No Rest for the Ritzy
Undaunted by an economic slowdown, shoppers have continued flocking to high-end shops on some of the region’s toniest streets and the resulting volume of business is pushing retail rents to unprecedented levels.
“If your foot traffic is down, your sales are down and your rents are going to be down that’s not what we’re seeing,” said Rafael Padilla, principal at Santa Monica-based PAR Commercial Brokerage.
The increase comes even as lease rates for office space continue to fall and rents on mid-priced retail strips plateau.
Rental increases between 30 percent and 50 percent over the past two years are the norm on several stretches: Robertson Boulevard along the Beverly Hills/West Hollywood border, Beverly Drive between Wilshire and Santa Monica boulevards, West Hollywood’s Sunset Plaza, and Santa Monica’s Third Street Promenade and Montana Avenue.
Rents along Sunset Plaza and Beverly Drive for 1,000- to 2,000-square-foot space are in the $8 a foot range, up from $4.50 to $5 two years ago. Larger stores, such as the 8,000-square-foot space recently leased by sportswear retailer The North Face, are leasing for more than $6 a foot, according to Matthew May, president of May Realty Advisors.
On Robertson Boulevard, boutique-sized rates have jumped to $6 from $4 in 1999.
Unlike shopping malls or mid-tier streets like Wilshire or Pico boulevards, which are dotted with larger chain store retailers, the upscale retail districts are dominated by smaller, single-unit boutique shops that cater to an affluent, loyal customer base.
“Specialty retail can weather the storm stronger because they’ve got a more targeted audience than broader department stores,” said Chuck Dembo, partner at Beverly Hills-based Dembo & Associates.
The loftiest rates remain on Third Street Promenade, where national and regional retailer chains have been plunking down $10 per foot, up from the $8 range a couple of years ago.
The strength of high-end retail leasing is in stark contrast to the downturn of the late ’80s and early ’90s, said Larry Taylor, principal of Christina Development Corp. Rent rates along Montana nearly tripled between 1984 and 1988, driving many boutique retailers out of business before the market bottomed out.
The more recent price run up has been far more gradual. As a result, while the rates on the Promenade could soon plateau, Dembo said, other districts could continue to see steady rent increases.
“We were at $4 in 1988 and we’re at $6.50 now,” said Taylor. “That’s not substantial over 14 years.
Danny King
