2009 Retrospective: Vacancies Rise and Rents Decline During an Uncertain Year
In a year marked by rising unemployment and tight credit markets, retail and warehouse vacancies have inched up and rents have crept down.
In Los Angeles, one of the hardest-hit retail areas is Melrose Avenue. Rents have slid from about $10 a square foot to $6 to $8 a square foot in the higher-end sections of the street. This year, vacancy rates stand at about 15 percent, compared with 10 percent last year, said Philip Klaparda, a senior associate at Dembo Realty in Beverly Hills.
Not far away, West Third Street has seen its vacancy rate climb to 10 percent, up from 5 percent last year. Rents have held steady at about $4 a square foot.
There is one shopping street, however, that is on the rebound. In recent months, Robertson Boulevard has seen its storefronts fill up. “Robertson is improving right now,” Klaparda said, citing new openings for stores such as Splendid, All Saints and Moods of Norway. “There are a few vacancies, but things are definitely tightening up.” Rents last year were going for about $15 a square foot. They have scooted up to about $15 to $20 a square foot.
Holding steady is Rodeo Drive, where rents are still around $40 a square foot. But there are two vacancies on the normally fully occupied lane, known for its high-end stores and mobs of curious tourists. A space once occupied by Max Mara at 323 N. Rodeo Drive was leased to Bebe, which never moved in. Then the lease was taken over by Rock & Republic, which also canceled its expansion to the street. And with Mont Blanc moving down the block, there is a vacancy in the 400 block of Rodeo Drive.
Warehouse space in the Los Angeles area is even more abundant than it was last year, with vacancies in the Los Angeles County area running at 3.2 percent, compared with 2.3 percent last year, said Jack Kyser, economist at the Los Angeles County Economic Development Corp.
But vacancies have really grown in San Bernardino and Riverside countries. “Los Angeles is a paragon of virtue compared to the Inland Empire, where vacancies are at 12.8 percent, compared to 8.6 percent last year,” Kyser said.
A modest recovery in international trade next year will start to fill up those vacant warehouses, Kyser said. But now is a good time to negotiate for space. According to CB Richard Ellis, the average asking lease rate for the Southern California industrial submarket is 59 cents a square foot compared with 61 cents last year.—Deborah Belgum
(Click here for the chart on Southern California Industrial vacancy and lease rates)
