Retail Real Estate Is Not Dead.
Every few years, another headline announces the collapse of brick-and-mortar retail, the end of the shopping center, or the final victory of online shopping. It makes for a good headline. It also misses what has actually happened.
Why Some Retail Struggled
The retail centers that suffered the most were often filled with tenants vulnerable to the internet: video stores, bookstores, electronics chains, clothing retailers, and other businesses whose products could be ordered from a website and delivered to the front door.
Many of those companies disappeared. Others reduced their store counts or became far more selective about where they leased space.
Walk through most well-located retail centers in Sacramento today and you will find restaurants, fitness studios, dental offices, urgent-care facilities, nail salons, hair salons, pet-care businesses, childcare providers, tutoring centers, and automotive services.
A website does not cut your hair, examine your teeth, repair your brakes, teach your child, or serve you dinner. Most people still prefer an actual restaurant to eating with a headset strapped to their face. The retailers selling commodities were squeezed. Businesses providing services, convenience, and experiences continued to need physical space.
Downtown Sacramento Gets Some of Its Customers Back
Beginning July 1, 2026, most California state employees moved from two in-office days per week to four. Whatever one thinks about the policy—and state employees have made their opinions fairly clear—the impact on Downtown Sacramento retail should be meaningful.
More workers downtown mean more morning coffee, lunches, errands, happy hours, parking receipts, and people walking past storefronts. For restaurants and service businesses that spent the past several years trying to survive without a dependable daytime population, getting those customers back four days a week is not a minor development. I am sure that if the State had not left Downtown, Solomon’s Deli (aka the Vinyl Diner) would still be in business.
The state’s return-to-office policy gives Downtown Sacramento something it has badly needed: a more consistent customer base. What individual businesses do with that opportunity is still up to them.
Retail Space is Expensive
Well-located retail real estate in Sacramento still has substantial value. A strong location provides visibility, parking, access, traffic, complementary tenants, and support from the surrounding neighborhood. Those fundamentals mattered before online shopping, and they still matter today.
Class A retail space in stronger Sacramento-area locations is now generally leasing for approximately $3.00 to $3.50 per square foot per month, plus triple-net charges that may add another $1.00 per square foot. For a 2,000-square-foot tenant, that can mean a monthly occupancy cost of roughly $8,000 to $9,000 before payroll, inventory, improvements, and the minor inconvenience of actually operating the business.
The strongest centers adapted. They brought in service businesses, restaurants, medical users, fitness operators, and other tenants that generate regular customer visits. Those properties continue to attract businesses, consumers, and investors.
A Lease is like a Marriage with a termination date
A very good friend was walking down the aisle. His future father-in-law and fiancée were waiting for him. Eight years later, he was walking into an attorney’s office. Even though every bone in his body told him to run, he walked down the aisle and kissed the bride. He felt like he could not turn back. The flowers alone cost $15,000, adjusted for inflation. He should have looked under the hood a little more closely.
The same thing happens in commercial real estate. A business owner tours a space, falls in love with it, begins imagining the finished operation, and becomes reluctant to walk away—even when the numbers, the property, or the lease are telling a different story.
Bacon Saves You Time — and the Wrong Lease.
If you’re a business owner evaluating retail real estate in Sacramento, or a property owner looking to lease or sell, let’s talk. Call (916) 761-1202 or reach out at tom@baconcre.com.
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