The dressmakers, taquerias, and jewelry stores along downtown L.A.’s Broadway could soon get a high-end, transformational neighbor.
Apple Inc. is in the in the process of securing a lease for retail space at the historic Tower Theater, according to sources familiar with the transaction. The tech giant has been scouting the market for months, and when completed the lease for an Apple store at the building, at 800 S. Broadway, could spark dramatic changes along a corridor that has long been in flux.
“Apple’s going to be massive,” said Justin Weiss, a senior associate for Beverly Hills real estate services firm Kennedy Wilson. “Once that gets announced, the seas will part.”
Terms of the deal under discussion could not be determined, and a spokesman for Apple said it has not made any announcements about a store at that location. The brokerage said to be representing Apple, New York-based Robert K. Futterman & Associates, did not respond to a request for comment.
The stretch of Broadway between First Street and Olympic Boulevard has roughly 250,000 square feet of vacant retail space, despite being populated recently by retailers such as Urban Outfitters, Gap Outlet, Burlington, Acne Studios, and Oak.
The presence of an Apple store could be the spark that attracts other boutiques and national retailers.
“You would see it start to take shape similar to other strong retail corridors like the Third Street Promenade (in Santa Monica), and Colorado (Boulevard) in Pasadena,” said Derrick Moore, an Avison Young principal in downtown Los Angeles who helped bring Whole Foods to a location close to Broadway.
Challenges ahead
But not everyone is quite sold on the retail promise for Broadway – a thoroughfare of shops selling low-cost electronics, discount apparel, quincenera dresses, and wholesale jewelry.
“It’s still an unknown. There are still tenants looking that are unsure what it all means,” said Jay Luchs, executive vice president at Newmark Grubb Knight Frank’s Century City office.
Broadway had boomed in the 1920s and ’30s, when art deco theaters boasting dazzling marquees and ornate interiors showcased vaudevillians like the Marx Brothers and Bing Crosby. Shoppers flocked to flagship department stores for the May Co. and Bullocks. But over the decades, theaters shuttered, stores relocated, and offices emptied out.
The influx of high-end apartments downtown in the last decade has prompted big changes, attracting gourmet restaurants and a lively art scene. Some theaters have reopened for special film screenings and events, and City Councilman Jose Huizar has advocated for the installation of a streetcar along Broadway.
But new retail has been slow to follow. One deterrent has been the high number of people sleeping on the streets, with Skid Row just a few blocks away.
“The homelessness is something that makes it tougher as a leasing broker to attract tenants,” said Weiss. “Certain segments of Broadway are still underdeveloped. In the evening time, you’ll have boarded-up properties.”
Other stumbling blocks are longtime landlords who have little incentive to update their properties. Nor are developers ready to jump in, based on current low rents.
Still, Weiss is optimistic that retail will follow the residential boom. Some 10,000 luxury condos and apartments are under construction in downtown, mostly clustered in South Park. And while there’s talk that many units will be left largely unoccupied by overseas buyers, Weiss said downtown already boasts more than enough people to support a burgeoning retail scene. Some 55,000 people live downtown and 500,000 people work there.
Apple shopping
As Apple hunted for retail space in the market, virtually all of downtown’s brokers and landlords clamored to attract the tech giant. Only a handful of locations were said to be seriously in the running, all historic sites on Broadway.
“Apple is known to do things that are outside of the box and unorthodox,” said Gabe Kadosh, a vice president at Colliers International’s downtown office. “It creates a bigger splash by going in a historic building.”
The Tower Theater was built in 1927 with ornate renaissance revival exteriors. Its interior, styled after the Paris Opera House, contains about 7,500 square feet of theater space and another 7,500 square feet of basement space. It was not immediately clear how much space Apple would be taking. The building also has streetfront retail spaces along Eighth Street occupied by small shops on short-term leases. Those spaces could potentially be made available to Apple.
The combined space at the Tower would put the location in line with Apple’s other stores in the L.A. market: The Promenade site occupies 17,500 square feet, the Pasadena store is 10,000 square feet. Given the size of the space at the theater, there is speculation that Apple could choose to create an untraditional format, perhaps with a coffee bar alongside the genius bar. The presence of a café would fit into Apple’s strategy of encouraging customers to linger in stores while playing with Apple products, rather than grab boxes off shelves and go.
“They want the store to represent a destination. It has to have some distinct nature,” said Bill Kehrer, an Apple analyst at Edward Jones in St. Louis. “It is part of what allows Apple to sell products at a premium price.”
With nearly 270 U.S. stores already under its belt, Apple’s focus is on flagship sites with striking designs, among them ornate, century-old buildings in London, Paris, and Berlin. Its stores in Los Angeles are more conventional, within tried-and-true shopping zones at the Glendale Galleria, Americana at Brand, Beverly Center, Westfield Century City, Grove, Third Street Promenade, and Colorado Boulevard.
Rolling in
Despite its potential for impact, Apple would by no means be a Broadway pioneer. A massive renovation is underway across from the Tower at the Broadway Trade Center, a 1.1 million-square-foot beaux arts building that opened in 1906 as the May Co. Its leasing representative, RFK, is said to be seeking luxury retailers for the site, which might also include offices, a hotel, and a food hall.
Down the street, next to the trendy Ace Hotel, Australian boutique BNKR recently opened its first U.S. store. And at the Olympic Theater on Eighth off of Broadway, high-end clothing brand Cos, owned by H&M, has just signed a lease for 9,000 square feet. Another H&M brand, called & Other Stories, is scouting for 10,000 square feet in the same neighborhood.
“The H&M company is a believer in downtown,” said Luchs, who is representing the retail giant.
Still, it’s Apple’s jump onto Broadway that would make a huge impact on surrounding rents and property values.
“Apple can change markets,” said Luchs, recalling that its Third Street Promenade store sold for $100 million in 2014, two years after it traded for $60 million.
Around the same time, landlords around the Santa Monica store began raising rents to nearly twice the level they were before the retail operation opened.
Luchs said there would be a similar effect on Broadway and that he believed Apple would attract not only other retailers, but also investors interested in apartments, condos, and offices.
“Apple does have that power, probably greater than any tenant in the world,” he said.
