Market Notes
Periodic observations on what the market is telling us
September 2026: What the market is telling us
Adapted from a talk to the Laguna Beach Business Club, September 17, 2026.
The forces reshaping commercial real estate
Laguna Beach is unusual, but it isn’t insulated from the larger forces changing commercial real estate:
Capital costs more. Higher interest rates and stricter underwriting have reduced transaction activity and changed what buyers can pay.
Investors are more selective. Capital is still available, but it’s concentrating around stronger locations, better properties and credible business plans.
Office demand has become more specific. Office isn’t simply “dead.” Businesses want distinctive locations, flexibility and an environment worth leaving home for.
Retail increasingly depends on experience. Restaurants, hospitality, wellness, culture and memorable concepts matter more and more to successful districts.
Adaptation matters. Older properties need new uses and new ideas, but approvals, construction costs and physical constraints can make change difficult.
What those forces mean here
Laguna amplifies nearly every one of those trends.
Scarcity protects value. Commercial properties here are hard to replace, and opportunities to buy or lease the right space are limited.
Scarcity doesn’t guarantee success. A rare property can still have the wrong layout, use restrictions, too little parking or unrealistic economics.
The customer changes by location. What works Downtown may not work in North Laguna, the Canyon, the Village or South Laguna.
Destination businesses have an advantage. Outside the strongest pedestrian areas, customers usually need a specific reason to visit.
Expectations matter. Owners, buyers, tenants, residents and public officials may all have different ideas about what a property is worth, or what it should become.
What recent sales tell us
Buyers here aren’t simply purchasing buildings based on conventional income and yield. They’re buying scarcity, location, long-term value and, in some cases, something they specifically want to own. Recent examples include the Surfing Heritage & Culture Center buying a major Downtown building on Broadway for its own use, a historic Downtown property bought with substantial vacancy as a repositioning opportunity, a boutique hotel purchased by a regional investor, and a small retail building that traded at a yield few markets would accept.
The takeaway: Laguna commercial real estate doesn’t always trade like conventional commercial real estate. Buyers often accept lower current returns because they’re buying something scarce, difficult to replicate and, in many cases, something they simply want to own.
What the for-sale market tells us
Properties on the market today aren’t five versions of the same investment. Each depends on a different value story: new construction, higher future rents, an owner-user opportunity, hotel repositioning or land redevelopment. In nearly every case, the asking price reflects what the property might become, not simply what it earns today.
The takeaway: Laguna’s for-sale market is a market of expectations. The properties may be scarce, but buyers still need a credible plan, and the capital, approvals and patience, to turn that potential into value.
What the for-lease market tells us
Spaces are available for very different reasons. Some need a destination use, some have challenging layouts, some are tied to a larger redevelopment, and some may not support the use the community wants most. The former Gelson’s in South Laguna is the clearest example: the community strongly wants another grocery store, but there may not be enough nearby households to support a market of that size. What Laguna wants and what a location can support aren’t always the same thing.
The takeaway: Laguna doesn’t simply have a vacancy problem; it has a fit problem. Successful leasing requires alignment among the business concept, location, physical space, ownership priorities and real customer demand. The right tenant for one property may be completely wrong for the next.
Laguna Beach is small, but it is not simple
Success here requires understanding the customer, the location, the economics and the community, and recognizing that each property tells a different story.