Los Angeles, CA Retail Market Report Q2 2026
Vacancy Climbs to a 10-Year High of 5.83% as Investment Surges 40%
Los Angeles retail real estate hit a turning point in the second quarter of 2026: vacancy rose to 5.83%, the highest level in more than a decade, as negative net absorption and a wave of tenant closures pushed mid-sized spaces back onto the market. At the same time, investor demand strengthened sharply, with retail sales volume climbing more than 40% year-over-year to $4.9 billion.
Los Angeles Retail Market at a Glance (Q2 2026)
- Vacancy rate: 5.83% (highest in more than 10 years)
- Asking rent per square foot: $36.90 (rent growth -0.8% year-over-year)
- Retail sales volume: $4.9 billion trailing 12 months, up more than 40% year-over-year
- Price per square foot: $403
- Cap rate: 5.96%
- Under construction: 600,000 square feet
- Delivered this quarter: 118,000 square feet
- Net absorption: 454,000 square feet
- Construction starts: 122,000 square feet
Why Is Los Angeles Retail Vacancy Rising?
Vacancy climbed as several national retailers reduced their footprints over three consecutive years of negative net absorption. Still, the pace of store closures has begun to slow, and grocery, discount, and fitness operators are increasingly backfilling vacant space, a sign that demand is starting to stabilize. Asking rents declined 1.2% year-over-year, though Los Angeles rents remain among the highest in the nation.
Limited New Supply Keeps Fundamentals in Check
New retail construction remains exceptionally limited across Los Angeles, with the development pipeline equal to just 0.1% of existing inventory. Most current activity is tied to redevelopment of older properties rather than new ground-up construction, which is helping prevent a sharper rise in vacancy despite softer leasing conditions.
Investment Activity Surges Despite Softer Leasing
Investor confidence in Los Angeles retail remains strong. Total sales volume rose more than 40% year-over-year to $4.9 billion, driven by continued demand for grocery-anchored centers and high-quality, supply-constrained assets, particularly toward the metro’s outskirts. Looking ahead, the 2028 Summer Olympics, the FIFA World Cup, and continued rebuilding following the 2025 wildfires are expected to provide meaningful economic stimulus.
Los Angeles Retail Performance by Submarket
| Submarket | Vacancy Rate | Asking Rent (PSF) | Rent Growth | Under Construction | Q2 Sales Volume | Cap Rate | Price PSF |
|---|---|---|---|---|---|---|---|
| Central | 6.3% | $39.98 | -1.6% | 172K SF | $497M | 5.9% | $342 |
| Tri-Cities | 4.6% | $40.26 | -1.0% | 16K SF | $45M | 5.9% | $425 |
| San Fernando Valley | 5.9% | $36.02 | -0.2% | 7K SF | $173M | 5.6% | $408 |
| South Bay | 6.5% | $33.94 | -0.9% | 211K SF | $155M | 6.1% | $410 |
Central Los Angeles Retail
Leasing activity strengthened in Q2 2026, with 273,071 SF of positive net absorption, a rebound from negative absorption in Q1. Only 25,052 SF delivered this quarter kept vacancy at 6.3%, down from 6.5% in Q1. Trailing 12-month sales volume reached $4.9 billion; notable Q2 sales included FIGat7th ($68.5M) and 400 Foothill Road ($49M).
Tri-Cities Retail (Burbank, Pasadena, Glendale)
Demand moderated with 48,156 SF of negative net absorption, though occupancy remains healthy at 95.4%. Asking rents rose to $40.26/SF. No new deliveries and just 16,899 SF under construction kept vacancy stable at 4.6%, the lowest of any Los Angeles submarket.
San Fernando Valley Retail
Negative net absorption improved to 35,359 SF from 136,936 SF in Q1, suggesting demand is stabilizing. Asking rents rose to $34.02/SF. Development remains minimal, nudging vacancy up slightly to 5.9%.
South Bay Retail
Negative net absorption narrowed to 45,337 SF from 61,717 SF in Q1, with occupancy holding at 93.5%. Asking rents increased to $33.94/SF, and supply stayed constrained, keeping vacancy essentially flat at 6.5%.
Frequently Asked Questions
What is the retail vacancy rate in Los Angeles in Q2 2026?
Los Angeles retail vacancy climbed to 5.83% in Q2 2026, the highest level in more than 10 years.
Is retail investment activity increasing in Los Angeles?
Yes. Retail sales volume rose more than 40% year-over-year to $4.9 billion, driven by demand for grocery-anchored centers and high-quality assets.
Which Los Angeles submarket has the lowest retail vacancy?
Tri-Cities (Burbank, Pasadena, Glendale) has the lowest retail vacancy at 4.6%.
Why is new retail construction so limited in Los Angeles?
The development pipeline equals just 0.1% of existing inventory, with most activity focused on redevelopment rather than new ground-up construction.
What’s driving future retail demand in Los Angeles?
The 2028 Summer Olympics, the FIFA World Cup, and continued rebuilding following the 2025 wildfires are expected to provide meaningful economic stimulus.
Source: CoStar Group, Inc.; Federal Reserve Bank of St. Louis (FRED). Data compiled by Matthews™.
For additional context, see our latest Los Angeles, CA Industrial Market Report Q2 2026 and our prior Los Angeles, CA Retail Market Report Q3 2025 for a cross-asset view of the metro.
