LA Cities in Crisis: How Budget Cuts Put Retail Real Estate Risk Front and Center

Marc Perlof • September 29, 2025

Hey, Retail Real Estate Rockstars!


City deficits are the hidden NOI risk most retail property owners aren’t watching. When cities go broke, service cuts, fee hikes, and tenant stress follow and that hits your bottom line. Let’s take a closer look.


Cities Under Pressure

  • Los Angeles faces a $1B deficit for FY 2025–26. Over 1,600 job cuts may slow permitting and inspections¹.
  • Santa Monica declared fiscal distress from $229M in settlement costs². Expect higher property taxes and fees.
  • Inglewood reports a $24M deficit with small retailers hurt by event-day traffic near SoFi and Intuit Dome³.
  • Beverly Hills looks stable today but is projecting $15–20M annual deficits soon⁴.
  • Long Beach faces a $60.5M five-year shortfall, with permit and inspection fees already rising⁵.


Why This Matters

When cities are broke, retail property owners feel it:

  • Cuts in police, fire, and street services can lower safety and curb appeal.
  • Higher taxes and fees raise tenant costs, making rent harder to collect.
  • Slower city approvals drag out leasing and redevelopment projects.
  • Struggling small businesses mean more vacancies and turnover.

For retail property owners, the real story is what this means for your bottom line. 


Rising city fees cut into tenant margins, which makes collecting rent harder. Service cuts and safety concerns lower customer traffic, reducing sales and weakening your rent roll. And when NOI drops, property values follow — meaning your asset could trade at a discount if you don’t stay ahead of these shifts.


Redevelopment and Highest-and-Best Use

If you’re holding property for redevelopment, city budget stress can make the process harder. Expect higher fees, slower approvals, and possible new costs tied to zoning. At the same time, weaker tenants can hurt your interim cash flow. But here’s the opportunity: budget stress can lead to discounted property sales and even city incentive programs. Smart investors who plan for longer timelines and extra costs can still win big.


Key Data Points

  • Los Angeles: ~$1 billion projected deficit for FY 2025-26¹.
  • Santa Monica: $229 million settlement liabilities².
  • Long Beach: $60.5 million shortfall over five years⁵.


Now is the time to stress-test your leases, evaluate tenant strength, and model rising costs. If you wait until the fee hikes hit, it’s too late.


Call or DM me today. Let’s make sure your property is protected and positioned to grow in this shifting market.


What do you think, can city budget problems be the hidden risk most retail property owners aren’t watching closely enough?


#RetailRealEstate #LosAngelesCRE #PropertyInvestment #CommercialRealEstate #LACounty


Footnotes & Sources

  1. ABC7 – LA faces $1B deficit, layoffs possible
  2. LA Times – Santa Monica financial crisis
  3. 2UrbanGirls – Inglewood $24M budget deficit
  4. Beverly Press – Beverly Hills council budget report
  5. Long Beach Local News – $20M shortfall, structural deficitems.

Disclaimer

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




© 2025 Marc Perlof Group. All rights reserved.

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