Greater Los Angeles Retail Continues Positive Activity
The Los Angeles Basin retail market closed the fourth quarter on a positive note as net absorption recorded 520,300 square feet. An additional 431,100 million square feet was delivered to the base with new construction completions. The Inland Empire market had the highest amount of new construction deliveries, recording 342,700 square feet, with Los Angeles following with 67,100 square feet and Inland Empire recording lowest with 21,300 square feet. Two of the three counties recorded positive tenant movement with Inland Empire recording the highest at 569,700 square feet of net absorption and Orange County following at 98,300 square feet. Los Angeles County recorded negative movement at 147,700 square feet following suit.
The vacancy rate for the Greater Los Angeles region decreased to 5.1%. Vacancy gains have been minimal both on a year to year basis (-20 basis points) and from last quarter (-10 basis points). Orange County recorded the lowest vacancy rate at 3.8%, while Inland Empire recorded a vacancy rate of 8.1%.
The weighted average asking rental rate increased $0.02 from the previous quarter to $2.08 per square foot (PSF) triple net (NNN), per month. Asking rents were highest in Los Angeles County at $2.52 PSF NNN and lowest in the Inland Empire at $1.68 PSF NNN. Super regional malls in Los Angeles County remains the most expensive space at $4.38 PSF NNN.
National retail and food services sales for November 2018 increased by 4.2% compared to one year ago. Consumer confidence had a modest decline in November. The economy is still expected to expand at a solid pace, however, consumers reported mixed assessment on labor market conditions and business condition standings. Consumers also have a less favorable outlook for the labor market as it is believed more jobs will be available in the months ahead.
GREATER LOS ANGELES
The Los Angeles County retail market saw nagative movement, recording -147,700 square feet of absorption, marking the lowest absorption in all three counties. Total vacancy increased by 10 basis point from last quarter to 4.0%. Asking rental rates recorded at $2.52 PSF NNN. The average asking rental rate was highest in the regional and super regional product type at $4.38 PSF NNN.
Currently, a total of 1,420,700 square feet of retail space is under construction in Los Angeles County. The largest project under construction is 6200 E 2nd Street, in Long Beach, consisting of 255,000 square feet. The anchor tenant is Whole Foods and the project is expected to be completed by mid-2019. A notable lease transaction in the Los Angeles County market was Sprouts Farmers Market leasing 30,275 square feet at 2630 Workman Avenue in West Covina.
Orange County saw positive tenant movement recording 98,300 square feet of absorption. Total vacancy decreased by 10 basis points from last quarter to 3.8%. Demand for retail space in Orange County is expected to remain positive as new multifamily product continues to deliver in the market. The overall average asking rental rate increased in comparison from last quarter to $2.13 PSF NNN. Approximately 417,500 square feet of retail space is under construction in Orange County. The Tustin Legacy, which consists of 220,000 square feet, is the largest property currently being built and is expected to be completed by the end of 2018..
Inland Empire absorption displayed the highest amount of tenant movement, recording 569,700 square feet as vacancy decreased by 20 basis points from last quarter to 8.1%. Much of this positive movement stemmed from tenant move-ins in the super regional/regional malls category. Average asking rents increased $0.03 PSF NNN from last quarter to end the fourth quarter at $1.68.
Currently 1,068,000 square feet of new retail inventory is under construction in the Inland Empire. The largest project under construction is the 152,000 square foot Costco located in Eastvale. The project is expected to be completed by first quarter 2019.