The Los Angeles retail market is continuing to improve after a challenging year of the COVID-19 pandemic. According to a second quarter retail market report from brokerage firm CBRE, the market has seen some positive changes. However, with the region still reporting negative absorption and slightly lower vacancy rates, some uncertainties remain.
According to the report, the Greater Los Angeles market reported an overall decline in net absorption totaling negative 113,750 square feet in the second quarter of 2021. At the same time, the region reported a 6.4 percent vacancy rate, compared to the 6.2 percent vacancy rate observed in the second quarter of 2020.
Despite this, some pockets of Los Angeles continue to outperform, with coveted locations and luxury retailers being the main reason why, according to the report.
“The stronger are only getting stronger I think. The flight to high traffic, greater walkable areas are going to continue to do extremely well, and the ones that are not and aren’t in generally safe neighborhoods or easily parkable or walkable areas are going to continue to struggle, and I don’t think that’s anything novel. I think that’s just what’s sort of been highlighted, obviously over COVID-19, and certainly over the last quarter,” Andrew Turf, senior vice president of CBRE’s Global Retail Advisory Services, said.
The report showed that high-traffic areas with luxury retailers continue to do well, with many of these locations seeing new retail development in the second quarter of the year. In total, CBRE reported 1.08 million square feet of new construction, with approximately 53,000 square feet delivered in the second quarter of the year.
The 53,000 square feet of newly delivered retail space is made up of one retail center, Manhattan Village, located at 3200 North Sepulveda Boulevard in Manhattan Beach. Other projects in the pipeline include the 100,000 square-foot Cumulus, located at 3321 La Cienega Boulevard in West Adams, the 153,192 square-foot Collection at Oceanwide Plaza, located at 1101 S. Flower Street in downtown Los Angeles, and more.
“Those areas are going to continue to outperform; they have great demographics, great neighborhoods surrounding them, and I think people enjoy being in those parts of town and tourists enjoy being in those parts of town, so money is going to continue to flow there,” Turf said.
Despite various uncertainties and changing trends in the sector, Los Angeles remains one of the leading markets for retail nationwide. According to CBRE, cap rates in Los Angeles averaged $320 per square foot in the second quarter of 2021, approximately 38 percent higher than the national average. At the same time, sales volume went up 18 percent during the second quarter.
Notable sales in Los Angeles include Atlas Capital’s acquisition of Eagle Rock Plaza for $72.6 million; Gyphon Capital’s acquisition of Valley Plaza for $33.9 million and Centerpoint Properties’ acquisition of the shopping center at 11729 Imperial Highway for $32.3 million, among others.
“I think it’s probably the strongest retail market in the U.S.,” Turf said. “In Los Angeles, we have an outdoor lifestyle and it’s like the billionaire’s playground. We have tremendous weather, so we can be outside of our homes…I think it’s in one of the best creative time periods I’ve ever seen, just with tremendous creative brands growing and using Los Angeles as a base as well.”
