Retail rents are going up despite the industry’s well-documented struggles – or perhaps because of them.
The average asking rent for retail space in Los Angeles County rose 4.5 percent year over year to $2.80 per square foot in the first quarter, according to NAI Capital, an Encino-based commercial real estate management company.
The lack of new retail construction in the county, coupled with the area’s dense demography – and persistent consumer demand in the densest areas – is driving up rents even as Amazon.com Inc. and other e-commerce companies take a toll on brick-and-mortar retailers, according to Fariba Kavian, executive vice president at NAI Capital.
“What you’re seeing is some vacancy, but the vacancy in dense areas gets absorbed very quickly,” Kavian said.
Even less dense areas such as Palmdale, Lancaster and Castaic are seeing rent increases, though they are not increasing as rapidly as West Los Angeles or the heart of the San Fernando Valley such as Studio City, Encino and Sherman Oaks, she noted.
The trend is getting help from a dearth of new retail construction even as the struggles of big-box retailers – such as the soon-to-be liquidated Toys R Us Inc. – have caused hesitation in the local real estate market.
“E-commerce is definitely putting a lot of hesitation into developers’ and investors’ minds,” Kavian said. “They’re only picking sites where they know they’re building supermarket anchors or service-driven tenants who cannot be replaced by e-commerce.”
Star Buildings
Los Angeles topped the Environmental Protection Agency’s list of U.S. metropolitan areas with the most Energy Star-certified commercial buildings in 2017.
Los Angeles had 716 Energy Star-certified buildings, which consume an average of 35 percent less energy and produce 35 percent fewer carbon dioxide emissions than ordinary buildings. Washington, D.C. came in second with 661 Energy Star-certified buildings.
Commercial buildings must perform better than at least 75 percent of buildings nationwide in order to receive the Energy Star-certified label, according to the Los Angeles Better Buildings Challenge, a city-backed network of energy efficient buildings.
Some of the county’s larger Energy Star buildings include Bank of America Plaza at 333 S. Hope St. and One California Plaza at 300 S. Grand Ave., both in the Bunker Hill district of downtown; Oceangate Tower at 100 Oceangate in downtown Long Beach, and the Century Plaza Towers at 2049 Century Park East in Century City, according to the EPA.
“Los Angeles’s commercial properties are leading the way when it comes to energy efficiency,” said David Hodgkins, executive director of LABBC. “The owners of the Energy Star-certified buildings are proving the business case for sustainability – that you can do well by doing good.”
Non-commercial buildings such as schools are part of the total as well.
Monetizing Medical Space
A&G Realty Partners of Melville, N.Y. has opened a new health care property division, led by its Pasadena-based principal Peter Lynch.
The aim of the unit is to help medical care providers ramp up their real estate holdings’ productivity, the company announced.
The efforts could include selling or subletting excess medical office space, re-negotiating urgent care centers’ leases or selling hospitals to mixed-used developers, Lynch said in a statement.
“Health care over the next five years will undergo an accelerating metamorphosis driven by the need for innovation, convenience and affordability,” Lynch said. “The forces in play are every bit as disruptive as those afoot in retail or higher education.”
