Q2 2025 Los Angeles Retail Market Report
Highlights
- Outmigration remains a central challenge to Los Angeles’ economic growth, with the region’s population declining by over 3%, weighing heavily on household formation and retail demand.
- Among the hardest-hit U.S. markets, Los Angeles experienced one of the steepest declines in retail demand, with tenants shedding 2.5 million square feet of space over the past year amid ongoing economic and consumer headwinds.
- Suburban retail markets are showing greater resilience, while urban cores like Santa Monica and West L.A. continue to struggle with elevated vacancies and year-over-year rent declines.
By the Numbers
- Sales Volume: $811M
- Cap Rate: 5.7%
- Market Sale Price Per SF: $417
- Vacancy Rate: 5.9%
- Rent Growth: -0.7%
- Market Asking Rent Per SF: $36.60
- SF Under Construction: 643K
- SF Delivered: (4.2K)
- SF Absorbed: (174K)
Vacancy Rate
Source: CoStar Group, Inc.
Los Angeles Demographics
- Unemployment Rate: 6.0%
- Current Population: 9,771,283
- Households: 3,497,992
- Median Household Income: $91,909
Market Performance
Despite persistent headwinds, Los Angeles retail continues to adapt within one of the more challenged U.S. property sectors. Rent growth fell to -0.9% year-over-year in Q2, down from -0.4% in Q1 and well below the 2.0% national average. Vacancy held at 5.9%, but availability ticked up to 6.4%, signaling more space may soon hit the market. Sales volume rose to $811 million—a modest rebound, though still below the $1.1B 10-year quarterly average.
Urban cores like West Hollywood, Santa Monica, and Downtown L.A. remain sluggish amid elevated vacancies and soft tenant demand. Santa Monica leads major submarkets with a 16% vacancy rate, while tourism-reliant districts such as Beverly Hills and Hollywood exceed 9%. Common challenges—reduced tourism, high costs, and safety concerns—continue to stall recovery.
Suburban markets like Glendale and Torrance are outperforming with vacancy near 4%, while the San Fernando and San Gabriel Valleys see modest rent gains tied to stable, service-based demand. Though vacancy may rise further this year, tenant interest remains focused on these stronger submarkets.
Under Construction
Retail construction in Los Angeles remains limited in Q2, with just 0.1% of inventory—or 640,000 SF—underway, following recent project stalls. Over the past decade, retail growth has averaged only 180,000 SF annually, with demolitions nearly offsetting new deliveries. Developers continue to favor adaptive reuse and mixed-use projects over ground-up. Notable developments include the 735-unit mixed-use project at 5420 Sunset Blvd. and the 375,000-SF West Harbor waterfront destination in San Pedro, set to open in 2026.
Sales
Despite soft leasing fundamentals, investors remain active in well-located, land-rich, and necessity-driven retail. Sales volume rose by $74 million quarter-over-quarter, reflecting a modest rebound led by grocery-anchored centers, triple-net leases, and redevelopment-driven assets. Caution is still the overarching theme, with private and regional buyers driving most of the activity, while institutional players stay on the sidelines amid cap rates holding between 5.0% and 5.5%.
Key Q1 2025 trades like District La Brea and Foothill Park Plaza continue to shape sentiment. New details reveal Philips Edison & Co. acquired 43,600 SF of Foothill Park Plaza for $31.25 million at 85% occupancy. CIM Group’s $44 million District La Brea purchase included 82,000 SF of retail, a three-story garage, and tenants like Sugarfish and Arc’teryx, backed by a $28.5 million loan at 65% LTV and a 35% discount from its 2016 sale price.
In the net lease segment, previously noted trades like Pollo Campero ($3.55M at 5.1% cap) and Starbucks ($2.75M at 5.5% cap) highlight continued demand for credit-tenant assets. Redevelopment remains a key motivator, illustrated by Melia Homes’ $13.7 million purchase of a 13,300-SF Hawthorne site slated for residential conversion.
Sales Volume and Market Sale Price Per SF
Source: CoStar Group, Inc.
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