The traditionally strong retail leasing market on the west side of Los Angeles mirrors the trends experienced throughout the rest of the county. The last part of third quarter 2008 saw a rise in retail vacancies, which is emblematic of the ever-worsening economy as seen in the rise in bankruptcy fillings, many retail closings and shelved expansion plans. Rental rates throughout the west side have been falling by as much as 20 percent while vacancy rates have risen from 3 to 4 percent in second quarter 2008 to 5 to 7 percent. However, unlike many national landlords, there have been few reports of west side landlords aggressively seeking to renew tenants earlier than normal.
Even the glamorous Beverly Hills submarket has seen this vacancy increase with properties staying on the market longer and asking rental rates slipping 10 to 15 percent. Yet it should be noted that asking rates on the famed Rodeo Drive have been between $45 and $60 per square foot per month, and even far less traveled Brighton Way has seen landlords getting more than $20 per square foot per month. The Golden Triangle should get a boost from the November 24, 2008, opening of the five-star Montage Hotel, and national tenants Anthropologie and Urban Outfitters plan on opening doors a few blocks south where rents are cheaper.
Hot Roberston Boulevard comprising the very select blocks between Third & Beverly currently has only two vacancies, one of which has been vacant for 6 months due to a high asking rental rate of $25 per square foot. Whether high-end and trendy retailers like Kitson, Tory Burch, Chanel, Anya Hindmarche et al that have flocked to these few paparazzi-infested blocks will continue to vie for these spaces remains to be seen. The high rents and entrenched luxury name brands have a new generation of cutting-edge retailers looking for the new Robertson Boulevard.
Trendy Melrose Avenue and Place have also witnessed properties staying vacant longer, and landlords have finally started lowering asking rates, which were in the $15 to $20 range, by as much as 30 percent.
In Los Angeles County, the retail vacancy rate stands at approximately 5.5 percent, which is considerably lower than the 8 percent vacancy nationally. The effective rental rates are being pushed downward, and the new inventory pipeline is dropping off from the historical plateau of 800,000 square feet of new neighborhood and community center space.
While retail pundits and executives see the bright spot nationally in the outlet environment, the retail lease market in Los Angeles, like the community it serves, is still unique in the broad range of industries housed here, the paucity of available land and the high barriers to entry. This makes it well positioned to rebound sooner and stronger that other areas of the state and country as a whole.
— Helga B. Weinbach is a vice president at Ramsey-Shilling Commercial Real Estate Services Inc. in Los Angeles.