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By Ed Moosbrugger
April 18 -- A year ago, a stretch on the north side of
Broadway from Second Street west was lined with empty storefronts.
Today, those spaces are filling up.
That dramatic change reflects the continued strong demand for retail
space in Downtown Santa Monica.
Many new stores and eating places are opening as momentum continues
from strong leasing in the second half of last year. But the pace
of activity may slow down as the impact of a weakening economy,
financial uncertainties and scaled back expansion plans by retailers
take hold.
“Over the last year it has been a strong leasing market,”
said Robert O. York, a consultant to the Bayside District Corp.
“There is a lot of very positive momentum.”
But, York said, the market may cool down a bit because “a
lot of retailers are starting to turn more cautious.”
For now, however, the market is solid.
Vincent C. Muselli of Muselli Commercial Realtors said the market
is as strong as a year ago, and he hasn't seen a downturn. But he
is a bit concerned that slowing retail sales could eventually hurt.
No signs of a slowdown are evident if you look at what has happened
over the past few months along Broadway. A string of retail spaces
from Second Street west have been leased in recent months.
Among them: Citrus Valley Yogurt & Ice Cream opened recently
at 123 Broadway and spaces immediately to the east have been leased
to Xooro (which sells baked goods), Evergreen Tea House and, on
the corner of Broadway and Second, Oxbow (a surf apparel and active
wear store).
The latter three should open within three or four months after major
improvements by tenants, said Arthur Peter, a broker with PAR Commercial
Brokerage who handled the leasing with Greg Eckhardt.
Peter hopes these and other new arrivals will “breathe some
good life” into that area of Downtown.
Nearby, Buddha's Belly restaurant recently opened at 205 Broadway
and Joe's Pizza opened at 111 Broadway.
“Downtown is moving,” Peter said. “It is doing
real well.”
The area continues to attract retailers with an international flavor.
Peter noted that Oxbow, which will also take a portion of the second
floor for its West Coast headquarters, is part of a French company,
while Evergreen is Korean.
On the Third Street Promenade, H & M, a Swedish fashion apparel
store, will open on the 1400 block, York said.
Numerous foreign-owned companies have already opened stores Downtown.
Although the market is strong, there's still room for improvement.
“We need to concentrate on getting good retail up and down
Second Street,” Peter said.
One big recent addition to Second Street is the Kensington luggage
store, which took the space formerly occupied by Wild About Music.
Kensington moved from Santa Monica Place, which is closed for a
major remodeling.
Rents have been holding up well. Typical rates on the Third Street
Promenade range from $18 to $25 a square foot depending on location
and size, Muselli said. There are very few transactions, however,
because of limited supply and turnover.
York said ground floor space on the Promenade typically rents in
the upper teens, while second floor space is much less.
A block or so off the Promenade, rents are half or less, and rents
scale down further away from the Promenade, York said.
Downtown is getting a mix of tenants.
“We get a bunch of calls from entrepreneurs and chain brokers,”
Muselli said. “Chains focus on the Promenade.”
“We're still getting the big guys, and entrepreneurs are showing
up on the periphery,” York said.
Many of the chain stores in Downtown, including the new Forever
21 on the Promenade, have been positioned as flagship stores, with
broader selections and more exciting environments, York said.
Some successful stores are expanding by relocating. York noted the
planned doubling of space for Sephora in its anticipated move from
the 1300 to the 1200 block of the Promenade.
Some of the first wave of retailers on the Promenade are starting
to look at their rents, and some may decide to move around the corner,
York said.
Meanwhile, Santa Monica Place has embarked on major construction
that could affect retail activity Downtown over the next year or
two. How construction and traffic flow are handled will be important.
“They have to make sure it is well lit and attractive,”
York said.
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