Los Angeles is hardly immune to the economic meltdown affecting the entire country, but the city, which boasts some of the most famous shopping destinations in the world, still sees a few bright spots in sought-after retail real estate.
Beverly Hills’ Rodeo Drive, a week ago the site of a star-jammed party honoring its latest Walk of Style award recipient, Manolo Blahnik, is one of the city’s most iconic thoroughfares. It is located in an area known as The Golden Triangle — from Crescent Boulevard to Wilshire Boulevard to Santa Monica Boulevard — that generates more than $1.3 billion in sales and attracts an estimated five million visitors annually. (Only South Coast Plaza, 35 miles south in Costa Mesa, Calif., rakes in more — an estimated $1.5 billion annually.)
Judging from the rents per square foot, which range from $27 to $50, the demand for retail space on the fabled street is still high, according to CB Richard Ellis vice president Jay Luchs, who recently brokered a deal for Judith Leiber on Rodeo.
“As bad as times are and as much as the retail industry is going to feel an effect, there is just so little available space that rents are still going up,” he said. “Rodeo Drive, Robertson Boulevard and Malibu are all very strong.”
Celebrity-heavy Robertson Boulevard has seen a spate of recent openings, from an 11,000-square-foot Ralph Lauren store last month to luxury eyewear boutique Ilori and contemporary label Vince. Still to come are Dolce & Gabbana’s D&G concept store and Rock & Republic.
Fraser Ross, who owns Kitson, has said the national and international chains will eventually damage Robertson’s shopping cachet.
“I think it takes away from what makes Robertson special, from why shoppers come here in the first place,” he contended.
But, according to Luchs, rents on the street between Third Avenue and Beverly Boulevard have risen to $25 to $28 a square foot. Currently, the largest available space on the street is the 4,500-square-foot space that used to house Robert Clergerie and agnès b. That store has received offers from at least one luxury brand.
Malibu, which also has its share of celebrity clients and high-volume sales, has an appeal much like that of the Hamptons or SoHo in New York. There are three adjacent shopping centers at the intersection of Pacific Coast Highway and Cross Creek Road: the Malibu Country Mart, home to Planet Blue, James Perse, Oliver Peoples, Sigerson Morrison and Ralph Lauren; Malibu Village, home to Free City and Ron Herman, and the Malibu Lumber Yard project, due to open in December, which counts Tory Burch, Maxfield, James Perse, Theory and Intermix as tenants. Rents there average between $20 and $25 a square foot.
But for all the solid commitments, there are still some dire statistics. The International Council of Shopping Centers is predicting that retail closures might reach almost 6,500 this year — up 41 percent over last year, and the most closures since 2001 when more than 7,000 stores were shuttered. There were 2,122 announced store closures in the first quarter of 2008, according to the ICSC.
Still, mall developers are pressing on, with Macerich’s $265 million renovation of the Santa Monica Place mall on the Third Street Promenade and the opening of The Oaks mall in the San Fernando Valley, as well as Westfield’s push in the Valley with its Westfield Topanga Mall.
The caveat, though, is that boutique-lined streets without proven track records face other challenges.
“Emerging markets that never really caught on or reached their potential are really going to take a hit,” said Robert Cohen, executive vice president of the retail leasing, investment sales and consulting firm RKF.
He pointed to Melrose Avenue and Melrose Place, home to recent high-profile openings such as Alberta Ferretti and Alexander McQueen.
“On paper it looks great, with world-class stores going in, but those deals were done months ago. Those areas haven’t done much to solidify their markets and that’s a problem. Some companies have deep pockets, but it remains to be seen how long they can stand by bad real estate before they think about moving or sitting on the sidelines,” Cohen said.
Luchs noted that rent prices have cooled on Melrose Avenue ($8 a square foot) and Melrose Place ($15 a square foot). “Tenants are making offers lower — by a long shot — than the asking prices, and landlords are agreeing to do deals for less,” he said.
“A lot of people are reevaluating deals, but others see a great opportunity to secure very good real estate at below-market prices,” said Cohen. “It’s a tenant’s market.”
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