Market Report: Santa Monica

Santa Monica has faced several headwinds in recent years. Local retailers and restaurants, which rely heavily on the area’s strong tourist traffic, continue to see fewer visitors compared to pre-pandemic levels. The shift toward hybrid work has also reduced the daytime working population, impacting foot traffic and spending. As one of Greater Los Angeles’ key office markets, Santa Monica has been especially affected by these changes. Compounding the challenge are growing concerns around crime and homelessness.

Retail vacancy in Santa Monica has gradually increased over the years and now sits at 11.1%—nearly double the metro average of 5.8%. As recently as 2019, the submarket’s vacancy rate was in line with the broader region. Availability is even higher at 14.8%, suggesting more move-outs could be on the horizon, creating further pressure on occupancy in the short term.

Leasing activity has remained muted, with some tenants reducing their space. That said, strip centers have performed relatively better than other retail formats in the area. Vacancy in strip centers has improved from 11.6% three years ago to 8.8%, likely due to their lower dependence on tourist traffic and proximity to offices. These properties have also attracted tenants who would typically lease space in power centers—an asset type not present in the Santa Monica submarket.