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Tuesday, May 30, 2023

Beverly Hills’ Golden Triangle Shines Despite the Pandemic

The pandemic may have shuttered retail stores around the world, but you’d never know it by looking down ritzy Rodeo Drive.

“The excitement, the energy is equal or better to pre-Covid times,” said Houman Mahboubi, an executive vice president at Jones Lang LaSalle Inc. Mahboubi specializes in landlord representation in the area.

Vacancy on the luxury shopping street climbed to 9% at the height of the pandemic but has since fallen back to about 5%, he said.

By the end of the year, Mahboubi expects vacancy to hit 0% after a flurry of leasing activity to fill the few vacant storefronts.

“I don’t think you’ll ever see more leased signs in the Triangle than you do now,” Mahboubi said, referring to the Beverly Hills Golden Triangle, the area between Santa Monica Boulevard, Wilshire Boulevard and Canon Drive.

Andrew Turf, a senior vice president at CBRE Group Inc., called Rodeo Drive “crazy strong.”

“You have Rodeo Drive, which is always going to be Rodeo Drive, which has gone into the pandemic stro
ng and came out even stronger because people are flush with money,” he said.

He added that the nearby streets of Canon and Beverly are seeing a lot of interest from restaurateurs.

Carine Mamann, an executive director at Cushman & Wakefield Inc., said that even during the Covid-19 pandemic, Rodeo Drive fared well. She managed to sign leases for companies such as Golden Goose.

“Rodeo has fared the best in all of the U.S., the best street in the U.S. even during Covid. And retail luxury sales are all up there as well,” she said.

Mamann said rents on the street are still where they were pre-Covid as interest in the area remains high.

Mahboubi added that rent collections in the area continue to be strong.

Beyond Rodeo

Other streets in the Triangle did not match the robust activity seen on Rodeo Drive, according to market experts, but are still coming out of the pandemic in good shape.

“The Beverly Hills Triangle has remained surprisingly strong during Covid. I say surprisingly just because of how scary it was in 2020, and a lot of these tenants maintained and held their own,” said Jay Luchs, a vice chairman at the Newmark Group Inc.

“Rodeo Drive and Canon Drive are the two better streets during this year. Rodeo continues to get the right tenants, continues to have expansion from the luxury brands and (benefits from) the news of the Cheval Blanc Hotel. The buzz has only gotten better,” he added.

Experts say part of the reason the Triangle has done well is that it appeals to both locals and tourists.

One street in the Triangle that hasn’t fared as well is Beverly Drive.

“Beverly Drive … is lagging in terms of just how it did during Covid. It was hit a little harder and has a little catching up to do, but long-term I’m not worried about it,” Luchs said.

He added that the street “has lost some of its luster” and was not “talked about as a hot street for a brand to go.”

Luchs predicts Beverly Drive will take about three years to come back.

One of the important changes to the street, according to market observers, is the arrival of Erewhon Market, which will open next year in the former Williams-Sonoma Inc. store location.

“It’s a huge addition to Beverly Hills,” Mamann said.

She added that some side streets within the Triangle were also hit hard during the pandemic as people worked remotely.

“The side streets are all really office and local, so that was hit the hardest, but now that people are going back to work it’s picked up,” she said.

Mahboubi added that there has been some migration of more affordable brands from Rodeo Drive to Beverly Drive, while the luxury brands, sometimes under the same company, remain on Rodeo.

It’s important to some tenants to maintain a presence in the area. “Nothing will ever replace brick and mortar. It’s a must to continue the growth and recognition of their brand,” Mahboubi said.

One change he has seen is that landlords are being more flexible on lease terms. Instead of a five- to 10-year lease, he is seeing some much shorter leases and has seen rents down by 20% to 25% from pre-Covid rates in parts of the Triangle beyond Rodeo Drive. 

High-end hotel

 One of the biggest changes planned for Rodeo Drive and the Beverly Hills Triangle is the Cheval Blanc Hotel.

LVMH Moët Hennessy Louis Vuitton Inc. is behind the 115-room hotel at the corner of Rodeo Drive and South Santa Monica Boulevard. It’s expected to open in 2025.

The company, which counts Marc Jacobs, Givenchy, Fendi, Christian Dior, Celine, Sephora, Bvlgari and Dom Perignon among its brands, has acquired multiple properties along the street recently, including the former Brooks Brothers building, which it purchased for $245 million.

“You’ve got a hotel coming in from LVMH in a couple of years, so everyone knows the north end of Rodeo Drive is going to get bookended by one of the world’s best brands,” Turf said, adding that he was “very bullish” on the street’s future.

Historically, Turf said, the 400 block was the weakest block within Rodeo Drive, but the hotel brings new strength to the space.

Experts believe luxury brands continue to focus on Beverly Hills, and some high-end retailers are even expanding their storefront.

“The fact that tenants want to be in Beverly Hills and want their names on the doors and want full-size stores is really important,” Luchs said. “Rodeo Drive for luxury brands is a place to showcase who they are.”

Mahboubi said the city is now allowing more mixed-use projects, and the Purple Line stop in the area is only a few years away, adding to optimism in the market.

“I’m a big believer in the power of Beverly Hills and how it’s basically the center of Los Angeles,” Turf said.

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans Welk is a managing editor at the Los Angeles Business Journal and the San Fernando Valley Business Journal. She previously covered real estate for the Los Angeles Business Journal. She has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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