Retail Property Prices Climb

The report lists median price increases in 2003 of 15% in the San Fernando Valley, 13% in West Los Angeles locations, for example. Overall, the median price for single-tenant properties in the county increased in 2003 by 11% to $210 per sf, while the median price for shopping centers increased by 10% to $149 per sf. Downtown shopping centers rose from $104 per sf in 2002 to $185 per sf in 2003. Over the last year, shopping centers in the Westside cities have increased in value by 13%, to $225 per square foot. Valley shopping centers increased in median price by 15%, to $160 per square foot.

The new M&M report also indicates that the local retail market will improve in 2004 as the rebounding economy spurs increased consumer spending and retailers move forward with expansion plans.

Lane M. Schwartz, regional manager of the firm's Los Angeles office, says the strong housing market and low interest rates are among a number of positive economic factors that have contributed to steady consumer spending. Other factors include expected increases in job formation this year and increased leasing that will further reduce retail vacancy rates.

The M&M report shows that, during 2003, developers delivered approximately 3.9 million sf of retail space in Los Angeles, with most of the new construction in single-tenant properties. Of the 3 million sf expected to be delivered in 2004, shopping centers will account for only 750,000 sf. Few projects are slated for completion downtown, with developers expected to add only three projects for a total of 350,000 sf. Relatively little new retail space will be constructed in Westside cities and the San Fernando Valley because of the shortage of space and high acquisition costs that limit projects to small infill developments in those areas.

Marcus & Millichap expects the average asking retail rent to increase by 4.5% in 2004, to $2.02 per sf.