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December 13, 2017
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Los Angeles Retail Vacancy Rate is Up Slightly and May Continue to Rise

8/03/17

The Los Angeles retail market vacancy rate ticked up 10 basis points to 4.3% in the second quarter of 2017 as 173.8k sf of newly completed construction was delivered to the market. According to the latest research provided by NAI Capital, the delivery of completed new construction to the market has contributed to the rise in the vacancy rate - and this trend may continue.


Los Angeles County has 1.4 msf of retail space under construction. Approximately 66% of the space under construction has been preleased. In LA County there is a growing trend toward mixed-use, lifestyle and specialty center construction replacing malls and power centers as the primary centers of retail activity.

Average asking rents continue to rise. The average asking rent closed the quarter at $2.78/sf, representing a 3.0% increase over the prior quarter and a 6.5% increase from last year.

In the second quarter, the Los Angeles retail market saw an increase total sales volume of 10.5% over the prior quarter as investors continue to look for reasonably priced low risk investments. Leasing activity totaled just under 1.9 msf, representing a decline of 5% over the first quarter.

According to Fariba Kavian, Executive Vice President with NAI Capital’s West Los Angeles office, “There is a disconnect that is happening between buyers and sellers right now. Buyers are not on a feeding frenzy any longer but many sellers refuse to acknowledge that the market is changing. Unless it is a premium property, most buyers are extremely careful and concerned about a potential downturn and therefore not motivated to purchase, unless they build in the risk. This translates into a slow-down in transaction volume and properties remaining on the market for a longer period. Eventually, it will lead to lower cap rates.”

According to a survey released in June from Chapman University’s Anderson Center for Economic Research, the California Composite Index of Consumer Sentiment declined 10 points from the first quarter to 98.7. This is significant because, according to the survey, a reading below 100 indicates pessimism. While consumers may be concerned about their economic future throughout California, the economic outlook for Los Angeles County remains solid. From June 2016 to June 2017, Los Angeles County gained 83,600 nonfarm jobs dropping the unemployment rate to 4.5% - the lowest since 2007.






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