Greater Los Angeles Retail Continues Positive Market Activity
The Los Angeles Basin retail market closed the second quarter on a positive note as net absorption recorded 98,900 square feet. A total of 227,000 square feet was delivered to the base with new construction completions. The Inland Empire (310,500 square feet) recorded positive movement, while Los Angeles (-154,800) and Orange County (-56,800) fell negative.
The vacancy rate a year ago stood at 5.6%. Los Angeles County recorded the lowest vacancy rate at 4.0%, a increase of 20 basis points. Orange County followed, recording a vacancy of 4.3%, up 20 basis points, while the Inland Empire recorded the highest vacancy rate at 8.4%, also a decrease of 20 basis points. The weighted average asking rental rate increased $0.02 from the previous quarter to $2.04 per square foot (PSF) triple net (NNN), per month. Super regional malls in Los Angeles County remain the most expensive space at $4.58 PSF NNN. Annual national retail and food services sales for May 2018 increased by 5.9%.
Due to additional inventory in Los Angeles County, vacancy increased by 20 basis points to 4.0%. Asking rental rates recorded at $2.56 PSF NNN. The average asking rental rate was highest in the regional and super regional product type at $4.58 PSF NNN. Currently, a total of 2,000,700 square feet of retail space is under construction in Los Angeles County. A notable lease transaction in the Los Angeles County market was Vallarta Supermarkets leasing 85,700 square feet at 9201 Topanga Canyon Blvd in Canoga Park.
Total vacancy in Orange County increased by 20 basis points from last quarter to 4.3%. The overall average asking rental rate decreased in comparison from last quarter by $0.07 to $2.10 PSF NNN. Approximately 602,800 square feet of retail space is under construction in Orange County.
The Inland Empire retail market witnessed an decrease in vacancy by 20 basis points to 8.4% during the second quarter. Overall net absorption recorded 310,500 square feet for the quarter. Much of this positive movement stemmed from tenant move-ins in the regional and super regional malls category. Average asking rents increased $0.06 PSF NNN from last quarter to end the second quarter at $1.57. Currently 905,700 square feet of new retail inventory is under construction in the Inland Empire.
- The Los Angeles market had the highest number of new construction deliveries, recording 140,500 square feet, with the Inland Empire following at 72,100 square feet and Orange County recording the least at 14,400 square feet.
- The vacancy rate for the Greater Los Angeles region decreased to 5.3%, down 10 basis points from last quarter.
- Asking rents were highest in Los Angeles County at $2.56 PSF NNN and lowest in the Inland Empire at $1.57 PSF NNN.
- The Los Angeles County retail market saw negative movement, recording negative 154,800 square feet of absorption, marking the lowest absorption in all three counties.
- Orange County absorption recorded negative movement at 56,800 square feet.
According to Chapman University, California consumer confidence remains steady. This steady result suggests that consumers are content with the overall current economic conditions. Consumer spending on big-ticket items will continue to be strong over the next six months. The largest project under construction is 5601 Santa Monica Boulevard in Hollywood, consisting of 258,900 square feet. The project is expected to be completed by early 2019.
Demand for retail space in Orange County is expected to remain positive as new multifamily product continues to deliver in the market, including The Tustin Legacy, which consists of 220,000 square feet, is the largest property currently being built and is expected to be completed by the end of 2018. The largest project under construction in the Inland Empire retail market is the 260,765-square-foot Renaissance Marketplace located in Rialto. The regional mall is expected to be completed by year-end.