Retail Leasing Starts the Year with Sharp Decline
Even prior to the recent impact of the market-wide shutdown due to the COVID-19 pandemic, the Los Angeles Basin retail market recorded negative market activity. In the first quarter, vacancy increased to 5.9%, up 30 basis points from last quarter. Overall absorption recorded negative 1,141,700 square feet. Furthermore, an additional 339,800 square feet of new construction was added to the inventory base. Inland Empire had the greatest amount of new construction deliveries, totaling 211,400 square feet, with Los Angeles County following with 116,200 square feet. Orange County deliveries totaling just
12,200 square feet.
All three counties recorded negative tenant movement with the Inland Empire recording the most move outs totaling negative 687,300 square feet of net absorption with Los Angeles County following at negative 346,100 square feet and Orange County recording slight negative movement of negative 108,300 square feet.
The vacancy rate for the Greater Los Angeles region increased 30 basis points to 5.9%. This is the widest increase recorded for vacancy within the past three years. Orange County (4.3%) and Los Angeles County (4.9%) recorded the lowest vacancy rates, while Inland Empire recorded the highest vacancy rate at 8.8%.
As tenant movement fell negative, the weighted average asking rental rate stayed flat from the previous quarter at $2.21 per square foot (PSF) triple net (NNN) per month. Asking rents were highest in Los Angeles County at $2.56 PSF NNN and lowest in the Inland Empire at $1.83 PSF NNN. Super regional malls in Los Angeles County remain the most expensive space at $4.00 PSF NNN.
National retail and food services sales for March decreased by 6.7% compared to one year ago. Due to the stay-at-home orders instituted on March 19th, consumer sentiment plunged 47% in the last days of March. This rapid drop in a short amount of time is new historical territory.