The Bottom Line Up Front
California’s economy won’t boom in 2026. It won’t bust either. UCLA Anderson Forecast calls it “muddling through.”
For retail investors, that’s actually useful information. Here’s why—and what to do about it.
The Timing Signal Most Investors Will Miss
Slow growth continues through early 2026. Real acceleration hits in the second half and carries into 2027.
The labor market follows the same pattern. Unemployment stays elevated near 5.5% through Q1. By 2027, it drops to 4.6%.
Translation: The first half of 2026 offers a window. Competition will be lighter. Motivated sellers will be more flexible. Smart buyers are already positioning.
Why Growth Feels Stuck
California businesses face compounding pressure:
- Input costs stay elevated even as headline inflation cools
- Insurance premiums have surged across commercial lines
- Regulatory costs continue their upward march
This drag slows hiring and expansion decisions.
But don’t mistake friction for weakness. California’s productivity still outpaces the nation. Tech and aerospace keep humming. AI investments are driving efficiency gains—growth without proportional job creation.
The state is recalibrating, not declining.
Two Markets, Two Strategies
Southern California isn’t one market. It’s several. Your investment thesis needs to reflect that.
Coastal Counties: Los Angeles, Orange, San Diego
These markets are outperforming. High-wage tech and professional jobs support premium retail. Demographics favor spending. Affluent consumers keep opening their wallets.
Best fit: Experiential retail, premium services, lifestyle tenants.
Inland Empire
Best fit: Essential services, grocery-anchored, medical, discount retail.
Same region. Different playbooks.
Headwinds are stronger here. The logistics-heavy economy faces trade policy uncertainty and tariff risk. Consumer spending tilts toward necessities.
Your Move: Timing the Cycle
Buying in 2026? Front-load your activity to the first half. Less competition. More negotiating leverage. You’ll be positioned when momentum builds.
Selling in 2026? Target the second half. Economic acceleration supports stronger pricing. Buyer confidence improves.
Holding? Focus on tenant quality. Credit strength matters more in uncertain periods. Lock in longer lease terms where possible.
Key Takeaways
- “Muddle through” means slow first half, stronger second half
- Coastal retail outperforms; Inland Empire requires defensive tenant mix
- Acquisition window opens in H1 2026
- Disposition timing favors H2 2026
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Ready to discuss your retail investment strategy?
(213) 880-8107 | francisco.williams@williamscap.ai | williamscapitaladvisors.com
Your Southern California Retail Investment Specialists
