South Bay, CA Retail Market Report
Market Overview
South Bay, CA, is a region of the Los Angeles MSA with diverse demographics, a distinctive mix of industries, and numerous tourist attractions. Consisting of 19 neighborhoods, South Bay houses over 143,000 residents with a median household income of $135,955, according to the U.S. Census Reporter. Its affluent demographics, well-performing public school system, and a plethora of restaurants and parks attract many. Located in the southwest corner of L.A., South Bay’s retail sector has seen strong sales activity over the past year, demonstrating investor demand in the area. Retail is seeing excellent liquidity within the areas and is staying on track with the greater L.A. numbers. The recent sales represent strategies across the risk spectrum, from well-leased, top-tier centers to challenging centers that require reinvention or redevelopment of the property’s site. Additionally, a rising cost of living has shown strong sales in grocers, discount retailers, and pharmacies.
Highlights
- Retail vacancies in Torrance/Carson/Lomita average 5.6%, higher than the metro average of 5.1%.
- About 40,000 SF of retail space has been delivered over the last three years throughout the Beach Cities/Palos Verdes.
- Long Beach Suburban is a particularly liquid investment market with heavy trading, as evidenced by the market’s performance this year. Whereas Long Beach Downtown is a relatively liquid investment market with high trading volume as well, but investment activity has slowed in the last year.
- Retail investors are quite active in El Segundo, but deal activity has slowed in the last year.
- During the first quarter of 2022, retail vacancies in Hawthorne/Gardena were generally in line with the five-year average and were virtually unchanged from this time last year. The rate is also higher than the market average.
- Inglewood/South L.A. construction development has been consistent throughout the last few years and is still active today.
Rents | Vacancy | Construction
The average retail market rent per square foot for the cities included is $38, slightly higher than the metro average of $36. Westchester, CA, has the highest market rent per square foot of $62, attributed to the area’s steady increases in rent over the past few years. The average retail vacancy of 5.55 percent was almost in line with the L.A. retail market of 5.1 percent.
Construction activity is bursting in several of these cities, with a combined total of 492,396 square feet of proposed construction within the next eight quarters. Torrance/ Carson/ Lomita/ Redondo Beach stands above the rest regarding development activity. This area currently has 410,000 square feet of retail space under construction.
Sales
The average cap rate in the surrounding area is 4.75 percent, almost directly on par with the metro average of 4.8 percent. Of the submarkets included in this report, the 12-month sales volume reached nearly $800 million, with an average of $99,650,000. South Bay is an area full of opportunities for investors, and retail activity remains robust despite volatile economic times.
These submarkets are quite liquid retail investments, and their combined sales volume makes up 13% of L.A.’s overall sales volume of $5.7 billion.
