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By NOLA L. SARKISIAN

Staff Reporter

Is venerable Farmers Market going the way of Old Pasadena?

The 65-year-old center at the corner of Third Street and Fairfax Avenue, noted for its crowded wooden stalls and kitschy barn-style architecture, long has served as a gathering place for the Fairfax district’s large Jewish and Russian communities, as well as tourists.

But some strange sights are starting to appear.

A young MIT graduate just opened a smoothie bar the venue’s first.

A 24-year-old entrepreneur bought the Kokomo Caf & #233; for $100,000 and then spent another $100,000 on a remodeling project for the once-tired breakfast spot.

A 33-year-old who recently joined her father’s business is taking his old-style fish market online.

It’s all part of changing demographics within the Fairfax area, as young professionals with disposable incomes move into neighboring communities. That’s attracting new merchants to Farmers Market and forcing older merchants to reexamine the way they do business.

“It’s a new breed of young people with training and understanding of technology that we’ve never seen before, who will help reshape things,” said Bernie Kodner, professor at the Institute of Retail Management at California State University, Los Angeles.

The new look is most apparent at the 11,000-person Park La Brea apartment complex near Farmers Market. Roughly 80 percent of its tenants are now in their 20s and 30s, a striking change from a decade ago when the complex was the largest concentration of elderly residents west of the Mississippi River.

“It’s clear that what’s driving the change is the great employment base in the area, with CBS, Cedars (Sinai Medical Center) and Paramount (Pictures),” said Rick Caruso, president of real estate development firm Caruso Affiliated Holdings.

Caruso has a big stake in the neighborhood, with plans to build a 700,000-square-foot retail project near Farmers Market scheduled for completion in 2001. Called the Grove at Farmers Market, the center will have about 10 sit-down restaurants, a 3,500-seat movie theater, and upscale stores such as Nordstrom, Crate & Barrel and Banana Republic.

Other local redevelopment projects are in the works as well. The city-owned, 30-acre Pan-Pacific Park on Third Street is undergoing a $9 million renovation. Casden Properties is building a new 1,600-unit apartment complex along Fairfax. Also, there have been rumors of a plan to renovate the Town and Country Shopping Center on the other side of Third Street across from the Farmers Market.

For Alfredo Diaz, the center’s youngest merchant, the purchase of 10-year-old Kokomo Caf & #233; for $100,000 seemed like a can’t-miss proposition. A former manager of red restaurant on Beverly Boulevard, Diaz realizes the vast potential of an already well-established venue in a marquee location. The restaurant brought in $800,000 in sales last year.

“This is a place where people can escape there’s a fierce loyalty here and I intend to respect that. We intend to change things without changing a lot,” he said. “I just think Farmers Market needs young fresh air to blow in. And it seems like others feel that way. Tenants come by and say they’re glad to see what we’re doing.”

With the help of architect Anthony Eckelberry, who worked on Patina restaurant, Diaz is installing stainless-steel pendant ceiling lights and replacing the chipped counter with a pale yellow strip trimmed in chrome. The menu has been modified somewhat (there’s a tofu breakfast burrito), and two 27-inch television screens will air CNN and CNBC so customers can keep an eye on the stock market.

“We really want to cater to the professional crowd,” he said.

Nearby is the new Copacabana Smoothie Bar, recently opened by entrepreneur Peter Cheng, who has a banking and venture capital background. He has spent under $100,000 to refurbish his 100-square-foot stall in vibrant hues of blue, yellow and green.

“This market has a lot of foot traffic you have a captive audience, which makes it a little safer to open a new venture,” he said. “You have a lot of places that open in stand-alone locations, which makes it tougher to make a go of it.”

Another young merchant shaking things up is Melanie Tusquellas. The 33-year-old daughter of Bob Tusquellas, who owns three business in the market, she will debut a Web site in October that allows people to order fish for next-day delivery, packed in iced containers.

“We have found that there is pretty good market for gourmet seafood in cities where it’s not available, like in Palm Springs and Scottsdale,” said Tusquellas, a former marketing executive for various record companies. “Our customers are excited about it and the tenants are too.”

The improvement bug has caught on among other merchants as well. Lillian Raymond, who has worked at the Coffee Corner since 1984, bought the place this year and took out a Small Business Administration loan to upgrade her store, taking down the walls and adding more light.

Fellow merchant Bob Arranaga Jr. opened his new Mexican restaurant called El Hijo de Granjero (“the farmer’s son”) after spending more than $100,000 in remodeling expenses. Arranaga, who for the past 20 years had worked as a sales and marketing executive in his family business, decided to strike out on his own and buy the worn-down Castillo’s Mexican Restaurant.

“I think this place is ready to go the next level and I wanted to be a part of it,” he said.

The low cost of these and other new ventures is what makes them so attractive to young entrepreneurs.

“It doesn’t take a big investment to try something new,” said Allan Kotin, principal at PCR Kotin, a real estate and consulting group. “That’s why places like Old Pasadena and Los Feliz have thrived. The bad news is if they upscale the hell out of it, rents may go up and the low cost of entry dries up, as in Pasadena. How low can rent be in Old Pasadena with a Saks Fifth Avenue?”

Rising rents are of concern to existing merchants, some of whom fear that the new developments will eventually push them out. Farmers Market’s retail space is 99 percent occupied, and normally a low vacancy rate is an indicator that rents may be about to rise.

Still, Mark Panatier, vice president of marketing and development for Farmers Market, said rents have been stable for the past five years, and there are no plans to raise them. But real estate brokers in the area say such thinking can’t last for long.

“There’s an absolute upward trend in rents in the area. Is Farmers Market immune to it? Absolutely not,” said Matthew May, a retail partner at Madison Partners.

May said monthly rents for incoming retailers at the Grove are ranging from $3 to $10 a square foot per month, a sharp jump from the $2 rents commanded on the western side of Third Street.

“Unless the Farmers Market is altruistic in economics, demand says rents will go up,” May said. “Third Street is going to pop, and the market is part of that.”

Despite such concerns, most of the older tenants and patrons welcome the new neighbors.

“It fits into what’s going on today. Things have changed. Like, smoothies wouldn’t have gone over a few years ago, but people are more health-conscious now,” said Patsy D’Amore, owner of Patsy’s Pizza, which was started by her father 50 years ago.

Longtime patron Mildred Holland sees the new blood as energizing.

“As long as this doesn’t become a mall, as long as it doesn’t become Franchise City, then it’s great,” said the 79-year-old Hollywood Hills resident. “This place has always had great quality, and as long as that doesn’t change, I’ll keep coming back.”

Most analysts concur that the new developments will create a corridor of activity. “The better the traffic, the better you’ll do,” said Larry Kosmont, president of real estate consulting firm Kosmont & Associates. “You will be hard pressed to find a study in retail that promotes less traffic.”

The land where Farmers Market now stands was purchased in 1880 by Arthur Fremont Gilmore, who wanted to use his 256 acres to begin a dairy farm. But in 1905 oil was discovered, so Gilmore created Gilmore Oil Co. and began putting up oil wells on his property.

During the Depression, two entrepreneurs approached Gilmore’s son Earl Bell to create a village-square atmosphere for farmers to sell their produce, and Bell agreed to build today’s Farmers Market. Before long, well-heeled women were arriving in chauffeured cars to purchase produce.

Property around the market also was developed. In 1934, a few months before the market opened, Gilmore built the first racetrack designed specifically for midget racers. A ballpark for the city’s first baseball team, the Hollywood Stars, sprang up in 1938. A self-serve gas station opened in the 1940s.

Over the years, Farmers Market managed to survive and thrive despite the advent of supermarkets, malls and other retail districts over the years, which increased competition for fresh produce.

Not everyone relishes further changes. One worried merchant is Hungarian native Mickey Jacobs, who has been using the same recipe to prepare the Hungarian cinnamon raisin bread and apple strudel that his grandfather made 80 years ago at his 30-year-old Bread Bin bakery.

“I tell you, it’s painful to see these changes people are scared for everything,” he said. “But, who can judge what the future will be like two years from now? Maybe it will all work out.”