Barnes & Noble is betting big on the iconic Third Street Promenade, despite the street experiencing high vacancy rates and difficulties attracting tourists since the start of the pandemic. The bookstore will open a smaller store on the street, not far from its previous location which shuttered pre-pandemic, as the street welcomes numerous other retailers and restaurants.

“The Third Street Promenade is really the heart of our downtown,” said Andrew Thomas, chief executive of Downtown Santa Monica Inc., a nonprofit committed to upkeeping and bettering its city.

The three-block pedestrian strip, which relies heavily on tourism, is currently in the process of reinventing itself. With the rise of e-commerce, brick and mortar has been struggling for over a decade now, but statistically, the onset of Covid-19 seems to have pushed Third Street down further, when the street saw fewer travelers and recorded more vacancies than ever before in February 2021.

That said, some argue that the street is on the brink of a comeback, as it’s actively working to reinvent itself, something that can be explained by the numerous redevelopments in the works.

The total occupancy rate on the Third Street Promenade was 76.5%, as of July 28 according to Downtown Santa Monica Inc. Within the last six months, new businesses that have opened include John Reed Fitness, Wilson, Blenders, Kitchen United Mix and Bella + Canvas.

Upcoming changes

And more retailers are on their way in what some agree could be a turning point for the street. 

Beyond Barnes & Noble, businesses coming soon to the promenade include Herschel Supply Co., Swish Studios, Pickle Pop, Aldo, Odd One Out, Yogurtland, as well as one undisclosed retailer and one undisclosed restaurant. And retailers currently under construction are HQ Gastropub and a mixed-use project coming to 1404 Third Street Promenade. 

“It’s one of the truly important streets in South California,” said Jeff Kreshek, western region president of Federal Realty Investment Trust. Federal Realty, which owns 11 properties on Third Street, was recently responsible for redeveloping the building which welcomed John Reed Fitness in June and replaced Banana Republic.

“Fundamentally, it’s some of the best dirt you’re going to find in California,” Kreshek said, noting that Third Street’s proximity to the Pacific Ocean makes it a highly desirable market with great access for both tourists and locals. “From an investment standpoint, it’s a very valuable asset… it’s fundamentally fantastic real estate.” 

One other change coming to the Third Street Promenade is a development in the works by Sawtelle-based Blatteis & Schnur Inc. The developer has torn down a 77-year-old building at 1404 – 1408 Third Street to make room for a project with 25,000 square feet of retail space, including 50 feet of retail frontage.

Beverly Hills-based Sonnenblick-Eichner Co. arranged a loan for the project in June, which was provided by Civitas Capital Group, a private debt fund.

While admitting the promenade is starting to look different, Kreshek said a lot of the changes are due to to fluctuations in retail trends and efforts to revitalize the street are means to catch up on modern trends.

“The challenges to Third Street aren’t Covid related,” Kreshek argued. “And it’s disingenuous to throw them all at the feet of the city or anything else. Streets, just like malls, just like any other project, have to transition at some point. We had a lot of legacy brands on the street that had been there for 20 or 25 years and it’s time for a change.”

Kreshek calls this “evolution,” adding that as consumer preferences change, retail centers must adopt.

One company now looking to evolve is Barnes & Noble. The bookstore closed its doors to Third Street in 2018 and recently announced plans to reopen. This time, however, in a location more than nine times smaller the size of its previous one. 

“They’re coming back in a completely different format, a scaled-back format,” Kreshek said. Kreshek explained this rebranding likely includes generating a more friction-less experience for customers. He explained that the 45,000-square-foot previous location was likely overwhelming, and that downsizing for the brand, particularly as modern times require less of a demand for mass inventory, is likely to support a more manageable and comfortable shopping environment, for both the retailer and consumer. 

“It was such a beloved retailer here in downtown Santa Monica,” Thomas added. “To see them choose downtown Santa Monica again, I think it’s indicative of a bigger story.”

Investors flock

According to Thomas, people still look at Third Street as “an ideal place to invest.”

“When you have an iconic street like Third Street Promenade that has been the epicenter of the retail world for Santa Monica and an international destination…when you have something as strong of a foundation as that, just like anything in life that has ups and downs, things will eventually come back,” said Houman Mahboubi, managing director of the high street retail division at Jones Lang LaSalle Inc. “And Third Street is coming back.”

JLL currently has the most active retail listings in terms of square footage on the Promenade. Its current listings include buildings which formerly housed Volcom, Gap, Santa Monica Post Office, NMS Leasing, and Sweet Fin. The brokerage also manages the building for Hollister, but the company’s lease is up Feb. 1 so JLL is in the process of interviewing potential new tenants.

“You can get all your shopping done in that three-block stretch,” Houman said.

More than retail 

But it’s not just retail on the street now.

“Santa Monica and downtown have been very retail centric,” Thomas said. “And as retail habits and trends change…Santa Monica and the promenade have to change as well.”

Thomas noted that there’s been a shift to include more experiences, including pop-ups like The World of Barbie interactive attraction which opened on April 14.

As part of that revitalization, Downtown Santa Monic Inc. is working with the city to pass new legislation. The city staff approved a number of big zoning changes for downtown, such as changes to create an arts and entertainment district and to loosen some of the alcohol restrictions which will allow for rooftop development without impacting floor area ratio, in a city council meeting held on July 25.

According to Thomas, efforts to revitalize the Promenade are ongoing conversations that will continue to evolve over time, as are plans to reimagine the city’s downtown. 

“I feel very strong about our bones and our viability going forward,” Thomas said. “And the change is inevitable. We will look different in some way or another.”