It seems nothing can get in the way of L.A.’s rising retail rents.
The Los Angeles area retail market still managed to post gains in overall lease rates in the first quarter, despite increased levels of vacancy in areas such as South Bay and the San Fernando Valley.
Average rates in the region increased by six cents to $1.37 per square foot, representing a year-over-year increase of 9.8 percent, according to a new report by CBRE. The firm attributed the rise in rents to an increase in the amount of available space in markets where rental rates are the strongest.
West L.A. and the Mid-Wilshire areas saw the highest rates in the first quarter, recording average rates of $7.69 and $3.43 per square foot, respectively. But some of the biggest price gains were seen in Downtown L.A., where rents went up by $0.16 to $2.85.
The uptick in rents comes amid a dip in absorption levels. The L.A. region posted negative absorption of 157,828 square feet in the first quarter, led by notably low absorption in South Bay, where vacant space went up by 192,337 square feet. Total vacancy across the market jumped to 5.3 percent from 5.1 percent. It was the second consecutive quarter in which vacancy levels increased.
Some of the negative absorption can be attributed to the departure of grocery chain Haggen from the L.A. market.
The Bellingham, Wash., company announced in September that it would shutter all its stores in the state as part of a larger exit of its Pacific Southwest holdings. Close to 70 California stores were impacted.
“While several deals are still in negotiations to fill these spaces, multiple grocer boxes remain vacant,” the report said.
Gelson’s Markets took over the company’s Santa Monica store, for instance.
As for new development, there were 440,372 square feet of retail space delivered in the Greater Los Angeles market in the first quarter, including the Stanford Regency and the Platform in Culver City, with an additional 344,138 square feet under construction.