Steve Canty
Director, GRS Group
(858) 433-0441
[email protected]
With the strong advent of Amazon, brick-and-mortar retail doesn’t have a lot of optimism right now.
But Southern California’s retail sector of commercial real estate seems to be holding up well, despite reports of doom and gloom.
A recent Colliers International report (download here), paints a second-quarter picture that doesn’t make retail real estate look all that bad in the Greater Los Angeles Basin.
In the overall area, vacancy decreased 10 basis points, to 5.3 percent from the same year-ago period. Though Los Angeles County saw a 20-basis-point rise, it was the lowest of all three regions, coming in at four percent. Orange County also experienced a 20-basis-point jump but still came in at a low 4.3 percent. The Inland Empire saw vacancy decrease by 20 points, dropping overall to 8.4 percent due to new tenants moving into regional shopping centers.
On the development front, Los Angeles is seeing the most activity, with just over two million square feet underway. The largest project being built there is the 258,900-square-foot mixed-use 5601 Santa Monica Boulevard, in Hollywood, by CIM Group. A historic Sears building is being renovated as part of the development. In Orange County, there are 602,800 square feet in the works. Its largest development is the 220,000 square feet in Tustin Legacy, which will include a new Stater Bros. Market grocery store. Finally, the Inland Empire has just over 905,000 square feet under construction. This includes the 260,765-square-foot Renaissance Marketplace, in Rialto, which is nearly leased up and opening in phases, with a Cinemark Theatre among its anchors.
Even with a slight dip in some regions’ vacancy rates and more construction coming online, rental rates are expected to increase, following their current upward momentum. Asking rents during the second quarter rose 2.5 percent year over year, hitting $2.04 per square foot. Los Angeles County saw the highest rents, at $2.56, while super-regional malls in that area topped out at $4.58, and their vacancy stood at a very low three percent, which was unchanged from the prior quarter.
Vacancy rates are forecast to increase, likely a result of new construction, but could be tempered by a continued drop in unemployment, which is being enjoyed throughout the Greater Los Angeles Basin. If the economy keeps performing well, retail should follow with it.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.