Los Angeles faces shortage of modern retail space as aging inventory dominates the market

Retailers want new space. They might not find it in Los Angeles.

By Catherine Yeh

CoStar Analytics

December 12, 2025 | 1:19 P.M.

Nearly 58% of retail inventory in Los Angeles was built before 1980, meaning more than half of retail space is at least 45 years old. Retail properties can have long lifespans, especially when landlords invest in renovations to attract new tenants. However, as demand in Los Angeles has dropped and many spaces remain vacant, landlords have had little motivation to update their buildings without prospective tenants. This is leading to a glut of old, outdated retail space on the market. At the same time, retail construction activity in Los Angeles has reached historic lows. This year, new construction did not exceed 150,000 square feet, compared to an annual average of 1.8 million square feet between 2015 and 2019. Since interest rates started rising in 2022, the average yearly construction starts have declined to 438,000 square feet — a 76% reduction.

Traditionally, a decrease in construction activity would be anticipated to lower vacancy rates by reducing available supply. However, over the past five years, Los Angeles has experienced a net reduction in retail inventory of approximately 2 million square feet, with 6 million square feet demolished or converted and only 3.9 million square feet added through new deliveries. Despite this contraction, vacancy rates have increased by roughly 1 percentage point, reaching a record high of 5.9%, and availability is even higher at 6.4%.

The central issue facing the city's retail market is not oversupply, but rather insufficient demand for older retail spaces. Notably, 58% of the retail inventory was built prior to 1980, yet these properties represent 61% of all available space. Retail developments completed after 2020 comprise just 1.2% of the total inventory and have achieved nearly 450,000 square feet of positive absorption. In contrast, spaces built before 2020 experienced negative absorption totaling 1.6 million square feet over the past 12 months.

The limited availability of new construction is reflected in rental rates. Properties delivered after 2020 command average asking rents of $55.37 per square foot, substantially higher than the $35.52 per square foot rate for those completed prior to 2020 — a premium of about 56%.