Economy: Unemployment Rate Down
The San Francisco/North Bay region's economic fundamentals remained relatively stable during the second quarter of 2026. Median household income reached $131,600, representing a 3.3% year-over-year (YOY) increase. At the same time, the labor market continued to show resilience, with the unemployment rate declining to 4.3% from 4.4% one year ago. Population remained a headwind, however, with the figure for the region declining 0.3% YOY.
Supply Or Demand: Positive Net Absorption
The San Francisco/North Bay shopping center inventory totaled 38.3 million square feet (msf) at the end of the second quarter of 2026. No new retail deliveries were completed during the quarter, and construction activity remained limited with approximately 106,500 square feet (sf) underway.
Leasing activity improved during the second quarter, resulting in 5,400 sf of positive net absorption, the region's first quarter of occupancy growth after five consecutive quarters of negative absorption. Despite the improvement, year-to-date (YTD) net absorption remained in negative territory at 182,300 square feet. Performance varied significantly by county. Solano County led the region with 24,700 sf of positive absorption during the quarter, followed by Sonoma County (18,100 sf), San Mateo County (4,200 sf), and Napa County (3,700 sf). Meanwhile, Marin County and San Francisco County recorded negative absorption of 27,000 sf and 18,400 sf, respectively.
The shopping center vacancy rate held steady at 6.3%, unchanged from the previous quarter but up 50 basis points (bps) from 5.8% one year earlier. Napa County maintained the lowest vacancy rate at 3.4%, followed by Marin County at 4.4% and San Mateo County at 4.7%. Meanwhile, Sonoma and Solano counties posted vacancy rates of 6.0% and 8.5%, respectively, while San Francisco remained the region's most challenged market with vacancy at 15.4%.
Pricing: Average Asking Rent Declines
The average asking rent slightly declined by 1.7% quarter-over-quarter (QOQ) to $25.56 per square foot (psf) on an annual triple net basis. Rent growth remained strongest in the region's affluent counties, with Marin County ($45.43 psf) and San Mateo County ($42.47 psf) commanding the highest rates, followed by Napa County ($38.79 psf) and San Francisco County ($38.55 psf).
