Q2 2023 Retail Market Outlook – Los Angeles
In Q2, the changing economy caused a slowdown in L.A. County’s retail market. Landlords with nonprime retail space experienced sluggish progress. The vacant space expanded by 746,932 square feet this quarter, adding to the existing 18.2 million square feet. Occupancy is over 3 million square feet lower than Q2 2020, marking the start of the pandemic shutdown and indicating a long journey for L.A.’s brick and mortar retail sector to reach pre-pandemic vacancy levels. The current vacancy rate stands at 5.8%, surpassing the rate during the Great Recession in Q2 2010.
TRENDS TO WATCH
Landlords and sublessors are actively making adjustments to their asking rent to improve cash flow and fill vacancies. In the region LA West currently has the highest amount of available retail space, totaling approximately 4.4 million square feet. To attract tenants, LA West has seen a quarter over quarter drop of 7.2% in asking rent for sublease space, now standing at $4.50 per square foot triple net. Sublessors may need to bear additional costs to entice replacement tenants, and some may still face challenges in filling large, vacant spaces. However, many landlords have not significantly discounted their direct asking rents.