Overall retail leasing activity in Greater Los Angeles has improved lately, as has net absorption, but market conditions across Southern California are more mixed on a granular level, according to a new quarterly report by Colliers (CIGI).
First, L.A. County: the third quarter saw a negative net absorption with 135,000 square feet of retail space returned to the market. Yet the negative absorption failed to disrupt the stability of the market, as vacancy remained at 6.2 percent due to 230,000 square feet of new inventory, per the report.
Average asking retail lease rates in the county have declined over the past four consecutive quarters, falling 10 percent year-over-year to $2.72 per square foot per month. Leasing activity, however, is up 22 percent from last quarter at 2.4 million square feet transacted. The development pipeline also remains strong with 1.29 million square feet under construction.
Meanwhile, Unibail-Rodamco-Westfield closed one of the biggest CMBS deals in the country last month with a $925 million refinancing of the Westfield Century City mall. The massive, 1.3 million-square-foot mall, just southwest of Beverly Hills, is currently 95 percent leased.
Orange County saw negative 317,000 square feet of net absorption in the third quarter. Retail vacancy rates increased by 20 basis points to 4.9 percent as a result. Average asking lease rates dropped slightly to $2.38 per square foot.
Yet leasing activity in Orange County also made noticeable gains, with a 33 percent increase quarter-over-quarter to 688,000 square feet. Nearly half of that square footage was conducted in community and neighborhood shopping centers, according to Colliers.
Conditions in the Inland Empire are almost the opposite. Net absorption in the region is positive with 630,000 square feet newly occupied, thereby offsetting the occupancy loss that it experienced in the first quarter of 2023. Those gains have contributed to a reduction in vacancy rates, which are down 11 basis points to 6.61 percent.
However, average asking lease rates have increased by 12.35 percent this quarter to $1.82 per square foot per month. Retail leasing activity in the Inland Empire totaled 1.2 million square feet this quarter, mostly in single-tenant buildings, a decline of 27 percent year-over-year.
Despite the declining leasing activity, the report notes that the overall market in the Inland Empire indicates momentum and a robust foundation for retail growth. This is partly due to an injection of nearly 300,000 square feet of new inventory in the region, along with an additional 1.3 million square feet of developments in the pipeline.
Nick Trombola can be reached at NTrombola@commercialobserver.com.