Q1 2025: FOCUS ON RETAIL AND INDUSTRIAL

RETAIL MARKET TRENDS

The retail sector in Los Angeles is experiencing mixed performance in Q1 2025. On one hand, the city is seeing growth in high-demand areas, while other locations are still recovering from challenges of recent years.

• Prime Locations: The demand for retail properties in prime areas like downtown Los Angeles, Santa Monica, and Beverly Hills remains strong. These high-traffic regions are benefiting from an increase in consumer spending, particularly in luxury and experience-driven retail. This is supported by tourists and returning office workers, bringing life back to shopping districts. (ArcGIS Marketplace)

• Vacancy Rates: According to the City of Los Angeles’ Office of Economic Analysis, retail vacancy rates in the city have shown slight improvements, although some areas are still grappling with vacancies. As of early 2025, retail vacancy in LA averages around 6.5%. Areas that are less frequented by consumers—such as older suburban malls—still face challenges. (Los Angeles Economic Development Corporation)

• Leasing Activity: Retail leasing is recovering steadily in the city, especially for spaces that offer flexible layouts and opportunities for experiential retail. As e-commerce continues to influence the market, retailers are focusing on locations where they can integrate both online and in-store experiences. (Planning Department, City of Los Angeles)

INDUSTRIAL MARKET TRENDS

The industrial sector in Los Angeles continues to outperform many other commercial real estate segments. The demand for logistics and warehouse space is driven by e-commerce growth and the city’s strategic location as a distribution hub.

• E-commerce Demand: The demand for industrial spaces, particularly for distribution centers, has remained robust. With the rise of online shopping, there’s a heightened need for last-mile delivery facilities near residential areas and transportation hubs. Industrial properties near the Ports of Los Angeles and Long Beach are still in high demand, which drives investment in the sector. (ArcGIS)

• Vacancy and Rent Trends: As of Q1 2025, the vacancy rate for industrial properties in Los Angeles remains low, hovering around 3.8%. With limited available space, rental rates are on the rise, particularly for high-quality, modern warehouses and distribution centers. This trend is expected to continue as businesses prioritize efficiency and proximity to major transportation hubs. (Los Angeles Economic Development Corporation)

• Logistics and Transportation Hubs: The city’s industrial sector is benefiting from its proximity to the Ports of Los Angeles and Long Beach, which are critical logistics and distribution centers. Industrial properties near these ports continue to attract significant investment due to the high demand for warehousing space and access to global supply chains. (Planning Department, City of Los Angeles)

KEY TAKEAWAYS FOR Q1 2025

• Retail Outlook: The Los Angeles retail market is seeing a recovery in prime locations like downtown and Beverly Hills, as consumer spending increases. Retail leasing activity is expected to remain strong in high-demand areas with a focus on adaptable spaces for omnichannel retail. However, suburban and older shopping centers still face challenges with higher vacancy rates.

• Industrial Outlook: The industrial market in Los Angeles remains a strong performer, driven by the continued rise in e-commerce and demand for logistics properties. Warehouse and distribution spaces near the Ports of LA and Long Beach are particularly sought after. Expect ongoing pressure on rental prices and low vacancy rates in the sector.

The retail and industrial commercial real estate markets in Los Angeles are moving in different directions, with retail cautiously recovering in select areas, and industrial real estate continuing its growth trajectory. Investors should focus on key locations for both sectors to capture the most opportunities in Q1 2025.