— By Mark Damiani of CBRE —
Los Angeles has always been a market that requires conviction.
Recent headlines have tested that conviction, but institutional capital continues to look through short-term noise and focus on long-term fundamentals. By that measure, Los Angeles remains one of the most structurally advantaged retail markets in the United States, defined by scale, supply constraints and global relevance.
The market today is not without challenges, but fundamentals are stabilizing and capital is re-engaging following a meaningful repricing cycle.
A Global Gateway with Structural Advantages
Greater Los Angeles is one of the largest retail markets in the country, with about 378 million square feet of inventory. It benefits from a diverse economic base, significant tourism, and a consumer profile that spans both necessity and luxury spending.
At the same time, new supply remains extremely limited. Total deliveries in 2025 were negligible relative to the size of the market, continuing a multi-year trend of underdevelopment. Entitlements, construction costs and land availability remain significant barriers, particularly in infill locations.
This combination of scale and scarcity continues to underpin long-term investment theses for institutional capital.
Leasing Fundamentals: Stabilization with Positive Momentum
Leasing fundamentals across LA have proven more resilient than broader narratives would suggest.
The market is operating with an approximate availability of 6.2 percent, while absorption meaningfully improved in 2025 following a weaker 2024. Demand has been led by street retail, freestanding formats and experiential uses. This includes food and beverage and fitness, which continue to backfill space and drive traffic.
Importantly, leasing activity is not being driven by new supply, but rather by tenant demand reactivating in a constrained environment.
Overall, fundamentals reflect a market that has moved through disruption and is now stabilizing with improving leasing velocity.
Capital Markets Repricing Drives Re-entry
LA’s retail capital markets have shifted from repricing to re-engagement over the past 24 months.
Transaction volume reached about $4.7 billion over the past 12 months, representing a roughly 40 percent increase year over year. After a period of limited liquidity, capital is returning with greater clarity and conviction around pricing and where to invest.
Cap rates have adjusted and are now tightening into the mid-5 percent to 6 percent range for stabilized assets, driven by improving investor sentiment and a more favorable debt environment. As a result, bid-ask spreads have narrowed and transaction activity is gaining momentum.
Private capital has led the recovery, but institutional investors are increasingly active, particularly for high-quality assets with durable income streams and strong underlying real estate.
Retail Segmentation: Divergence Creates Opportunity
Performance across retail formats remains uneven, but that divergence is creating opportunity.
Grocery-anchored and necessity-based centers continue to attract consistent demand from both tenants and investors. At the same time, higher-profile street retail locations are showing tangible signs of recovery.
Santa Monica’s Third Street Promenade has re-emerged as a leasing story, highlighted by the opening of Google’s first retail store in the Los Angeles area. While the corridor continues to evolve, the return of flagship tenants signals renewed confidence in long-term foot traffic and positioning.
At the top end of the market, luxury retail continues to perform at a high level. Rodeo Drive remains one of the most productive retail corridors globally, supported by resilient high-income consumer spending and sustained tenant demand.
Los Angeles retail is entering a new phase of the cycle.
Fundamentals have stabilized, pricing has adjusted and capital is returning with greater selectivity. For institutional investors, the opportunity lies in identifying assets that combine durable cash flow with long-term positional strength in a supply constrained market.
As the market continues to normalize, Los Angeles is likely to remain a focal point for capital seeking exposure to high-barrier, globally relevant retail real estate.
— By Mark Damini, Executive Vice President of CBRE. This article was originally published in the April 2026 issue of Western Real Estate Business.