Commercial broker sees bright future for retail in Silicon Valley

News about retail stores folding has not fazed James Chung. Chung knows many success stories and believes the future of retail is bright. He recently told members of the Silicon Valley Association of Realtors that despite competition from online shopping, retail has survived and even thrived in communities where stores are an integral part

of the lives of residents. There is a future especially for retail that has been able to adapt and innovate as market conditions change.

Chung is a commercial broker who in March launched Econic Company, a San Jose commercial brokerage company that controls millions of square feet of shopping products, from big box clients, financial institutions, restaurants, locally and nationwide. He said during the height of the Covid pandemic, there was an expectation there would be an influx of significant inventory because people assumed many businesses would close and give up their leases. It did not happen. He explained in the industry investors look two to three years down the road and take advantage of opportunities.

It is true that demand in retail sectors at large urban cores like Union Square and Rodeo Drive, which peaked in price before the pandemic, has dropped. Both San Francisco and Honolulu are still the most impacted due to fewer international travelers. In the case of San Francisco, only 10-20 percent of daytime office workers are back, and crime and the homeless problem are especially significant issues that impact investment. Demand in Rodeo Drive has plateaued as its customer base is locally driven.

Chung said the outlook nationally is getting better. He is excited at the trajectory, as GDP is up 5.6 percent, consumer spending is up 11 percent, overall retail growth is up

14 percent and unemployment is down. The expectation is in 2022, when more workers return to the office, the urban cores will be reactivated.

Chung noted it is the traditional shopping centers where stores like Target and other essential retail are located that have thrived, bringing more competition in the marketplace. Local investors and their tenants are holding on because they see the demand. He related success stories of businesses whose sales increased more than during pre-covid times because savvy retailers pivoted and were able to compete with creative repositioning and repurposing, and new concepts like shipping products to customers and storefront pick up service.

By Westgate West shopping center on Lawrence Expressway, the empty Orchard Supply store and nearby vacant

lot may give the impression of a struggling center, but many cases like this are by design. Plans are in the making to build a new Costco in that location.

“Empty storefronts are rarely a reflection of struggle. Changed storefronts have all been by design,” explained Chung.

In Santana Row, over 50 storefronts in the last 15 years were changed by design. Leases are revisited, and options are studied regarding the direction the retail is heading, to see if their products were still relevant.

“Storefronts don’t come together by accident. It’s not like running an apartment,” said Chung. “Retail ultimately will find the right home.”

According to Chung, Westfield Valley Fair Mall and Santana Row offer customers a different shopping experience. In downtown San Jose, Google will be the catalyst. The area has a solid office population which is promising, but Chung indicated it will never be like San Francisco because the cities have different qualities.

The local commercial broker sees new categories coming into the retail environment. They are evolving and taking shape.

“Retail is a living organism, it grows, it ages. Retail is becoming a better version of what it was,” said Chung.