Los Angeles remains a place characterised by ambition and the pursuit of opportunity. However, a significant split is currently occurring in the retail real estate market. This market is increasingly dividing into segments that benefit from dynamic developments and those where the business dreams of smaller companies are at risk of collapsing.
While a long-term lack of retail developments has driven demand for prime locations in high-traffic and high-income areas, Los Angeles and its surrounding communities have simultaneously been affected by changes in federal policy regarding immigration enforcement and small business loans. These developments have impacted customer footfall and weakened the vitality of many immigrant communities and commercial districts.
According to the U.S. Census Bureau, one in three workers in the state is an immigrant. A recent UCLA study titled “The Cost of Fear” found that new federal measures had a significant impact on the region's considerable Latin American business sector. Los Angeles County has 4.76 million Latinos, representing half of the county's total population. This group collectively owns 374,000 businesses across various industries, accounting for a quarter of all firms.
The surge in immigration enforcement in June 2025, which made national headlines, led to estimated losses of $3.16 million in nine key enforcement areas. Almost 60 percent of businesses reported that their sales declined by half, not including informal businesses such as street vendors. UCLA researchers estimate that Latin American businesses across the county experienced sales losses of $52 million within two weeks of the escalation. Many of these businesses have not fully recovered to this day. The report notes that a year later, the crisis has not yet passed, with many businesses still in debt, barely breaking even, and struggling to survive.
This stands in stark contrast to other areas of the real estate market in L.A. A striking statistic highlighting the retail division in Los Angeles is the investment volume in sales, which increased by 40 percent in the second quarter of the year, according to the latest sector analysis from real estate services provider Matthews. This represents a massive year-on-year jump. Analysts noted that a significant portion of this capital was focused on neighbourhood shopping centres with grocery anchor tenants, as well as high-value properties on the periphery of the metropolitan area.
In Torrance, a modest, grocery market-anchored centre was sold in December for $108 million, setting a record for such sales in L.A. County's South Bay. JLL noted that the occupancy rate in L.A.'s grocery-anchored centres reached 95 percent in spring. Part of this growth results from a shift in the broader investment market, according to Sandy Sigal, Chairman and CEO of NewMark Merrill Companies. With office properties remaining under pressure, investors have targeted retail, which emerged stronger from the pandemic, boasts a proven track record, and does not suffer from oversupply.
Simultaneously, the supply of new space is low – only 600,000 square feet of retail space is under development in the city of Los Angeles, representing 0.1 percent of existing space. In parallel, the region is seeing strong demand from value-oriented retailers. Brands like T.J. Maxx are benefiting from budget-conscious shoppers amidst ongoing inflation and subdued consumer sentiment. The overall retail vacancy rate may have risen slightly this quarter, according to Matthews data, but it remains at just 5.83 percent citywide.
Neighbourhood shopping centres remain a safe investment, yet the growth of recent years is not comparable to that in high-end shopping districts. Brands are competing for prime locations such as Rodeo Drive in Beverly Hills, where opportunities to lease the coveted spaces that attract affluent buyers are becoming increasingly scarce, explained Jay Luchs, Executive Vice Chairman at Newmark. Rents on Rodeo Drive have risen by 50 percent since 2019, according to CBRE, with one property fetching nearly $1,400 per square foot. This is prompting elite brands to purchase and renovate their own stores in an expanding part of Rodeo Drive and Beverly Hills' Golden Triangle.
Furthermore, demand is increasing for key commercial streets such as San Vicente, South Beverly Drive, Larchmont, Riviera Village in Redondo Beach, and Manhattan Beach Boulevard, according to Michael Pakravan, Senior Vice President and Director of Retail Leasing at Matthews. The upswing in the South Bay – where aerospace, defence, and advanced manufacturing start-ups are creating a critical mass of young, highly paid engineers and other employees – is also fuelling retail demand. Pakravan refers to this as the “Hermosa Beach Big Bang Theory”.
Pakravan recently brokered a lease for Chamberlain Coffee, a business paying almost $25 per square foot per month for a prime space on Abbot Kinney in Venice Beach – a shopping mecca full of start-up brands and high-end fashion. Although there is high turnover on this street, brands see the activity – consumers taking selfies and drinking $21 Erewhon smoothies – and the branding opportunities continue to drive rents higher, averaging $2.76 per square foot per month.
