Q3 2023 Retail Market Outlook – Los Angeles
MARKET OVERVIEW
In Q3 2023, LA County’s retail market recovery continued, marking three years post-pandemic. With
construction easing and vacancy slowing down, landlords are contending with a changing economy,
leading to mixed demand for retail space. The initial pivot back to brick and mortar from retailers that
vacated space during the pandemic shutdown is now more about economic survival, as bankruptcy has
caused several popular chains to close their doors. Nevertheless, the pace at which retail space is being
vacated slowed significantly up a mere 150,000 square feet quarter over quarter in contrast to 1.6 million
square feet or 9.4 percent year over year. While the total amount of vacant space on the market at 18.2
million square feet this quarter is at an all-time high it appears to be reaching its peak. Still, the retail
market has a way to go toward getting vacancy back to ‘normal’ levels. Since Q3 2020, as retail started to
recover from the pandemic shutdown, there has been an increase in the vacancy of retail space by more
than 1.9 million square feet.
TRENDS TO WATCH
Landlords with retail vacancies looking to improve occupancy are making concession adjustments as
retailers continue to battle online threats, with Amazon being the usual suspect, and facing increased
competition from direct-to-consumer e-commerce. While big chains like Walmart, Kroger, Costco,
Walgreens, Target, and others maintain a strong presence in brick-and-mortar, they are not all immune to
rising costs and stagnant revenue. Rite Aid, with 2,111 stores in 17 states and seven distribution centers,
has filed for Chapter 11 bankruptcy protection. In its court filing, Rite Aid announced plans to “Reject
Leases” at over 347 locations, 30 of them in Los Angeles County, to renegotiate more favorable terms
from landlords in their reorganization. However, they plan to close 10 stores in Los Angeles County. Rite
Aid’s owned and leased stores range from 6,400 to 37,154 square feet, and this will have an impact on
the retail market. Rivals CVS and Walgreens may view this as an opportunity to expand, and retailers will
compete for the better sites, while some locations may sit vacant as landlords work to secure new retailers.
