As retail leaders head into ICSC Las Vegas, Southern California is offering a preview of where neighborhood shopping centers may be headed next: fewer rigid leasing rules, faster municipal approvals and a growing willingness to rethink what fills empty space.
The region's retail market is entering the second half of the year with cautious momentum, even as landlords continue to backfill vacancies left by a wave of national chain closures. According to Chris Premac, vice president of retail brokerage at Coreland Companies, the balance between limited new supply and ongoing "right-sizing" is helping stabilize conditions.
"Southern California retail is in a good position heading into the second half of the year," Premac said.
That relative stability is notable given the number of mid-box vacancies created by bankruptcies and store downsizings from retailers such as Rite Aid, JOANN and Party City. With little new construction coming online, landlords are being forced to get more creative about how quickly and effectively they can reposition existing space.
One of the clearest shifts is coming from grocery-anchored centers, long known for strict leasing controls that limited adjacent uses. Premac said that stance is beginning to soften as grocers recognize the broader impact of empty storefronts.
"Grocery store anchors have come to better understand that any vacant space, especially mid-major space, is a detriment to the entire shopping center," Premac said.
That evolution is opening the door to nontraditional tenants that would have struggled to gain approval in the past. Fitness, entertainment and other experiential concepts are increasingly viewed as traffic drivers that can complement daily-needs retail rather than compete with it.
A recent example is The Picklr, an indoor pickleball concept set to take over an 18,144-square-foot former Rite Aid in a Sprouts-anchored center in Fountain Valley. The deal required roughly six months of coordination among the landlord, city officials, community stakeholders and the grocer itself. The project is expected to open in the fourth quarter of 2026.
Premac said the alignment reflects a broader industry realization that activating space quickly — even with unconventional uses — is often more valuable than holding out for a traditional retailer that may never materialize. For landlords, that shift can help preserve co-tenancy, maintain foot traffic and protect asset value in centers where vacancy can ripple across smaller tenants.
At the same time, municipalities are increasingly playing a more active role in keeping retail corridors viable. Premac pointed to a growing number of cities taking a more pragmatic approach to approvals and redevelopment.
"This more progressive approach of select California cities is a second key trend," he said.
Cities including Fountain Valley, Huntington Beach, Tustin and Orange are showing greater flexibility after years of post-pandemic delays that often stalled deals. Lengthy entitlement processes, evolving zoning rules and parking requirements had made it difficult for both national and local tenants to commit to new space, with smaller operators particularly vulnerable to rising costs and uncertainty.
That environment appears to be improving.
"Over the last few months, we have seen more proactive communication, improved permitting departments, and city-assisted marketing efforts," Premac said.
He added that recent deals, including The Picklr and a Habit Burger project in Huntington Beach, likely would not have come together without that level of coordination.
For the broader retail real estate sector, the implications are meaningful. In supply-constrained markets like Southern California, where ground-up development is constrained by costs and entitlement hurdles, the ability to quickly reposition existing space is becoming a primary driver of leasing velocity. Grocery anchors loosening restrictions and cities accelerating approvals effectively remove two of the biggest friction points in that process.
As a result, adaptive reuse is emerging less as a fallback strategy and more as a core leasing playbook. Landlords that align with anchors and municipalities are better positioned to stabilize centers more quickly, while those that cling to older leasing models may face prolonged vacancies and declining tenant demand.
With ICSC Las Vegas set to spotlight the industry's next phase, Southern California's evolving approach underscores a simple reality: keeping neighborhood retail relevant increasingly depends on flexibility, speed and collaboration across every stakeholder involved.
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