— By Tony Solomon of Marcus & Millichap —
The positive relationship between retailers and rooftops is proving true in key ways across Los Angeles County. The market’s retail vacancy has risen in recent years — with the metro-wide rate up 120 basis points since 2022 – but the overall measure of 6.5 percent belies strong local dynamics.
Retailers are continuing to find opportunities, especially in zones with recent and upcoming residential growth. Multifamily vacancy dropped by 50 basis points or more last year in the Santa Clarita Valley, Southeast Los Angeles and the South San Gabriel Valley. These same submarkets recorded retail vacancy rates at or under 5.2 percent at the onset of this year, which are some of the lowest in the county. Property performance momentum is set to continue in those areas amid numerous upcoming move-ins, including from tenants like Savers and Planet Fitness.
The growing local apartment sector is expected to help absorb the primary area of heightened availability: Downtown Los Angeles. Retail vacancy here jumped 220 basis points last year to 9.1 percent, more than 100 basis points above the next highest submarket. Thankfully, that vacancy pressure may begin to ease in the near future. More than 2,000 new rental households entered the submarket in 2024. These move-ins will increase foot traffic at area retailers going forward.
North and west from Downtown Los Angeles, housing and retail dynamics are being impacted by damage from the January wildfires. Households displaced by the disasters in nearby communities like Santa Monica and Pasadena could lead to greater foot traffic at retailers in those areas. At the same time, the loss of retail properties along stretches of Sunset Boulevard, Fair Oaks Avenue and Lake Avenue will likely increase competition for suitable floorplans in nearby neighborhoods as tenants look to restart.
Despite the market’s recent challenges and hurdles (including Measure ULA), Los Angeles continues to be one of the most active markets for investment sales nationally. Investors frequently pursue sub-$5 million deals, circumventing the latter obstacle. The San Fernando Valley led submarkets last year in the number of individual investment sales as local buyers pursued storefronts, drugstores and restaurants, among other floorplans.
The Mid-Cities area also noted frequent sub-$3 million trades, with mixed-use storefronts a common option. Both submarkets should see similar interest this year. Investors seeking to outlay additional capital are more likely to look outside the City of Los Angeles due to Measure ULA. Beverly Hills and Santa Monica draw buyers willing to incur a premium, while South Bay attracts with per-square-foot sale prices closer to the metro mean.
— By Tony Solomon, Senior Vice President/District Manager, Marcus & Millichap. This article was originally published in the April 2025 issue of Western Real Estate Business.