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Downtown Santa Monica Thriving But Faces Challenges, Officials Say

Bob Kronovetrealty
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Santa Monica Convention and Visitors

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By Jorge Casuso

September 3, 2019 -- Thirty years after Downtown Santa Monica's moribund Third Street was transformed into the Promenade, its paved streets were visited by strollers more than 29.2 million times last year.

Those who shopped and dined Downtown rang up $1.21 billion in taxable sales during Fiscal Year 2018-19, a 6.4 percent increase over the previous year, according to data released by Downtown officials last week.

Of that amount, $493 million stemmed from the Third Street Promenade, an increase of 4.2 percent over 2017, according to Downtown Santa Monica Inc.'s (DTSM) annual report released at the agency's annual meeting Thursday.

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While the report shows that the Central Business District continues to thrive, it also acknowledges that the world-renown strip faces serious challenges

"A reassuring takeaway is that Downtown Santa Monica and Third Street Promenade remains one of the premiere destinations in all of Southern California, attracting millions of people each year," DTSM's CEO Kathleen Rawson said in the report.

"We are still a healthy economic engine for the city, and a beloved gathering place for our residents."

But Downtown is grappling with a seismic shift from brick and mortar stores to online shopping that it forcing officials to re-envision a strip created before the internet.

"We love that people use the Promenade to show off LA," Rawson told the more than 200 stakeholders and civic leaders at the annual meeting. "We have a beautiful public space. But today’s population is looking for complete experiences.

"They are looking for music, dancing, art, comfort and unexpected but exciting events both day and night," she said.

"The complete experience" Rawson said, is the focus of Promenade 3.0, a "multi-pronged effort with the City to re-imagine the Promenade."

The project focuses on "effectively managing public space, maximizing the utility of private property and developing supportive physical infrastructure," officials said.

Despite the challenges -- which spurred a recent spate of large retail vacancies -- Downtown remains one of the hottest office and retail markets in Southern California ("Retail Vacancies on Santa Monica's Promenade Offer Opportunities, Downtown Officials Say," July 26, 2017).

The average rent for a retail space Downtown rose by 6.6 percent to $7.69 per square foot over the past year, while the average occupancy dipped .7 percent to 94.1 percent, according to the report.

Meanwhile, the average rent for an office space dropped by 1 percent during the past fiscal year to $5.24 per square foot, while the average office occupancy dipped by .3 percent to 93.3 percent.

Santa Monica remains a major employment hub with more than 29,214 employees in industries ranging from retail and hospitality to scientific, technical and information services, according to the report.

Downtown has also become a residential center, with a population of about 4,367 living in approximately 3,096 households.

The median household income of some $63,010 is expected to increase by 35 percent over the next five years, compared to a projected increase of 14 percent for the nation. The median age was 39.

Most of the residents -- 73.1 percent -- were white, 13.2 percent were Asian and 4.1 percent were black. The other 10 percent identified as "other" or mixed.

The vast majority of the housing units -- 87 percent -- were occupied by renters, 5 percent by owners and 8 percent were vacant, according to the report.

There are 1,141 housing units in the planning pipeline, the report said.

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