Commercial rental rates are a little tricky. In order for a retail unit to generate more rent, the business that occupies that unit has to generate more revenue.

Poway’s retail district along Poway Road has a lot of variation in age and appeal, and as a result has a sizable variation in rental rates. For the best properties (relatively recent construction, nice appeal) the rental rates have not quite doubled over the last 10 years. For the industrial properties to the south along Scripps Poway Parkway, the industrial rents haven’t even gone up by 50%. Each of these market segments marches to a different beat.

I think that the big retail mega centers like Trolley Square in Santee, Vista’s Townsite Center, and the ones in San Marcos are eventually going to run into a brick wall on rents and occupancy ratios because the retail business just isn’t going to increase enough to economically justify the renewals or exercise of options. Especially as retail spending related to houses decreases and as fewer people dine out 7 days a week.

One other thing to remember is that when a new retail center comes to town it often scavenges tenants from the older properties. This has happened big time in Santee, and Oceanside; and to lesser extents in San Marcos, Escondido and Poway.