Retail Leads DTLA Growth in 2018

The retail sector lead the growth in the Downtown Los Angeles market in the first quarter of the year. The retail vacancy rate fell a whopping 2.3% to 4.5% and rental rates climbed an even more impressive 6.6% to $3.55 per square foot, according to the first quarter report from the Downtown Central Improvement District. Residential activity—which has also been strong—has been crucial in driving the retail market. In total, the market saw 51,822 square feet of net absorption, a year-over-year increase of 137,913 square feet, with some wins including Uniqlo’s 15,000-squre-foot lease at the Bloc.

“One truism about retailers is they don’t enter markets if the numbers and demographics aren’t there,” Carol Schatz, president and CEO of the DCBID, tells GlobeSt.com. “Today, in downtown, they are here. There is a growing residential population of roughly 70,000; a weekday population near 500,000; and a thriving hospitality and tourism industry. This dynamic critical mass is now garnering the attention of retailers from across the country. Uniqlo’s 15,000 square foot lease at the Bloc is a real feather in the cap for that project, which is strategically important for the CBD retail market, and a clear indication that national brand retailers are increasingly confident in the future of DTLA.”

Retail activity slowed at the end of 2017, but generally, the sector has been one of the more active growth areas for Downtown Los Angeles. As the market has grown, the retailers migrating to the market have changed as well. “While DTLA has long been a location of choice for early adopters and boutique retailers, we are beginning to see a growing migration of national and regional brands opening in downtown,” says Schatz. “Uniqlo, Adidas, Zara, Jordan, West Elm, H&M, Urban Outfitters and more, are not simply opening outlets, but committing to flagship stores, and in some cases, corporate office locations too. Recognizing the opportunity, global brands are making a point to have a significant presence in DTLA.”

This activity is not likely to slow down. Some reports show that the market will have a population of 200,000 people in the next decade. “Since major retailers tend to be followers, we see the retail market as still being in the early stages,” explains Schatz. “When you consider some projections giving DTLA a residential population of 200,000 in just the next 10 years, and the announced redevelopment of the Convention Center, and the pending completion of the Metro Regional Connector, the DTLA retail market appears to be ripe for expansion.”

While that growth is far in the future, today, there are big changes happening in the retail sector. “To meet the growing demand, we have several major retail projects coming to market, including Oceanwide Plaza across from LA Live, the Broadway Trade Center in the historic core and Row DTLA and At Mateo in the Arts District, providing a diversity of product and multiple centers and corridors for retailers to choose from,” says Schatz. “That’s what a robust retail market in a major urban center looks like.”