The spate of high-profile store closings and bankruptcies has some finance executives thinking the retail slump is “forever.”
But things don’t look too bad in Los Angeles right now, according to a first quarter market report from CBRE. Vacancy rates in the greater L.A. area declined, and there were record asking lease rates and new retail developments. Overall, CBRE Research predicts Los Angeles’s retail market will see slow growth with steadily increasing lease rates, projected to rise another 1.3 percent, and stable vacancy over the next 12 months.
While secondary markets were affected by retail closures, urban and high density environments continued to attract prime food and retail tenants. Landlords and developers have also been reworking spaces by breaking up larger box stores and redeveloping properties, according to CBRE’s analysis.
Average asking retail lease rates saw a growth of 15 cents per square foot in the first quarter this year, bringing the total average up to $2.63 per square foot. The largest contributor to the overall increase was West Los Angeles, CBRE noted. The neighborhood’s reported average asking lease rate hit $11.66 per square foot, or 41 cents per square foot higher compared with the fourth quarter of 2016.
Vacancy dropped just slightly to 4.8 percent, compared with 4.9 percent in the prior quarter. The decrease, while nominal, highlights the flexibility and demand from retailers in greater Los Angeles.
Big box vacancy grew to 5.5 percent at year-end, according to CBRE. However, Q1 was the most active quarter for leasing spaces over 20,000 square feet. The region saw over 20 leases in big box spaces with new tenants such as Dave & Buster’s, ULTA, Gold’s Gym, Sprouts and H&M.
Total net absorption for the quarter was 130,358 square feet. The largest contributor to overall gains was in the San Gabriel Valley submarket with 218,535 square feet of positive net absorption. A number of big leases were signed in the area, including Sprouts and Ross Stores in Diamond Bar, Planet Fitness in El Monte and Howard’s Electronics in Alhambra.