rents ranged from $19.43 psf in Sonoma County to $48.68 psf in Marin County.
