Market Activity Slows In 3rd Quarter
The Los Angeles Basin retail market closed the third quarter with negative absorption as market fundamentals showed signs of market activity slowing. Tenant demand fell to -198,500 square feet for the Los Angeles Basin. There was an additional 268,600 square feet of new construction added to the inventory base. The Inland Empire market had the highest amount of new construction deliveries, recording 194,400 square feet, with Los Angeles County following recording 37,600 square feet and Orange County recording the lowest recording 36,600 square feet.
Two of the three counties recorded positive tenant movement with Inland Empire recording the highest at 695,000 square feet of net absorption and Orange County following at 130,300 square feet. Los Angeles recorded negative movement at 931,500 square feet. The vacancy rate for the Greater Los Angeles region increased to 5.4%. Vacancy changes have been minimal on a year-to-year basis (20 basis points). Orange County (4.0%) and Los Angeles County (4.5%) recorded the lowest vacancy rates, while Inland Empire recorded a vacancy rate of 7.8%.
Despite a slowdown in tenant movement, the weighted average asking rental rate continued to increase while climbing $0.04 from the previous quarter to $2.18 per square foot (PSF) triple net (NNN), per month. Asking rents were highest in Los Angeles County at $2.51 PSF NNN and lowest in the Inland Empire at $1.76 PSF NNN. Super regional malls in Los Angeles County remains the most expensive space at $3.46 PSF NNN. National retail and food services sales for August increased by 4.1% compared to one year ago. Consumer confidence decreased in September following a slight decline in August. The escalation in trade and tariff tensions also contributed to a drop in confidence.