The Los Angeles retail sector was particularly exposed to the pandemic, but certain segments strengthened and retailers were able to make investments that added technology to operations leading to labor costs and streamlined services. Despite an uptick in COVID-19 cases, retailers are much more adept at providing goods and services through an omnichannel approach. Furthermore, some sectors have had increases in sales compared to pre-pandemic levels. Home goods and furniture sales increased during the pandemic as people spent more time at home. Grocery stores and fitness centers drive traffic to retail properties and have been pursued as anchors to neighborhood centers and new mixed-use developments.
The retail sector will need to evolve and rightsize by repurposing or demolishing defunct retail properties. Some longtime vacant big-box sites with excellent freeway access were acquired with plans to reposition them as industrial sites. For example, a vacant 140,000- SF former Costco site in Montebello was sold to a developer that reached an agreement with the city to convert a portion of the site to a last-mile delivery facility. Other longtime vacant sites have drawn interest from developers, especially along the region’s expanding light rail system.
Vacancy has increased for several years, and all plausible economic scenarios in CoStar’s property market forecast anticipate market vacancy to rise for at least the near term. Average asking rates are projected to correspondingly decline through the end of the year.
