AB 2418: Can California AB 2418 Reduce Permit Delays That Hold Up Rent?

Marc Perlof • October 21, 2026

By Marc Perlof | @MarcRetailGuy
CA #01489206

October 21, 2026


If you own retail real estate, here’s what just changed for you.


As of September 30, 2026, California has passed AB 2418,² a new law aimed at reducing certain delays in commercial plan checks and inspections. For retail property owners, that matters because every extra month a tenant waits for approvals can mean another month before the space opens and starts producing rent. AB 2418 applies statewide, including cities such as Los Angeles, Inglewood, Malibu, Santa Monica and more.¹


What Does AB 2418 Change?

For qualifying commercial permit applications, cities and counties must provide an estimated timeframe for determining whether a complete application meets permit standards.¹ The law also creates another option when certain plan checks take too long.


An excessive delay generally means the city takes, or says it expects to take, more than 30 business days to complete the first structural building safety plan check after receiving a complete application.¹ If the city returns the plans for corrections, the law also looks at the total review time. If the initial review plus the review of the corrected plans goes beyond 60 days, that can also qualify as an excessive delay.¹


If there is an excessive delay, the applicant can ask the city or county to use a private entity to perform the plan check. If the city cannot provide a qualified outside reviewer, the applicant may be able to hire an approved private professional and pay the cost directly. ¹ That professional must meet the law’s licensing and certification requirements.


Does This Apply to Every Retail Tenant?

No. This is an important limit. The private plan check portion of AB 2418 applies to qualifying tenant improvements in buildings that are generally:

  • One to three stories
  • No more than 40 feet to an occupied floor
  • Group B Business occupancy
  • Limited to an occupant load of 49 or fewer
  • Not a health facility or public building¹

That means a typical Group M retail store should not assume it qualifies for the private plan check provision.


However, AB 2418 includes another rule that can be more relevant to traditional retail. For certain completed commercial projects, local building departments must conduct an inspection within 10 business days after receiving notice that the permitted work is complete. This provision covers several occupancy groups, including Group B and Group M.¹


That could matter when construction is finished but a retail tenant is waiting for an inspection before it can move closer to opening.


How Could Delays Affect Your NOI?

A signed lease does not necessarily mean the owner is collecting rent. Assume a tenant will pay $10,000 per month once rent commencement occurs. If permitting or inspections push that date back by three months, the owner could have $30,000 of delayed rent, depending on the lease terms.


During that period, the owner may still be paying taxes, insurance, utilities, debt service, and other property expenses. This is why permitting should be part of lease underwriting, not something considered only after the lease is signed.


Why Should Medical and Dental Owners Pay Attention?

Many professional office, medical, and dental uses may fall within Group B occupancy depending on the specific use, building, and patient conditions.


That means AB 2418 may be more relevant to certain medical or dental tenant improvements than laws aimed specifically at traditional retailers. But owners should not assume a particular medical or dental project qualifies. The project's architect and local building department should confirm the occupancy classification and eligibility.


What Should Retail Property Owners Do?

  1. Before signing a lease involving tenant improvements, confirm the property's occupancy classification and expected permit timeline.
  2. Review exactly when rent starts under the lease. If commencement depends on permits, construction, opening, or final approvals, delays can shift meaningful income into a later period.
  3. For projects that may qualify for AB 2418, ask the tenant's architect and local building department whether the new plan check or inspection rules could apply.


The main owner decision is to understand the permitting risk before you agree to the final lease terms.


Owner Self Assessment

If your next tenant's opening is delayed by 60 or 90 days, how much rent and expense reimbursement would you lose before the property reaches its expected NOI?


Final Takeaway

AB 2418 may shorten certain commercial plan check and inspection delays, but owners need to understand which parts of the law actually apply to their tenant and property.


If you're reviewing a lease, tenant improvement plan, or vacancy where permitting could delay rent, call or DM me. I can help you compare the expected downtime, income, and effect on property value before you make the decision.


Sources

¹ California AB 2418 bill text and history

² Governor of California announcement


Based in Los Angeles. Serving Southern California. Active across California. Advising clients nationwide.


#CaliforniaRetailRealEstate #RetailRealEstate #CommercialRealEstate #RetailProperty #AB2418 #RetailLeasing #CommercialPermits #TenantImprovements #PropertyOwners #CaliforniaRealEstate


Disclaimer

This post is for information only. It is not legal, tax, or financial advice. Always check with a licensed professional before making decisions.




© 2026 Marc Perlof Group. All rights reserved.

Can Lease Guarantees Affect Your Retail Property’s Value?

By Marc Perlof • October 19, 2026
By Marc Perlof | @MarcRetailGuy CA #01489206 October 19, 2026 If you own retail real estate, here’s what just changed for you. Your property’s value may depend partly on who guarantees the rent, not just on the tenant’s name or current payment history. If the guaranty is weaker, shorter, or more limited than you think, it may affect your refinancing options, sale strategy, negotiating leverage, and expected proceeds. The main retail property owner decision is whether the property’s value is supported by verified tenant credit, strong underlying real estate, or a combination of both. What Owners Commonly Miss Many owners focus on the national brand, current rent, and remaining lease term. Those factors matter, but they do not tell you how much of your property’s value depends on the guaranty. Two properties may have the same tenant brand, rent, and lease term but different levels of support. One lease may be guaranteed by the national parent company. Another may be backed by a franchise operator, subsidiary, affiliate, smaller LLC, or individual. That does not automatically make one property good and the other bad. It means the owner should understand where the investment’s value comes from. If the guaranty is strong, buyers and lenders may place more confidence in the future rent. If the guaranty is limited or unclear, they may rely more heavily on the property’s location, market rent, replacement tenant demand, and the cost of a future vacancy. Before setting a value, refinancing, renewing the lease, or deciding when to sell, determine how much of your expected price depends on tenant credit. How Much of Your Property’s Value Depends on the Guarantee? A lease guaranty may support value by increasing confidence that the rent will continue through the remaining lease term. That support may be stronger when: The guarantor is financially stable The guaranty lasts through the lease term The obligations are not heavily capped or limited The tenant’s rent appears sustainable The location remains important to the tenant The guaranty may provide less support when it expires early, burns off, becomes capped, is released after an assignment, or comes from an entity with limited assets. The owner should also consider whether the lease can stand on its own without the guaranty. A long lease with above market rent may appear valuable while the tenant remains in place, but the property could face a different value if the tenant leaves and the space must be leased at a lower rent. This is why owners should separate two questions: How reliable is the current income? What is the property worth if that income changes or disappears? The stronger your answer to both questions, the more flexibility you may have when deciding whether to hold, refinance, renew, or sell. How Can the Guarantee Affect Pricing? Buyer behavior matters because it helps determine what your property may be worth in the market. Assume your property produces $250,000 in annual NOI. At a 6.00% cap rate, the indicated value would be approximately $4,167,000 At a 6.50% cap rate, the indicated value would be approximately $3,846,000 That is a difference of approximately $321,000 even though the NOI did not change. This example does not mean a weaker guaranty automatically creates a 50 basis point difference. It shows how a change in perceived income risk can affect pricing. If buyers view the guaranty as strong and dependable, they may accept a lower return. If they see more tenant credit risk, they may require a higher return, offer less, or place more weight on the real estate than on the lease income. Financing may also affect the result. Some lenders may be more comfortable with leases backed by financially transparent or stronger guarantors. If fewer buyers can obtain financing or become comfortable with the lease structure, competition may decrease. For the owner, the practical question is not simply what cap rate similar properties achieved. It is whether buyers will view your income as equally secure. What Protects Value If the Tenant Leaves? A strong guaranty can support value, but it should not replace an evaluation of the real estate. Your property may still hold value if it has: A strong location Rent below market Flexible building design Good visibility and access Strong replacement tenant demand Limited future capital needs Your value may face more pressure if the property has specialized improvements, above market rent, weak replacement demand, deferred maintenance, or a large amount of lease rollover risk. A future vacancy can create more than lost rent. It may also require tenant improvements, leasing commissions, free rent, repairs, demolition, or time to complete a new lease. Those costs can reduce NOI, increase capital needs, and affect net sale proceeds. The owner should understand whether the property is attractive because of the tenant, because of the real estate, or because both are strong. What Should Retail Property Owners Do Now? Confirm the exact tenant and guarantor. Do not assume a national brand means the parent company supports the lease. Review how long the guaranty lasts and what it covers. Determine whether it is full, capped, reduced, temporary, or affected by an assignment or ownership change. Evaluate the property without the current tenant. Estimate market rent, possible downtime, leasing commissions, tenant improvement costs, repairs, and replacement-tenant demand. That review can help you decide whether to: Sell while the current lease and guaranty remain attractive Seek stronger support during a renewal Refinance before the lease or guaranty weakens Hold because the underlying real estate remains valuable Adjust pricing expectations before going to market The goal is not to predict every future problem. It is to understand what supports your value before a buyer, lender, vacancy, or lease expiration forces the question. In next week’s blog, “What Retail Property Owners Should Review Before Relying on a Lease Guarantee,” I’ll explain what owners should verify with guarantor information before buying, refinancing, renewing, or selling a retail property. Final Takeaway Your property’s value depends not only on the rent being paid, but also on who stands behind that income and what the real estate is worth if the tenant leaves. If you are considering a sale, refinance, or lease renewal, call or DM me. I can help you compare the guaranty, lease term, replacement costs, underlying real estate, and the value buyers may place on your income. If the tenant and guaranty disappeared tomorrow, would your location, market rent, and replacement demand still support your expected property value? Based in Los Angeles. Serving Southern California. Active across California. Advising clients nationwide. #RetailRealEstate #CommercialRealEstate #RetailProperty #NetLease #LeaseGuarantee #CorporateGuarantee #TenantCredit #PropertyValue #RetailInvesting #InvestmentSales #MarcRetailGuy #MarcPerlof

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • October 16, 2026
US Inflation Hits 3.7%, Sinking Bitcoin and Gold: Will the Fed Hike in October? US consumer prices rose 3.7% in the year to September, above the 3.6% forecast, and Bitcoin and gold fell within minutes. The hotter reading raises the odds of another Federal Reserve rate hike, which would lift borrowing costs.  Core inflation, which strips out volatile food and energy prices, also beat forecasts at 2.6%, against an expected 2.5%. Both measures climbed from August's readings of 3.4% and 2.4%..

AB 1679: Can California’s New Pop Up Law Help Reduce Retail Vacancy?

By Marc Perlof • October 14, 2026
By Marc Perlof | @MarcRetailGuy CA #01489206 October 14, 2026 If you own retail real estate, here’s what just changed for you. As of September 30, 2026,² California has passed AB 1679, a new law designed to make it easier for qualifying small businesses to temporarily operate in existing commercial space. For retail property owners, that could create another way to activate a vacant storefront, generate activity, and possibly collect temporary income while searching for a long term tenant.¹ The law applies statewide, including cities such as Los Angeles, Inglewood, Culver City, Santa Monica, Beverly Hills, and other California cities and counties.¹ How Does AB 1679 Work? AB 1679 allows a qualifying pop up small business to operate in eligible commercial space for up to 120 days under a temporary commercial activation authorization.¹ Local governments may also allow extensions or renewals. If temporary use of the same space goes beyond a total of 12 months within a 24 month period, the city or county may require the normal permanent occupancy process.¹ The law generally covers temporary businesses operating in Group B Business or Group M Mercantile occupancies with a total occupant load of no more than 49 people, including customers and employees.¹ There is no single maximum square footage because the allowed occupant load depends on how the space is used and laid out. For example, a retail sales area using 60 square feet per occupant would reach 49 occupants at about 2,940 square feet. But a store with a large stockroom or office area could have a different calculation, so owners should confirm the actual occupant load for their specific space. That can make the law relevant to many traditional retail and service spaces. The existing space must meet several requirements. It generally must already have been designed or used for commercial purposes, cannot be undergoing structural alterations, and cannot require changes to fire resistant building elements.¹ Health, safety, fire, and accessibility rules still apply. How Do You Apply? AB 1679 does not create one statewide application. The property owner or tenant will need to apply through the city or county where the property is located for a temporary commercial activation authorization. Each jurisdiction may use its existing permitting system or create a new AB 1679 process, so owners should check with the local building or planning department before offering the space to a temporary tenant. Why Could This Matter to a Retail Owner? Vacancy costs money. Assume a vacant storefront could produce $8,000 per month under a permanent lease. Six months of vacancy represents $48,000 of potential lost rent before considering property taxes, insurance, utilities, security, and other carrying costs. A temporary tenant will not necessarily replace that entire amount. But AB 1679 could give some owners another option besides leaving the storefront dark while waiting for the right permanent tenant. Possible uses could include a seasonal retailer, a business testing a new location, or another qualifying temporary commercial use. There may also be a nonfinancial benefit. An occupied storefront can create activity at a shopping center that might otherwise have dark space. Should You Treat Pop up Rent Like Permanent NOI? No. Temporary income and permanent lease income are not the same thing. A buyer evaluating your property will still want to know when the temporary tenant leaves, what rent a permanent tenant could pay, how much tenant improvement money may be needed, and how long the next lease up could take. A 120 day pop up can help reduce carrying costs, but it should not automatically be treated like income from a long term lease. What Should Retail Property Owners Do? Confirm the vacant space’s existing occupancy classification and whether the proposed temporary tenant qualifies under AB 1679. Compare the economics of temporary occupancy with leaving the space vacant. Consider rent, operating expenses, improvements, insurance, and how easily the temporary tenant can leave if you find a permanent tenant. Confirm the local approval process with the city or county before making commitments to a pop up tenant. The main question is whether temporary occupancy helps reduce your vacancy cost without creating a new leasing problem. Owner Self-Assessment If one of your storefronts stayed vacant for another six months, how much rent and expense reimbursement would you lose, and could a temporary tenant reduce some of that cost? Final Takeaway AB 1679 may give California retail property owners another tool for putting qualifying vacant commercial space to work while pursuing a permanent leasing strategy. If you're evaluating whether to keep a storefront vacant, use it temporarily, or wait for a long term tenant, call or DM me. I can help you compare the income, downtime, and value implications of each option. Sources 1 California AB 1679 bill text and history 2 Governor of California announcement Based in Los Angeles. Serving Southern California. Active across California. Advising clients nationwide. #CaliforniaRetailRealEstate #RetailRealEstate #CommercialRealEstate #RetailProperty #AB1679 #RetailLeasing #VacantRetail #PopUpRetail #PropertyOwners #CaliforniaRealEstate
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