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Monday, Jun 5, 2023

Top-Tier Malls Elevate Retail Lease Rates

Retail rents are going up, despite the list of shopping malls biting the dust. Year over year, the average asking rental rate for retail space in Los Angeles County has risen 4.5 percent to $2.80 per square foot in the first quarter, according to data from Encino-based commercial real estate company NAI Capital Inc. A lack of new retail construction, coupled with the area’s dense demography and consumer demand, is driving up rents, even at a time when e-commerce chips away at traditional brick-and-mortar stores’ profit margins. Even submarkets such as the Antelope Valley and Castaic are seeing retail rent hikes, though not as dramatic as the more densely populated, centrally located San Fernando Valley neighborhoods, said NAI’s Executive Vice President Fariba Kavian. “Retail is very fragmented,” Kavian said. “The prime retail properties in dense in-fill areas such as West Los Angeles, Santa Monica and Venice are highly sought after and those are increasing in rental rates by much more than 3 percent and are rarely experiencing any vacancies.” The hard-hit areas for brick-and-mortar shopping are malls in secondary and tertiary markets. However, even those rents are leasing up higher than the year prior, Kavian continued, albeit still lower than a decade ago. “So, once averaged out, there is an increase all over,” she said. Remarkably, complexes such as the Caruso malls (Americana at Brand, Commons at Calabasas) have defied the dying mall trend. Kavian believes such town centers command the highest market prices because of their expert execution. “Rick Caruso brilliantly anticipated the urbanization trend,” she said. “People want to live, shop, dine and be entertained all in the same place. They want to enjoy and weave experiences into their shopping and dining, with outdoor seating and retailers who provide an experience.” Valley-side, submarkets Woodland Hills, Encino, Sherman Oaks and Studio City command top-tier rental rates competitive with L.A.’s Westside. “They are densely populated, urban areas with high average household income demographics and a limited supply of retail stores. It’s supply and demand and consequently rental rates are increasing,” Kavian said. Farther north, different dynamics are at play. “The problem in (Antelope Valley and Castaic) is that retail had been highly overbuilt in anticipation of many more homes being constructed there,” Kavian said. “There were some employers in that area, but mostly people were commuting to Los Angeles for work. Once the economy went into recession and subsequently the homebuilding market crashed in those areas, it affected retail substantially.” Kavian does sees a glimmer of hope as retail rents slowly rise due to several large employers opening plants with Northrop Grumman and Bang Printing signing long leases. “Also, home development has once again commenced and resulted in a growing and healthy demographic for retailers,” Kavian said. Conejo Honors 40 Greater Conejo Chamber of Commerce held its third annual “40 Under 40” awards ceremony at the Canyon in Agoura Hills April 25, recognizing rising young locals from real estate to retail. Among the personalities feted: Four Seasons Hotel Westlake Village Director of Rooms Bradley Russell; Oaks Mall Senior Manager Adam Antoniskis; Jessica Weihe of Thousand Oaks-based Mustang Marketing; Nicholas Nino of Ameriprise Financial Services in Woodland Hills; Chris Purkey, mortgage loan officer at Bank of America in Westlake Village; Dean Solomon, wealth advisor, Southwest region, at Hillcrest Financial Group of Thrivent Financial in Thousand Oaks; Giancarlo Hamner of Edward Jones Investments’ Westlake Village office; and Rachel Guettler, recruitment manager at Pepperdine University Graziadio Business School. “It was such a terrific night and the honorees were really deserving,” said Chamber President Jill Lederer, who added that honorees were chosen by their peers. This year’s winners appeared floored by the fanfare. “Serving my community as a financial planner for the past 13 years, it was an honor to be recognized,” Hillcrest’s Solomon said. “It was inspiring to hear about the other honorees’ accomplishments and contributions and was a good reminder of how fortunate I am to live in Conejo Valley,” Mustang’s Weihe said. Staff Reporter Michael Aushenker can be reached at (818) 316-3123 or maushenker@sfvbj.com.

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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