Q4 2020 Retail Market Outlook – Los Angeles

In the fourth quarter of 2020, Los Angeles County’s retail market continued to be challenged
by the effects of an economy that spent three quarters of the year under a COVID-19
shutdown. Since the onset of the pandemic’s forced closure of non-essential businesses
in March 2020, vacancies steadily increased, up 20 basis points from the previous quarter
and 80 basis points year over year to 5.5%. As ecommerce volume skyrocketed, brick and
mortar retail lost considerable demand. Vacancies hit an eight-year high as the coronavirus
pandemic recession continues to slam businesses in Los Angeles County. While vacancy
hit 5.6% in the fourth quarter of 2009, the average asking rent would need to fall by 30%
to reach Great Recession levels. The average asking rent fell only one cent from the prior
quarter to $2.92 triple net, down 2.3% from the fourth quarter of 2019.

The decline of in-store traffic is creating new challenges for retailers and landlords. Slow growth
hurt total leasing volume in 2020, down 34.8% compared to the total for 2019. While total sales
volume on a square footage basis suffered in 2020, down 48.2% from the 2019 total, volume
in the fourth quarter shot up 121.3% from the third quarter. This demonstrates that buyers saw
market conditions as an opportunity to acquire retail real estate as others exit.