Although fewer retail spaces are changing hands in Southern California, commercial real estate firms have so far invested significantly more in this asset class in 2026. Boosted by slow construction activity and improved market sentiment, retail sales reached US$3.52 billion in Los Angeles, Orange and Ventura Counties, as well as the Inland Empire of California, during the first six months of the year. This represents an increase of almost 62 per cent compared to the same period last year, according to a new report by NAI Capital.
This increase is remarkable, as the square footage traded in the first half of the year decreased by 28 per cent. Approximately 8.35 million square feet in the aforementioned regions were sold to new owners by the end of June, compared to 11.55 million square feet in the first half of 2025. NAI Capital reports that transactions have shifted towards higher-quality properties and attributes the increase in investment to better alignment between buyers and sellers on pricing.
Completed construction activity decreased by 45 per cent year-on-year to just 473,008 square feet, while the development pipeline also shrank by 10.2 per cent to 1.5 million square feet. Los Angeles County led in volume with retail property sales worth US$1.7 billion, a 64.6 per cent increase from the previous year, covering almost 4 million square feet. Asking rents rose by 1 per cent to US$2.98 per square foot (triple net).
Driven by a vacancy rate of 3.8 per cent, retail investments in Orange County reached US$976 million. NAI Capital noted that demand for smaller, high-quality retail properties and coastal assets remained particularly strong.
The Inland Empire also saw a relative increase in investment with a 142 per cent annual rise, while Riverside and San Bernardino Counties recorded a 9.3 per cent increase in lettings this year. For the region as a whole, however, the volume of lettings decreased by 14.6 per cent year-on-year to 6.23 million square feet. Nevertheless, the general retail vacancy rate improved from 6.3 per cent to 5.9 per cent, and average asking rents increased by 1.1 per cent to US$2.36 per square foot (triple net).
Provided there is no decline in consumer spending, NAI Capital expects retail investments to continue their gains into the second half of 2026, driven by neighbourhood centres with supermarkets and service-oriented shopping centres.
