This significant shift in work dynamics has initiated a noteworthy transformation across various regions of California. An additional 19% have embraced a flexible work arrangement, which entails part-time remote work. A recent statewide survey conducted by the Public Policy Institute of California found that approximately 16% of residents in California engage solely in remote work. Other lifestyle changes, including evolving work-from-home policies, have also played a major role in the ongoing suburb migration. However, less typical locations experienced a surge in inbound migration during the initial year of the pandemic, with certain counties witnessing over double the usual number of people relocating compared to previous years.Īccording to Home Bay, 25% of Americans relocated from cities to suburbs in the last year, while 31% of rural residents relocated to suburbs. The most recent IRS data reveals that a significant number of individuals migrated to neighboring suburbs. Among the top 10 preferences for individuals leaving San Francisco, nine were within California, and six of those were situated within the Bay Area. However, the most common choice for San Franciscans looking to relocate was mainly to other suburban counties within California. The city was a prominent urban center that saw unforeseen population declines from 2020 to 2021. This was highly evident in San Francisco. Other residents who cannot afford to stay in cities have moved to more affordable suburbs within the state. Additionally, due to the high cost of living, the state had a net loss of 343,230 residents in 2022. More than a quarter of Americans wish to move to California, according to a recent study conducted by Homebay. The Suburb Migration and Lifestyle Changes According to MSCI, with 125 deals closed, Los Angeles stood out as one of only two retail markets to achieve sales exceeding $1 billion during the year’s first half. The surge in sales primarily stemmed from the exchange of individual properties, as portfolio transactions made up a mere 2% of the total deal volume. This top-ranking status has been consistently upheld every year since 2016 when the market displaced Manhattan from the top spot. Los Angeles was the #1 market for retail investment in H1 2023. Nevertheless, cap rates have recently displayed an upward trend. In the period spanning from 2015 to 2019, this metric maintained an average of 6.6%, with values fluctuating between 6.5% and 6.7%. Currently, the 6.5% mark aligns with the levels observed before the pandemic. However, by Q2 2023, they had climbed to 6.5%. The RCA Hedonic Series, which accounts for variations in cap rates influenced by the quality of assets, indicated that retail cap rates reached an unprecedented low of 6.1% in 2022. ![]() Major Trends Across the Coast Rising Cap RatesĬap rates for retail spaces across the nation are on the rise. As industries diversify and grow, consumer spending and demand for retail spaces will likely follow suit. Economic Resilience: The West Coast’s robust economic foundation will continue supporting the NNN retail market.Convenience-driven features such as seamless online shopping, efficient delivery options, click-and-collect services, and streamlined in-store experiences can enhance customer satisfaction and engagement. Consumer Experience Focus: As more businesses focus on the consumer experience and opt for more convenient business plans, the retail market will continue to evolve.Retailers may leverage data analytics, augmented reality, and smart systems to optimize operations and engage consumers effectively. ![]() Technological Integration: Technology will enhance the tenant and customer experience.As the economy rebounds and evolves, several factors are likely to influence its performance: ![]() The California retail market is poised for continued growth and resilience. In Q2 2023, demand for retail space grew by almost 12 million square feet, according to CoStar Group, continuing the trend of growth in retail space markets for the ninth consecutive quarter. After navigating the obstacles of 2020, the retail real estate industry has demonstrated remarkable adaptability and strength in the last few years. ![]() Among its many sectors, the triple-net (NNN) retail market stands out as an area of particular interest and resilience. California has long been known for its vibrant economies, breathtaking landscapes, and thriving real estate markets.
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