Q2 2012 Los Angeles, California Retail Submarket Trends

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Q2 2012 Los Angeles, California Retail Submarket Trends

Santa Monica/Westside/Downtown

  • The Santa Monica/Westside/Downtown submarket has a second quarter 2012 vacancy rate of 3.8% for 2.4 million square feet of anchor space, and 6.8% for 2.9 million square feet of non-anchor space. The second quarter average asking rent in this submarket is $24.11 psf for anchor space, second highest among 12 submarkets, and $39.80 psf for non-anchor space, the highest.
  • The overall vacancy rate of 5.4% was down 20 basis points during the quarter but up 10 basis points from a year earlier. Net absorption for the quarter totaled 12,000 square feet. The 12,000-square-foot Waa Waa Plaza completed construction in Los Angeles in April.
  • Two neighborhood centers with 315,000 square feet are under construction for delivery in this submarket, with the 140,000-square-foot 8500 Burton Way Center expected to complete construction at that address in Los Angeles by the end of the year.
  • The average asking rent increased 0.4% and the average effective rent rose 0.5% in the second quarter, the latter to $35.08 psf. The year-over-year gains are 2.1% and 2.3% respectively.

South Bay/Long Beach

  • Reis reports the South Bay/Torrance submarket has a 0.7% vacancy rate for 2.8 million square feet of anchor space, and a 6.5% rate for 3.2 million square feet of non-anchor space. The overall vacancy rate of 3.8% is down 40 basis points from the prior quarter and 160 from a year earlier.
  • The average asking rent is $20.27 psf for anchor space and $31.38 psf for non-anchor space. Both the average asking rent and the average effective rent increased 0.2% during second quarter, the latter to $27.51 psf. Rents are up 1.1% asking and 1.5% effective from a year earlier.
  • In the Long Beach/Cerritos/Carson submarket, Reis reports a vacancy rate of 3.1% for 3.6 million square feet of anchor space, along with an average asking rent of $16.78 psf. For 3.3 million square feet of non-anchor space, the vacancy rate is 10.7%, with the average asking rent at $27.77 psf.
  • The overall vacancy rate was unchanged in the second quarter at 6.8%, but it is up 40 basis points from a year earlier. The average asking rent increased up 0.3% for the quarter, with the average effective rent up 0.2% at $24.39 psf. Rents are essentially flat here year-over-year.
  • “Developers have not added any retail space to the South Bay/Long Beach retail market since the fourth quarter of 2008, allowing incoming retailers to take up existing space,” according to Marcus & Millichap. “The local construction pipeline has swelled, however, as projects totaling 1.3 million square feet of space reach the planning stages. The only project with a firm start date is the 20,000-square foot North Catalina Avenue shopping center, which is slated to be under way by midyear,” according to this source. “The Boulevards at South Bay mixed-use development is the largest project in the pipeline, with approximately 1.2 million square feet of retail space expected.”

Tri Cities/San Fernando Valley

  • The Tri-Cities (Burbank, Glendale, Pasadena) submarket has a 0.0% vacancy rate for its 1.6 million square feet of anchor space, lowest among the submarkets, and an 12.9% vacancy rate for 1.1 million square feet of non-anchor space. The overall vacancy rate fell 10 basis points in the second quarter to 5.4%, but is the same as one year earlier.
  • The average asking rent is $21.44 psf for anchor space and $31.17 psf for non-anchor space in the Tri-Cities, Reis reports. Rents were up 0.8% by as measured by both the overall asking and effective averages for the quarter and 1.7% by both measures year-over-year, with the average effective rent at $27.76 psf.
  • The San Fernando Valley East submarket has a 0.9% vacancy rate for 1.7 million square feet of anchor space, and a 12.1% vacancy rate for 2.2 million square feet of non-anchor space. The average asking rents are $18.46 psf and $32.27 psf for anchor and non-anchor space, respectively.
  • The overall vacancy rate decreased 40 basis points during the second quarter to 7.3%, and is up 100 basis points since the second quarter of 2011. The average asking fell 0.4% during the quarter, with the average effective rent also down 0.4% to $28.14 psf.
  • In San Fernando Valley West, the 2.6 million square feet of anchor space has a 3.0% vacancy rate and an average asking rent of $22.37 psf. For the 2.8 million square feet of non-anchor space, the vacancy rate is 9.9% and the average asking rent is $33.32 psf.
  • The overall vacancy rate decreased 50 basis points in the second quarter to 6.6%. The rate is unchanged year-over-year. The average asking rent and the average effective rent are up 2.1% and 1.9% from a year earlier, the latter to $28.21 psf. The second quarter increases were 0.4% and 0.3%, respectively.
  • “Vacancy in the San Fernando Valley rose 30 basis points in the last 12 months to 6.7%,” Marcus & Millichap reports. “Asking rents climbed 1.7% in the last year to $31.49 per square foot, after falling 0.5% in the preceding year-long period…Effective rents advanced 1.6% since the first quarter of last year to $26.98 psf,” this source notes.

Inland Empire: LA County Portion

  • The Santa Clarita Valley/Palmdale/Lancaster submarket has a 4.6% second quarter vacancy rate for 4.2 million square feet of anchor space, and an 11.3% vacancy rate for 4.9 million square feet of non-anchor space. The overall vacancy rate fell 80 basis points during the second quarter to 8.2%.
  • The average asking rent is reported at $15.09 psf for anchor space and $22.71 psf for non-anchor space, the latter the lowest among the tracked submarkets. In the second quarter the average asking rent fell 0.4% and the average effective rent decreased 0.3% to $20.15 psf. The year-over-year decreases are 1.1% and 1.0% respectively.
  • The 61,250-square-foot Palmdale Spectrum community center is not yet under construction, but it is expected to complete construction in October 2013. Additional retail space is expected to come on line each year from 2014 to 2016.
  • Marcus & Millichap report a second quarter vacancy rate of 8.7%, down 20 basis points year-over-year, for its Santa Clarita Palmdale/Lancaster submarket. The effective rent is reported at $19.46 psf, down 1.2% year-over-year.