Q3 2017 – Research and Forecast Report | Greater Los Angeles

Q3 2017 – Research and Forecast Report

Executive Summary

The Los Angeles Basin retail market closed the third quarter on a positive note as net absorption recorded 1.2 million square feet (SF). A total of 499,000 SF was delivered to the base with new construction completions. The Los Angeles County market had the highest number of new construction deliveries recording 248,700 SF, with the Inland Empire following at 135,200 SF and Orange County recording last at 115,100 SF. All counties recorded positive absorption: Los Angeles County (934,800SF), Inland Empire (228,800 SF) and Orange County (52,200 SF). The vacancy rate for the Greater Los Angeles region decreased to 5.4%, down 20 basis points from last quarter. The vacancy rate a year ago stood at 5.7%. Los Angeles County recorded the lowest vacancy rate at 4.2%, a decrease of 60 basis points. Orange County followed, recording a vacancy of 4.3%, a decrease of 10 basis points, and the Inland Empire recorded the highest vacancy rate at 8.4%, a decrease of 10 basis points. The weighted average asking rental rate increased up $0.01 to $2.00 per square foot (PSF), triple net (NNN), per month from the previous quarter. Asking rents were highest in Los Angeles county at $2.54 PSF NNN and lowest in the Inland Empire at $1.46 PSF NNN. Super regional malls in Los Angeles County remain the most expensive space at $6.20 PSF NNN. Annual national retail and food services sales for August 2017 increased by 3.2%. According to the Conference Board Consumer Con dence Index, consumer con dence decreased slightly in September due to the impact of recent weather events. Despite the slight downtick in con dence, consumer assessment of current economic conditions remains favorable as the economy is expected to expand at its current pace.


The Los Angeles County retail market recorded positive movement, recording 934,800 SF of absorption and resulting in the highest amount of absorption in the Los Angeles Basin. Due to positive absorption, vacancy decreased by 60 basis points to 4.2%. Asking rental rates recorded at $2.45 PSF NNN. The average asking rental rate was highest in the super regional/regional malls product type. Currently, a total of 1,180,800 SF of retail space is under construction in Los Angeles County. The largest project under construction is The Vineyards in Porter Ranch, consisting of 214,800 SF. The project is expected to be completed by mid- 2018. A notable lease transaction in the Los Angeles County market was Target leasing 45,000 SF at 1 Sport Chalet Drive in La Canada Flintridge.


Orange County absorption recorded positive movement at 52,200 SF. Total vacancy decreased to 4.3% from last quarter’s 4.4%. Demand for retail space in Orange County is expected to remain positive as new multifamily product continues to deliver within the market. The overall average asking


rental rate increased in comparison from last quarter, increasing $0.03 to $2.18 PSF NNN. Approximately 555,000 SF of retail space is under construction in Orange County. The largest property currently being built is the Laguna Hills Mall, which consists of 170,000 SF and is expected to be completed by the third quarter of 2018.

Inland Empire

Inland Empire retail market activity witnessed an increase in vacancy by 10 basis points to 8.6% during the rst quarter. Overall positive net absorption recorded -133,900 SF for the quarter. Average asking rents increased $0.01 PSF NNN from last quarter to end rst quarter at $1.42 PSF NNN. There is currently 1,054,100 SF of new retail inventory under construction in the Inland Empire market. The largest project currently under construction is the Renaissance Marketplace located in Rialto at 260,765 SF. The regional mall is expected to be completed by mid-2018. Recent leases signed at the Renaissance Marketplace include: Burlington, 24 Hour Fitness, Ross, Party City and Ulta.




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