Axiom Retail’s Lea Clay Park On Flattening Rents, Filling Shuttered Drugstores

Retail real estate was palpably confident at ICSC Las Vegas thanks to scarce space, limited construction and steady tenant demand.

Nationally, CoStar warned that low availability is now the sector’s modus operandi rather than a temporary post-pandemic trend. Southern California landlords are in a particularly strong position, with Los Angeles County’s retail availability at 6.2 percent in the first quarter, while Orange County was even tighter at 3.9 percent.

Commercial Observer caught up with Lea Clay Park, founder and executive director at retail real estate brokerage Axiom Retail Advisors, at ICSC to discuss what that means for tenants, landlords, and how the market has shifted between the lines to survive and thrive.

This conversation has been edited for length and clarity.

Commercial Observer: Southern California retail appears to be benefiting from tight supply and limited new construction. How would you describe the state of the market heading into the second half of 2026?

Lea Clay Park: It benefits the landlords, obviously, because they’re able to drive rent growth, although that has flattened a bit in the last 12 months or so.

I would characterize the market largely by low supply and still fairly steady demand. There’s definitely been some softening in the quick-service restaurant (QSR) category, with inflation, cost of goods sold and labor huge issues. Even though the minimum wage increase for fast food was supposed to be limited to that segment of the industry, it obviously has broader implications. If you’re working at the grocery store and there’s a McDonald’s in the parking lot, you can walk 100 yards and get a raise. So, it’s definitely had implications for all of retail, not just QSRs.

And then gas prices, of course, feed their way into everything. I would say it’s very soft.

CoStar recently noted that even people making six figures are shopping at dollar stores more often.

You’re seeing that with Walmart, too. Walmart is one of our clients, and they’ve been reporting on that for a while now — that they’re seeing a lot of growth on their top end.

Which retail formats are getting the most attention from tenants right now?

Grocery-anchored centers are still the gold standard. Everybody is worried about AI and the internet and online shopping. So there’s definitely been a flight to the relative safety of the grocery store and daily needs. I would say that hasn’t really changed.

What are you seeing in rents?

Rent growth is starting to flatten. I think it’s gone from 4 percent to 3 percent. So it’s still growing, but not quite at the rate that it was.

Are landlords offering more concessions to get tenants to sign leases?

No. With interest rates being what they are, it’s hard to even buy deals up now, because you just don’t get the return with cap rates being what they are.

We’re still seeing concessions, but they certainly haven’t increased. They’re pretty standard. On a QSR deal, you’re still seeing tenant improvement dollars roughly equal to first-year annual rent per square foot.

With that sector being a little bit weak, landlords are hesitant to give too much in tenant improvements unless it’s really a credit statement. In the past, maybe somebody who had half a dozen locations, landlords might throw some TI at them to buy them up. Now they’re not feeling quite as confident in those guys. 

They’ll still buy up a Chipotle deal, but not a guy who’s got six locations.

Have tariffs changed anything meaningfully for retail real estate?

Prices did go up, and tariffs seemed like they were going to be a much bigger story. But they seem to have been pretty well-absorbed. Gas prices are going to be a lot harder.

At ICSC and heading into the rest of the year, what is the biggest misconception about Southern California retail real estate?

The biggest misconception, for sure, in California … is that the place is just littered with big-box retail because so many drugstores have closed. A big chunk of those boxes have been absorbed quickly, and at pretty good rents — and not always by retail.

What kinds of users are taking those former drugstore boxes?

They’re being taken not only by retail, but day care centers, medical, plasma, last-mile, grocery delivery — lots of alternative uses.

They’re very attractive because they’re freestanding. You’re not dealing with co-tenancy, common area maintenance caps and all this other stuff that you’ve got to deal with in a shopping center. You can kind of control your own destiny.

People in the press generally said, “Oh, my god, all these boxes are becoming available at once, it’s going to be a bloodbath.” But there are some really unique, marketable and attractive characteristics to those freestanding stores that made them pretty easily absorbed by not only retail but alternative uses, too — convenience-oriented users of all kinds.

So the former drugstore closures have not created the vacancy problem so many expected?

Look around, and there are not too many of them left.

Is there anything else people should know about the retail market that you think is underreported?

It has less to do with just California — it has to do with the globe — but I think there is an underreported story about inflation that relates to climate change.

There’s the difficulty of growing food and transporting things in places that are experiencing climate challenges, whether it’s low volume on a river and trying to get things down the Mississippi on a barge when the river is too low, or trying to grow crops in extreme heat followed by extreme floods followed by fires.

Certainly, gas prices and tariffs are playing into inflation, but there’s a lot of other stuff going on that plays into it as well that I just don’t think gets any coverage. And with the West Coast struggling to figure out how to significantly cut back overusing on the Colorado River — look at all of it. There are going to be huge cuts, and a lot of it to agricultural producers. So, if you’re worried about $8 strawberries, get used to it.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.