LA Retail Rents Rise, Though Investors Are Cautious
When it comes to the retail market in LA County, rents are up.
The vacancy rate went up 10 basis points to 4.3% in Q2 as 173,816 SF of new construction was delivered to the market, according to NAI Capital research.
New construction hitting the market has helped elevate vacancy rates. NAI Capital reports there is 1.4M SF of retail under construction countywide. Around 66% has been pre-leased.
Investors appear to be cautious.
"Although market fundamentals are strong, investors feel skittish about the fact that the market has far exceeded the usual cycle for continuous upward movement," NAI Capital Executive Vice President Fariba Kavian said. "Sellers expect the same prices and cap rates as the last couple years, which were exceptionally high. Consequently, there is a gap between buyer and seller expectations, and unless either the buyer or seller is motivated it creates a drop in transaction volume."
Average asking rents are climbing with rents closing the quarter at $2.78/SF, a 3% increase over the previous quarter and up 6.5% from last year.
In Q2, the local retail market saw an increase of total sales volume of 10.5% over the previous quarter as investors continued to look for reasonable and low-risk investments.
Leasing activity totaled just under 1.9M SF, representing a decline of 5% over Q1.