Q2 2022 Retail Report: Los Angeles
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
In Q2 2022, Los Angeles’s retail sector performed well as the overall economy continued to strengthen and unemployment rates fell.
Los Angeles retail space rents increased about 3.5% in Q2 2022 and are projected to increase another 2% in Q3 2022.
The national unemployment rate remained unchanged at 3.6% from Q1 2022 to Q2 2022 as the labor market holds its tight grip on the economy.
Retail Sector Performance in Los Angeles in Q2 2022
Overall retail sales in Los Angeles in Q2 2022 were strong, with positive growth in both brick-and-mortar and online sales.
Rent prices for retail space in Los Angeles continued to rise in Q2 2022, as demand for retail space remained high.
Inflationary pressures continued to affect the retail sector in Los Angeles, as higher prices for goods and services led to slower, yet positive growth in sales.
However, despite these challenges, the retail sector in Los Angeles is expected to continue to grow at a healthy pace in the coming quarters.
Q2 2022 Los Angeles Retail Sector Performance by the Numbers
In the second quarter of 2022, Los Angeles’s retail sector saw a slight uptick in performance, with retail sales rising by about 0.5%.
This was driven by strong growth in the apparel and accessories category, which saw sales increase by 2.0%.
However, this was offset by weak performance in the home goods and furniture category, which saw sales decline by 1.5%. This decline may be due to the currently overvalued housing market in Los Angeles, keeping homebuyers out of the area.
The Pacing of Retail Space Rents in Los Angeles
In the second quarter of 2022, Los Angeles’s retail sector continued to outperform the national average, with retail space rents rising at a pace of 3.5%.
This was driven by strong consumer confidence and spending, as well as tight vacancy rates.
Looking ahead, we expect retail space rents in Los Angeles to continue to rise, albeit at a slower pace, as inflationary pressures start to take hold.
In particular, we expect landlords to start passing on some of their higher costs to tenants in the form of higher rents.
As a result, we forecast that retail space rents in Los Angeles will rise by 2.0% in Q3 2022 and 1.5% in Q4 2022.
How is inflation affecting Los Angeles’s retail performance?
Inflation has been affecting the Los Angeles’s retail sector in the same ways it’s been affecting others:
- First, it has been driving up rents for retail space. This is because landlords are looking to increase their profits in order to offset the rising costs of operating their businesses.
- Second, inflation has been driving up the cost of goods and services, which is making it more difficult for businesses to make a profit.
- Third, inflation is making it more difficult for consumers to afford the items they need and want, which is resulting in fewer sales for businesses.
- Finally, inflation is making it more difficult for businesses to borrow money and expand their operations.
With the recent hike in interest rates, we may see inflationary pressures begin to soften come Q1 2023.
Emerging Trends in Los Angeles’s Retail Sector
In the second quarter of 2022, Los Angeles’s retail sector saw a continued increase in average asking rents. This is due to a combination of factors, including the ongoing effects of inflation and the continued expansion of the city’s population.
In addition, we are seeing new trends emerge in Los Angeles’s retail sector, including an increase in demand for high-end retail space and a shift towards smaller, more boutique-style stores.
These trends are likely to continue in the coming quarters, as retailers seek to capitalize on the city’s growing population.
Notable Retail Space Acquisitions in and Near Los Angeles
Several notable retail space acquisitions have occurred in Los Angeles in recent years. One of the most notable was the opening of another store by Uniqlo in L.A.’s The Bloc.
Other notable acquisitions include the purchase of a new shopping center in Beverly Hills by Unibail-Rodamco-Westfield.
Reports indicate that they plan to expand this location with additional square feet of retail space and make significant investments in infrastructure, including upgrades to parking facilities and energy-saving implementations.
These investments are reflective of positive growth and increased confidence in the city’s economy.
Occupancy Rates in Los Angeles’s Retail Sector
In the second quarter of 2022, Los Angeles’s retail sector saw an occupancy rate of 92.1%. This is a slight decrease from the previous quarter’s occupancy rate of 92.3%.
However, it is still higher than the occupancy rate of 91.4% in the same quarter last year.
Takeaways for Los Angeles Retail Space Investors
Los Angeles is signaling strong indicators for retail space investors:
- Overall, the retail sector in Los Angeles is doing well, with rents rising and vacancy rates falling.
- However, inflation is starting to have an impact on performance, with retail sales growth slowing down slightly.
- Despite this, Los Angeles is still one of the best markets for retail space investors, due to its strong economy and population growth.
- Investors should look for opportunities in areas with high foot traffic and good demographics.
- Rents are expected to continue to rise in the next few quarters, so now is a good time to invest.
- However, be prepared for some slowdown in the future as inflation starts to take its toll on the market.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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