Q1 2025 Los Angeles Retail Market Report
Highlights
- Los Angeles faces major long-term economic setbacks due to the January wildfires, causing over $54B in damages.
- Retail rents in Los Angeles remain among the highest in the nation, averaging $37/SF, 40% above the national average—despite declining demand.
- Due to high housing costs, a population plateau, and an unsteady market, demand for retail space has declined. Los Angeles has lost about 2.4M SF of leased space over the past year
By the Numbers
- Sales Volume: $737M
- Cap Rate: 5.7%
- Market Sale Price Per SF: $416
- Vacancy Rate: 5.8%
- Rent Growth: -0.4%
- Market Asking Rent Per SF: $36.63
- SF Under Construction: 650K
- SF Delivered: 430K
- SF Absorbed: -2.4M
Vacancy Rate
Los Angeles Demographics
- Unemployment Rate: 6.0%
- Households: 3,497,433
- Current Population: 9,770,563
- Median Houshold Income: $91,658
Market Performance
The Los Angeles retail sector started the year as one of the worst-performing among major U.S. property types, with vacancy rising to 6.3% and rent growth falling to -0.4% year-over-year—underperforming the national average of 1.9%. Sales volume dropped to $737 million in Q1, well below the 10-year quarterly average of $1.1 billion.
Urban cores like Santa Monica and Downtown L.A. are seeing a 3.3% drop in population. With high rent, reduced foot traffic, and concerns over crime, retailers are hesitant to expand in the current market as the Sunbelt sees higher-growth in household formation.
Momentum remains soft, but areas across the San Fernando Valley and San Gabriel Valley show modest, year-over-year rent gains. With limited exposure to tourism, private buyers are targeting smaller-format, service-oriented retail with long-term upside potential. Suburban areas are experiencing an increase in demand, attracting more value-focused and necessity-driven tenants.
Under Construction
Retail construction in Los Angeles remains subdued, with only 650,000 square feet underway—representing only 0.1% of total inventory. Most of this activity involves small-scale redevelopments or mixed-use projects that replace outdated retail rather than ground up retail expansion. The standout project is West Harbor in San Pedro, a waterfront dining and entertainment destination slated to open in 2026. Given the region’s entitlement hurdles, elevated land prices, and complex permitting environment, developers are increasingly focused on adaptive reuse and repositioning of existing retail footprints.
Sales
Even with overall deal volume below historical norms, the market isn’t completely frozen over. Philips Edison & Company purchased portions of Foothill Park Plaza in Monrovia for $31.25 million. CIM Group acquired District La Brea for $44 million— 35% below its 2016 sale price—reflects a steep value correction driven by operational decline. Between 2022 and 2024, NOI per square foot decreased by more than 70% across the portfolio, with effective gross income dropping from $33.50/SF to just $9.47/SF.
Net lease transactions included a Pollo Campero in Bellflower and a Starbucks in Long Beach, both trading at cap rates near 5%, a level not seen in a decade. This marks a clear departure from pre-pandemic norms, where similar assets are often sold at yields below 4.5%, and reflects a market where investors are repricing risk and demanding more substantial returns.
In Hawthorne, Melia Homes acquired a 13,300 SF retail parcel with plans to redevelop the site for residential use. While the forecast anticipates market conditions to remain softer, buyers are proceeding with caution to find opportunities despite expectations of limited occupancy and rental rates.
