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Promenade Holds Steady During Sales Drop

By Ed Moosbrugger

Santa Monica's Third Street Promenade eked out a 0.8 percent increase in taxable sales during the second quarter of 2002. That may not sound like much, but the Promenade fared a lot better than the city as a whole, which dropped 3 percent.

For the first half of 2002, the Promenade posted a 3.2 percent sales increase while the city suffered a 5.4 percent decline.

"The Promenade is holding up reasonably well," said Robert O. York, a partner in The Fransen Co. and a consultant to the Bayside District Corp. "The Promenade, in relative terms, is standing its ground."

Results weren't as good in other parts of Downtown. Santa Monica Place suffered a 10.3 percent drop in second quarter sales vs. a year earlier and was down 15.3 percent for the first half as they continue to plan for their major renovation.

The Bayside District outside the Promenade fell 7.3 percent for the second quarter and 5.1 percent for the first half, possibly hurt somewhat by road construction that particularly affected Fourth Street.

For the Ocean Avenue/Pier/Hotels segment in and near Downtown, taxable sales edged up 0.8 percent in the second period, but fell 9 percent for the first half.

Gwen Pentecost, senior administrative analyst for the City's Economic Development Division, expressed cautious optimism about the sales outlook. She noted that the City's sales increase between the first and second quarters this year was stronger than last year, possibly indicating the economy has bottomed out. But, Pentecost said, "It's not going to be a fast recovery."

Downtown retailers still feel the drop off in tourism. "It' a difficult environment," York said. "It's more promotional."

Indeed, some of the sales increase on the Promenade in the first half of this year came from new stores.

Sales at Promenade apparel stores that have been open at least a year appeared to be down in the second quarter, Pentecost said.

Promenade restaurant sales, after adjusting for closures, dipped but not as much as they did citywide, she reported. Restaurants selling beer and wine showed increases, while the more expensive restaurants with liquor sales posted a drop.

Specialty stores had a small sales increase.

York said the Promenade was able to hold its own for several reasons, including a good mix of uses and its ability to maintain a strong position in the local and Westside markets.

"The Promenade has been very resilient in the last several years," York said. Potential retail tenants continued to look at Downtown, but it is taking a little more time to put deals together and "in some cases it seems tenants have a little more leverage," he said.

Santa Monica's economy has been hit hard by the dotcom meltdown, a slowing in the film industry and the steep decline in travel and tourism following the 9/11 terrorist attacks, according to economists at California State University, Long Beach.

All three of those blows hit Downtown.

Jobs dropped 3.3 percent in Santa Monica in 2001, and little growth is expected for this year, the university economists said in an economic report prepared for Santa Monica.

But better days are ahead, with predicted job growth of about 3 percent in 2003-04 for Santa Monica, which would be faster expansion than for the region.

Santa Monica's taxable sales probably will be flat this year following a 3.2 percent decline last year but should improve 7 percent next year, according to the economic report.

Because of its heavy reliance on restaurant sales and tourism, Santa Monica's taxable sales probably will grow slower than the region until after 2003, when Santa Monica should begin to exceed the sales growth for Los Angeles County, the economists predicted.

Hotels in Santa Monica enjoyed a much better September this year than the disastrous experience following 9/11 last year, but results still fell short of 2000.

The hotel occupancy rate this September jumped 20.4 percent from last year, reaching 70.6 percent, and the average room rate edged up 2.7 percent to $185.85, according to PKF Consulting.

But this September's results trailed September 2000, when occupancy was reported at 79.6 percent and the average room rate was $199.85.

For the first nine months of 2002, the occupancy rate rose 6.5 percent from last year to 77.5 percent, while the room rate fell 7.8 percent to $193.81. In 2000, occupancy exceeded 80 percent and the room rate topped $200.

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