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The Los Angeles retail market showed notable resilience in Q2 2024, holding its ground despite economic headwinds. Demand for well-positioned retail space remains robust, helping to sustain occupancy rates and support moderate rent growth across the region.
Steady Occupancy and Active Leasing
Occupancy rates across Los Angeles held relatively steady, with the vacancy rate seeing a slight uptick to 5.2% from 5.0% last quarter. This minor increase is largely due to newly completed developments that are still in the lease-up phase. Even so, prime locations—think Beverly Hills, Santa Monica, and West Hollywood—continue to enjoy near-full occupancy, underpinned by strong tenant demand.
Leasing activity remains a key driver, with retailers focusing on securing high-visibility locations with strong foot traffic. Shopping centers anchored by grocery stores and experiential retail outlets are particularly sought after. Lifestyle centers and open-air retail formats are gaining traction, as tenants view these setups as more adaptable to the evolving retail landscape.
Modest Rent Growth Amid Market Dynamics
Rent growth across Los Angeles has been modest but steady, with average asking rents rising 1.3% year-over-year to $3.26 per square foot per month. Notably, high-demand submarkets like Beverly Hills and West Hollywood are seeing more significant rent increases due to the scarcity of available space. Conversely, areas with higher vacancy rates are experiencing more subdued rent growth, with some landlords offering concessions to attract quality tenants.
A key trend is the increasing diversity of tenant types. While fashion and dining still dominate, there’s a growing presence of non-traditional tenants like healthcare providers, fitness studios, and entertainment venues. This diversification is enhancing the market’s stability, cushioning it against potential downturns in specific retail sectors.
Investment and Development Trends
Investment in Los Angeles retail properties remains healthy, although it has slowed from the frantic pace of recent years. Investors are becoming more discerning, with a focus on properties in prime locations that feature stable, long-term tenants. Cap rates for top-tier assets are holding steady around 5.5%, indicating ongoing confidence in the market’s fundamentals.
New development continues, albeit at a more measured pace, with a particular emphasis on mixed-use projects that blend retail with residential and office space. This trend is particularly pronounced in urban settings, where demand for lifestyle-oriented developments remains high.
Looking Ahead
As we move forward, the Los Angeles retail market is expected to continue its steady performance, supported by ongoing demand for prime retail locations. However, economic uncertainties—ranging from shifts in consumer spending to interest rate volatility—could present challenges.
Nonetheless, the market’s underlying strength suggests that Los Angeles remains a compelling destination for both tenants and investors looking to navigate the evolving retail landscape.
For a detailed analysis, refer to the full CBRE’s report by clicking on the button below:
