The retail spaces in Walnut Creek's The Mercer residential complex have been bought by an investment group eyeing an upside in the bustling downtown, brokers said Thursday.

Menlo Park-based Deerfield Realty paid about $7.5 million for the 22,000-square-foot ground-floor retail center on North California Boulevard between Trinity and Cole avenues, a short distance from the Lesher Center for the Arts. The purchase was completed May 5.

"This is a high quality retail asset," said Forrest Gherlone, a senior sales associate with Cornish & Carey Commercial Real Estate. "It's in a prime downtown district."

The Mercer retail property sold for about $339 a square foot, according to information from Cornish & Carey, which arranged the purchase.

The price that Deerfield 2000 LLC paid for the retail center is a reminder that the steep decline in real estate values, commercial and residential, can jolt even a top-flight market such as downtown Walnut Creek.

"During the peak of the market, we saw plenty of deals for retail buildings in the $500 to $600 range" per square foot, said John Cumbelich, a Walnut Creek-based commercial realty agent who specializes in retail. "There also were a few isolated examples above those prices."

That commercial real estate heyday was in 2007. Four years later, downtown Walnut Creek property values have fallen 32 percent or so.

The Mercer retail is about 83 percent leased to a mix of local and regional tenants, Cornish & Carey said.


Advertisement

"The buyers are getting a pretty good rental yield going in and the chance to increase that yield by leasing up the remaining vacancy," Gherlone said.

Noteworthy tenants in the retail center include The Counter Burger and Mike's Bikes. The bicycle store is the closest the center has to an anchor and occupies 7,000 square feet. Other tenants include Metamorphosis Spa, Skin Spirit and Galaxy Nails.

The retailers also serve the residents in the 181 luxury condominium units above the stores.

"This project has struggled with the recession," Cumbelich said. "Since the economy has started to recover, so has this project. The timing on the buyer's part was excellent." The Cumbelich realty firm was responsible for signing up all the tenants that are now in the retail center.

Deerfield, the new owner of the Mercer retail center, also owns The Glassworks Building across from AT&T park in San Francisco, an office building in downtown Danville, and other buildings in Sunnyvale, Santa Clara, Mountain View and the Peninsula.

"The Mercer retail remains in capable hands and will continue to thrive as an important retail center for downtown Walnut Creek," Gherlone said.

Contact George Avalos at 925-977-8477. Follow him at twitter.com/george_avalos.