According to a report from NAI Capital, the retail market vacancy rate across Southern California was down 4.6 percent in Q1, a decrease of 20 basis points from Q1 2017. While Los Angeles County had the lowest vacancy rate in SoCal – 3.6 percent, down 40 basis points over Q1 2017 – Orange County, Ventura County and the Inland Empire were all down as well.
Orange County was down 20 basis points to 3.7 percent, Ventura County was down 30 basis points to 4.2%, and the Inland Empire was down 10 basis points to 7.1 percent.
While NAI did not include San Diego in its report, Marcus & Millichap (M&M) recently reported that retail vacancy in the market was down 20 basis points in Q1, with limited construction allowing the metro’s vacancy rate to com¬press, ending the year at 3.5 percent. In 2017, a decline of 30 basis points was registered.
M&M also reports that retailer demand outweighs construction in the San Diego market, but retailers wishing to expand their footprints could have difficulty finding available space in a metro with sub-4 percent vacancy. A lack of new construction also limits leasing options for growing shops, with just 25,000 square feet slated for completion in the city of San Diego this year. Heightened tenant demand and a lack of development enable the metro’s vacancy rate to further compress, which warrants additional rent growth. M&M predicts that pent-up demand for available retail and asking rents that match last cycle’s peak could motivate developers with proposed projects to expedite construction timelines moving forward.