Q1 2023 Retail Market Outlook – Los Angeles
The retail market in L.A. County’s post-pandemic recovery was slow in Q1 2023 as landlords dealt with sluggish demand for retail space due to the changing economy. Some of the retail space that was put on the market during the pandemic shutdown has been occupied by retailers pivoting back to brick and mortar, but the progress has been slow. The total amount of vacant square footage on the market increased by 537,254 square feet from year-end 2022, pushing it to 17.5M square feet as of Q1 2023.
Trends to Watch
Landlords and sublessors will continue adjusting asking rent in their efforts to improve cash flow and fill available retail space. LA West holds approximately 4.4M square feet of available retail space, the most in the region, and witnessed a 4-cent quarter over quarter drop in asking rent for direct space to $4.77/SF triple net. Property owners will have to absorb additional costs to lure replacement tenants, and some might still struggle to fill large, vacated spaces, but many sublessors haven’t discounted sublease rents yet. LA West, home to the most prestigious retail market, which leads L.A. County with the highest average rent, netted 184,385 square feet of negative absorption in Q1 as vacancy increased 40 bps to 7.7%.