A THRIVING RETAIL CLIMATE
THE SOUTHERN CALIFORNIA ECONOMY CONTINUES TO REBOUND, AND RISING CONSUMER CONFIDENCE LEVELS AUGUR A HEALTHY HOLIDAY SEASON.
Byline: Teena Hammond
LOS ANGELES — If the early Nineties were a bad horror flick for the economy in Southern California, the end of the decade is proving to be a blockbuster.
The economy in the region slowed around 1990 and continued on a downward spiral with the well-publicized Los Angeles riots in 1992, the 1994 Northridge earthquake and several U.S. Air Force base closings.
But now, job growth is at new highs in Orange, Riverside, San Bernardino and Ventura Counties, which all surround Los Angeles County. Meanwhile, Los Angeles County employment, although not at an all-time high, is still up 2 percent, with 74,000 jobs created this year, said Jack Kyser, chief economist for the Los Angeles Economic Development Corporation.
“There’s a pretty optimistic mood in Los Angeles right now because people believe the economy is back and it’s strong,” Kyser said.
Tony Cherbak, a retail specialist with Deloitte & Touche LLP, said the consumer-confidence index was a whopping 129 at the end of August. “That’s just phenomenal. It’s running right around an all-time high.”
The consumer-confidence index points to how consumers feel about a number of economic factors, including the employment rate and employment perspectives, he explained.
“If consumers are primarily pretty confident that they’re going to have a job and they’re going to have the ability to pay off debt, then they tend to take on debt a little more frequently than they otherwise would,” Cherbak said.
If unemployment stays at its current low levels and if the consumer-confidence index remains steady, then “it bodes very well for the holiday season,” Cherbak said.
Kyser added, “Everybody is banking on a strong holiday season. What we watch is traffic at the local ports. That’s an early indicator. We’ve seen a very strong surge in imports.”
Part of what’s pushing the economy is plenty of tourists.
“Tourism has been very good this year, and we forget that tourists, especially from Japan, consider Los Angeles great because they find interesting things to buy and they’re always much cheaper than they are in Tokyo,” Kyser said.
Another strong area is real estate.
“It’s tough to find good retail space. There are a lot of people looking,” Kyser said. “Some of the happiest campers I’ve seen lately have been people in the real estate industry.”
One of those is Dan Blatteis, principal with Blatteis Realty in Beverly Hills.
“The economy has been extremely strong. Almost boomlike. Retail vacancy on Rodeo Drive is less than 2 percent,” Blatteis said. “There’s only two or three locations even available on Rodeo Drive.”
As a result, annual rents on Rodeo Drive in the three-block stretch from Wilshire to Santa Monica Boulevards have surged from $120 per square foot just two years ago to more than $200 per square foot.
“The rents are now just exceeding what they were in the late Eighties,” Blatteis said. The now-healthy Southern California economy is one of the reasons Hermes ended a five-year wait to replace its 1,700-square-foot site on Rodeo Drive with a 17,000-square-foot unit on the same street, said Laurent Mommeja-Hermes, president and chief executive of Hermes USA.
The new Hermes opened Sept. 16 with an invitation-only party that shut down the block and oozed Hollywood glamour.
Tourists make up a significant part of the Hermes customer base in Beverly Hills. Fifty percent of customers are tourists, with 30 percent from Asia, 10 percent from South America and 10 percent American tourists, Mommeja-Hermes said.
There’s been plenty of changes lately on Rodeo Drive, with Guess the latest to remodel, with a 6,000-square-foot location that opened Sept. 19, combining two other Guess stores at the same location. Meanwhile, Prada snatched up the old Hermes digs with as-yet-unannounced plans for what will be sold at the site. Salvatore Ferragamo just spent $1 million to revamp its longstanding unit and boost its selling space to 6,500 square feet from 5,000. The boutique opened Aug. 15 and is expected to pull in more than $20 million annually, a 30 to 40 percent increase from last year, according to a Ferragamo spokeswoman.
Gucci began remodeling its quarters in July. The new site will open next fall and will add more than 10,000 square feet to Gucci’s existing 10,100-square-foot store. While the construction is under way, Gucci is housed in a 7,000-square-foot site one block north on Rodeo Drive.
There are also plenty of retailers moving onto Rodeo Drive for the first time. Tommy Hilfiger is opening a 20,000-square-foot site on Nov. 16, and Lacoste plans to open a 2,700-square-foot location on Dec. 15. Frederic Fekkai is opening a 6,600-square-foot salon and cafe during the last week of November. Fekkai’s salon, in the 400 block of Rodeo, will occupy the top floor of the building that also houses Holland & Holland’s upcoming 6,000-square-foot store, slated to open Oct. 29, and Giorgio Armani’s existing store.
Faconnable joined the ranks on Sept. 26, opening a 16,000-square-foot unit on Wilshire Boulevard, just one block west of Rodeo Drive. This is the first Faconnable store to carry women’s clothing, said Michele Rutherford, head of its women’s wear division.
The Third Street Promenade in Santa Monica along with trendy Robertson Boulevard in Los Angeles are also thriving, Blatteis said.
At the Promenade, a pedestrian mall nestled next to the Pacific Ocean, Gap has signed a lease for a 20,000-square-foot Gap/Gap Kids store slated to open next June. Pottery Barn and Restoration Hardware have also signed leases for the mall, while other retailers reportedly scouting the area include J. Crew, Diesel and Crate & Barrel. The mall is already home to dozens of restaurants and retailers, including French Connection, Banana Republic and Urban Outfitters.
Rents on the promenade have jumped to more than $72 per square foot annually from $36 per square foot in the past two years, Blatteis said.
On Robertson Boulevard, annual rents have increased to $60 per square foot from $36, he said.
Robertson is home to retailers including Cynthia Rowley, Madison, Harari and Agnes B. Kate Spade is also scouting for space on Robertson, according to a company spokeswoman.
The economy is expected to continue to strengthen, with “a lot of interesting projects on the drawing board, such as the mid-December opening of the Getty museum,” Kyser said. “Right now, we’re feeling very positive.”