On the heels of a yearslong legacy of declining sentiments around public safety and the undeniable exodus of businesses, Santa Monica has earned itself a certain reputation – marked by untapped potential and municipal inaction.

Fresh city leadership looks to change the narrative.

Tempted by the promise of being a part of the revitalization of a city he views as “quintessential Southern California,” Oliver Chi said he couldn’t resist getting into bed with Santa Monica when the opportunity to become city manager presented itself. He officially began work in July.

While local government’s ability to enact change, or lack thereof, has left a bad taste in many Angelenos’ mouths, Chi is hoping a $60 million investment into Santa Monica will reverse the course. This capital comes from the city’s cash reserves and was previously set aside to deploy in the event of any operating deficits in the next five to seven years.

Now, the City Council has voted to instead use it as an investment over the next two years to prop up its business landscape.

Chi identified public safety, securing capital investment and prioritizing maintenance as top focus areas for the city’s recently approved “realignment plan.”

Between 2023 and 2024 alone, crimes such as weapons violations, narcotics offenses and disorderly conduct increased by 16%, according to the Santa Monica Police Department – though more serious and violent crimes decreased by 2%. Also, recent estimates from the city report nearly 16% vacancies in retail and 35% in office.

Based on this environment, if people aren’t so sure about the city’s new plan, Chi hears where they’re coming from.

“That skepticism is warranted, given what’s happened in the last five to seven years,” Chi said.

Prior to this plan – which doubles the size of SMPD’s Downtown Services Unit and streamlines permitting for businesses, among other things – Chi said the city had been mostly just hoping markets would self-correct without much “concrete” action.

But as the city declared itself in a state of fiscal distress in September, Santa Monica could no longer get by with a passive approach.

Thus, Chi and other city officials asked themselves, “What do we need to do to encourage private sector investment back into town? Because that’s what will solve the city’s budgetary problems long-term,” Chi said. “We need the local economy to come back.”

Safety in the city

When it comes to marketing an area to clients, the perception of safety matters, said Ryan Gurman, a senior vice president at CBRE specializing in retail leasing and investment sales for the Westside.

“Safety and security are a huge talking point, and that’s all across the city and all across the country,” Gurman said. “Obviously, it directly impacts my business as a broker, and it impacts retail very heavily.”

To tackle the issue, Santa Monica’s plans call for the doubling of police’s downtown unit and adding eight public safety officers to patrol the Third Street Promenade, Palisades Park, Tongva Park, Reed Park and downtown parking structures. Additionally, the city is relocating its homeless shelter out of downtown and creating a new police substation at Santa Monica Place Mall.

Following conversations with the current operator of the mall, Chi said they indicated interest in re-tenanting the space but “it’s contingent on the city doing something meaningful around public safety.” He cited more than two dozen letters of intent from retail users. Upon securing tenants, the plan is to reposition the mall as a regional shopping center rather than a tourist destination.

‘Interrelation’ – office and retail

Vibrancy in retail and perceptions of safety trickle into Santa Monica’s office performance as well.

Companies used to want to be in downtown because of the retail scene but as vacancy and crime have increased, that’s no longer a motivator, said Danny Rainer, an executive vice president at Jones Lang LaSalle who focuses on West L.A.’s office market. Rainer recalled when Santa Monica used to be “the shining gold star of the Westside” for office with high occupancy from several Fortune 500 companies, gaming companies and tech and media giants. A noticeable decline came in 2021 amid the Covid-19 pandemic, and it intensified in 2023 when prominent firms “hit recessionary moments and decided to right size, sublease, terminate and in some cases, flee the state altogether,” Rainer said. “It compounded very quickly.”

Since then, there’s been a gradual, modest recovery. Even still, with vacancy at 35% right now, compared to about 13% in 2019, it’s safe to say there’s a long way to go.

Chi hopes the city’s efforts to create a safer environment and pump life into the retail scene will boost office.

“There’s absolutely an interrelation between retail and office,” Chi said. “…From a restaurant and retail perspective, people generate activity, and activity stimulates the possibility for economic growth which stimulates investment.”

Cleanliness and aesthetic also play a role which is why the city’s plan allocated $4 million to maintenance such as adding new trees, modernizing crosswalks and signage, landscaping and targeted corridor improvements on major streets in the city’s business district.

Santa Monica looks to develop a more comprehensive plan in the near future specifically looking into consumer preferences in office types and overall footprint and determining which industries they should focus on attracting.

Permitting process

Restructuring the city’s permitting process is another way Santa Monica hopes to regain trust within the business community, as many have grown weary of what Rainer described as the area’s “non-favorable, non-business friendly environment.”

To change the current system, which Chi called “Byzantine,” the key will be eliminating certain steps in the process, improving interdepartmental coordination and allocating funds to outsource support.

Upon implementing these changes, the city has committed to the following plan review timelines: five weeks for new construction of non-residential or mixed-use buildings; two weeks for retail and office structural improvements; two weeks for restaurant tenant improvements; and one week for commercial, non-structural tenant improvements.

For context, the timeline for a non-structural improvement used to be about three weeks, which can make a big difference, as “a one-week delay can result in six or seven months of additional time to get through the final approval of plans,” Chi said.

Gurman can attest to the previous system’s impact on business attraction, adding that adhering to streamlined timelines “will be beneficial in getting more retailers to go into spaces and more businesses to open.

“As brokers, those would be important tools because we are the people that assist businesses with finding locations and getting open,” he added. “So, if we have those tools, we can further help do that.”

Plus, brokers don’t get paid until their client officially opens, so recommending a place that has a reputation of delays hurts their bottom line.

Easing the process for restaurants to operate outdoor dining is another part of the plan. The former $1,400 fee per outdoor seat at a restaurant has been eliminated and the cost per square foot of outdoor dining has been reduced from $2.50 to $1 for sidewalks and from $4 to $2 for parklets in the street.

Future outlook

Matthew Fainchtein, managing director of Los Angeles retail advisory at JLL, is pleased with actions from the city and thinks they will build on positive momentum Santa Monica has seen recently, noting increased tenant attraction in the 1400 block of Third Street Promenade. He also wants to see solutions for the configuration of the city’s retail spaces.

Pointing to the overly large parcel sizes in both the Promenade and Santa Monica Place Mall, Fainchtein thinks adaptive reuse could help spur more demand. In the Promenade, where there’s a “smorgasbord of owners,” he said it can be a bit more complex.

“There has to be a way that we either incentivize owners to redevelop their properties to accommodate the new demands of retail today or (accomplish this) through a public-private partnership,” Fainchtein said.

For Santa Monica Place, he sees potential in redeveloping some of the larger box retail into housing while keeping the smaller spaces that are more attuned to today’s consumers.

Leaning into community events, activations and live music is another way to boost foot traffic, which is something Chi wants to also invest in, along with expanding the entertainment zone, which kicked off this summer in the Promenade and allows people to walk around with alcoholic beverages purchased from retailers within the zone.

“We want to show off that Santa Monica can be a place for fun and activity again, and so there’s funding allocated for more proactive activation,” Chi said.

In terms of overall fiscal health, the city plans to enact cash saving measures through operational budgetary adjustments, such as internal streamlining, examining staffing, boosting parking enforcement and new parking rates, refinancing outstanding debt and adding digital signage, among other initiatives. From Chi’s estimation, these efforts would result in more than $30 million in new revenue/cost cuts over the next two years.

“This is a new approach to how we’re looking at our finances, to invest money today, to encourage private investment moving forward and to identify a coherent strategy of how the budget is going to be balanced,” said Chi – noting that current projections predict a net positive structural general fund position by end of June 2027.