12 Mo Deliveries in SF
12 Mo Net Absorption in SF
12 Mo Rent Growth
12 Mo Sale Volume
$ 0 .3 B
The Los Angeles retail sector was particularly exposed to the pandemic, but certain segments strengthened and retailers were able to make investments that added technology to operations leading to labor costs and streamlined services. Despite an uptick in COVID-19 cases, retailers are much more adept at providing goods and services through an omnichannel approach. Furthermore, some sectors have had increases in sales compared to pre-pandemic levels. Home goods and furniture sales increased during the pandemic as people spent more time at home. Grocery stores and fitness centers drive traffic to retail properties and have been pursued as anchors to neighborhood centers and new mixed-use developments.
The retail sector will need to evolve and rightsize by repurposing or demolishing defunct retail properties. Some longtime vacant big-box sites with excellent freeway access were acquired with plans to reposition them as industrial sites. For example, a vacant 140,000- SF former Costco site in Montebello was sold to a developer that reached an agreement with the city to convert a portion of the site to a last-mile delivery facility. Other longtime vacant sites have drawn interest from developers, especially along the region’s expanding light rail system.
Vacancy has increased for several years, and all plausible economic scenarios in CoStar’s property market forecast anticipate market vacancy to rise for at least the near term. Average asking rates are projected to correspondingly decline through the end of the year.
Construction is bifurcated among high-end retail in major mixed-use developments and small retail pads, usually with drive-thru capabilities. Large projects nearing completion include The Grand on Bunker Hill in Downtown Los Angeles and Hollywood Park in Inglewood. Construction will commence early next year on the waterfront development project in San Pedro that will add 100,000 SF at the Ports O’Call village.
Los Angeles has some of the most prized and expensive retail real estate in the nation, much of which is on the Westside. Beverly Hills and its famed Rodeo Drive are world renowned, but other high-street retail districts in Abbot Kinney, Santa Monica, and West Hollywood have rental rates that surpass the highest rates in most other markets. On Rodeo Drive, the former Luxe Hotel site sold for $200 million in December.
The 86-room hotel closed last year due to the pandemic. An undisclosed buyer acquired the 43,000-SF property at 360 N Rodeo Drive following the hotel’s closure last year. Three ground-floor retail stores are occupied by Rolex, Patek Philippe, and Ferrari.
One underlying advantage L.A. retail has compared to most markets in the nation is its relatively lower retail stock per capita. As an example, Los Angeles has about 20% less retail square footage than the Chicago metro despite having a higher population. Development is much harder to launch in L.A. than in more pro-growth metros with greater land availability, and potential retail sites compete with industrial and multifamily uses. While there is obsolete retail that needs to be filtered out of the local market, these properties are coveted for a variety of conversion options.