LOS ANGELES-Despite sliding one place in the annual rankings compiled by Marcus & Millichap, the local retail market has weathered the economic downturn nicely and is poised to do even better as the economy improves, according to the latest M&M rankings.The Marcus & Millichap National Retail Index ranks Los Angeles eighth this year among the 40 markets surveyed nationwide, down from seventh last year, but the research report accompanying the index says that economic recovery “will serve as additional fuel to Los Angeles’ already hot retail market and keep property prices on the rise in 2004.”Although Los Angeles ranks eighth in the index, its vacancy rate is the third-lowest in the survey universe. The index is a snapshot analysis that ranks 40 retail markets based on a series of 12-month forward-looking supply and demand indicators, one of which is vacancy.Retail sales grew by 3.1% in 2003 as consumers “largely ignored the fact that the county lost jobs,” says Lane M. Schwartz, regional manager of Marcus & Millichap’s Los Angeles office. He notes that the average revenue per sf has increased by more than 5% for investors who bought retail properties in early 2003. Orange County ranks first in this year’s retail index. It edges out Washington, DC, which held the title for the previous two years.Marcus & Millichap bases its outlook for Los Angeles on a series of factors, including a forecast that the county will gain 48,000 jobs this year. It expects national tenants, including discount retailers, to continue expanding in the county during the next year, accounting for most of the nearly three million sf of new retail space expected in the county this year. That figure will be down from 3.9 million sf last year. Vacancies are expected to decline by 0.6% during 2004, to 4.5%. At the same time, average asking rates for retail space are expected to rise by 4.7% to reach $24.24 per sf per year.The M&M report forecasts that shopping center prices will increase by 10% to $149 per sf. It also states that single-tenant properties will grow by 11% to $210 per sf.

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