Southern California Retail Markets Tighten as Tenant Demand Picks Up

Southern California’s retail real estate market continued to tighten in the third quarter of 2026, with positive net absorption and declining vacancy across much of the region, according to a new report released Monday from Colliers.

Retail tenants absorbed about 757,600 square feet during the quarter across Los Angeles and Orange counties and the Inland Empire. Overall vacancy fell 12 basis points from the second quarter to 6.15 percent, while leasing activity totaled 2.5 million square feet.

Average asking rents increased 1 cent from the previous quarter to $2.40 per square foot per month on a triple-net basis, and up 1.33 percent compared to last year.

The Inland Empire led the region with 527,000 square feet of positive net absorption, bringing its year-to-date total to more than 1 million square feet. The market accounted for nearly 70 percent of the region’s third-quarter absorption, despite a 34 percent quarterly decline in leasing activity to 767,000 square feet.

Vacancy in the Inland Empire fell 30 basis points to 6.9 percent, while asking rents bumped up to $1.88 per square foot. Community and neighborhood shopping centers drove demand, accounting for approximately 276,000 square feet of positive absorption and 476,000 square feet of leasing activity.

Orange County recorded another strong quarter, with 180,000 square feet of positive absorption and 444,000 square feet of leasing activity. Vacancy declined 25 basis points to 3.55 percent, a five-year low, while average asking rents jumped 3 percent quarter-over-quarter to $2.65 per square foot.

Power centers accounted for approximately 143,000 square feet of Orange County’s absorption, helping offset losses at lifestyle and theme-festival centers, which gave back 118,000 square feet.

Meanwhile, Los Angeles County experienced more modest strength. Net absorption totaled just 50,000 square feet, down 77 percent from the previous quarter, although leasing activity remained relatively strong at 1.3 million square feet.

The county’s vacancy rate held steady at 6.67 percent, while average asking rents remained flat at $2.62 per square foot per month. Single-tenant retail buildings accounted for 40 percent of leasing volume, but also recorded approximately 135,000 square feet of negative absorption.

Across Greater Los Angeles, community and neighborhood centers remained the strongest-performing property type, absorbing 519,000 square feet during the quarter. Those centers represent nearly 249 million square feet, or about 40 percent of the region’s 622 million-square-foot retail inventory.

Construction activity remained limited relative to existing inventory. Developers completed approximately 219,000 square feet during the quarter, while nearly 1.7 million square feet remained under construction. The Inland Empire accounted for the largest share of the pipeline at approximately 733,000 square feet, followed by Los Angeles County with 718,000 square feet and Orange County with 240,000 square feet.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.

Source: commercialobserver.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.