- Retail tenants absorbed about 757,600 SF across Los Angeles and Orange counties and the Inland Empire in Q3 2026, while overall vacancy dropped 12 basis points to 6.15%.
- Orange County vacancy fell 25 basis points to a five-year low of 3.55% with rents up 3% to $2.65 per SF, while the Inland Empire led absorption at 527,000 SF.
- Los Angeles County lagged with 50,000 SF of absorption, down 77% from Q2, so the recovery is uneven even as community centers lead and construction stays limited.
Southern California’s retail market kept tightening in Q3 2026, with positive absorption and falling vacancy across most of the region, according to a Colliers report covered by Commercial Observer.
Tenants took up roughly 757,600 SF in the Los Angeles, Orange County and Inland Empire markets combined, and vacancy slipped 12 basis points from Q2 to 6.15%.
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Orange County Hits a Five-Year Low
Orange County recorded 180,000 SF of absorption and 444,000 SF of leasing, according to Colliers data cited by Commercial Observer. Meanwhile, vacancy fell 25 basis points to 3.55%, its lowest level in five years. In addition, asking rents rose 3% from Q2 to $2.65 per SF.
Power centers accounted for roughly 143,000 SF of the county’s absorption, Commercial Observer reported. As a result, they helped offset 118,000 SF returned by lifestyle and theme formats.
Inland Empire Leads Absorption
The Inland Empire absorbed 527,000 SF, representing nearly 70% of Q3 absorption across the three markets. According to Colliers data cited by Commercial Observer, its year-to-date total now exceeds 1 million SF.
However, leasing fell 34% from Q2 to 767,000 SF. Despite that decline, vacancy dropped 30 basis points to 6.9%, while asking rents edged up to $1.88 per SF.
Community and neighborhood centers led the market. They generated about 276,000 SF of absorption and 476,000 SF of leasing, Commercial Observer reported.
Los Angeles County Cools
Los Angeles County was the weakest of the three markets. Net absorption reached just 50,000 SF, down 77% from Q2. However, leasing remained healthy at 1.3 million SF, according to Colliers.
Meanwhile, vacancy held steady at 6.67%, and asking rents remained flat at $2.62 per SF per month. Single-tenant buildings accounted for 40% of leasing volume. However, they also gave back about 135,000 SF, per Commercial Observer.
Community Centers Set the Pace
Across the three markets, community and neighborhood centers absorbed 519,000 SF, making them the strongest property type, Commercial Observer reported. Together, these centers total nearly 249 million SF. That represents about 40% of the region’s 622 million SF of retail inventory.
Meanwhile, average asking rents rose 1 cent from Q2 to $2.40 per SF per month on a NNN basis. That marks a 1.33% increase from a year earlier, according to Colliers.
Leasing activity totaled 2.5 million SF for the quarter. Similarly, CRE Daily’s coverage of falling retail vacancy shows continued strength in the sector during Q3.
Why It Matters
Retail supply is not keeping pace with demand. Developers delivered about 219,000 SF during the quarter. Additionally, nearly 1.7 million SF remains under construction. That pipeline is small compared with the region’s 622 million SF of existing inventory, Commercial Observer reported.
The Inland Empire accounts for 733,000 SF of the construction pipeline. Los Angeles County holds another 718,000 SF, while Orange County has 240,000 SF.
In Orange County, limited availability is already pushing rents higher. Asking rents rose 3% in just one quarter, Commercial Observer reported. Meanwhile, retail is becoming more attractive to owners elsewhere. CRE Daily’s report on small-cap CRE sales highlights a similar trend.
What’s Next
Watch whether Orange County’s rent growth spreads to the Inland Empire and Los Angeles County. Asking rents in those markets rose only slightly or remained flat.
Also, monitor leasing in the Inland Empire following its 34% quarterly decline. Finally, watch whether Los Angeles County’s absorption rebounds from 50,000 SF.
