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Wednesday, May 25, 2022

High-End Move

EDITOR’S NOTE: This story has been changed from the print version to correct the spelling of Stuart Millar’s name.

Rodeo Drive has long been world famous for its ultraluxe designer shops such as Louis Vuitton, Gucci and Prada that line its palm-dotted street. But in more recent years, it also has become home to the kinds of shops familiar to mallgoers.

For example, Bebe, Guess, Juicy Couture and Lacoste moved onto the Beverly Hills shopping street over the last decade. And that trend continued last week when G-Star Raw, a premium denim brand out of Amsterdam, the Netherlands, opened its largest L.A. store at 413 N. Rodeo Drive.

Nikoleta Panteva, an apparel analyst in the Santa Monica office of market research firm IbisWorld, said Rodeo Drive is shifting toward more accessible merchandise to target a wider range of consumers.

“Rodeo Drive is diversifying a little more because there’s a market for it,” Panteva said. “Not only are the younger shoppers buying now, but as the economy recovers over the next five years, they’re likely to continue shopping. It’s a market that’s expected to grow.”

But that doesn’t mean the Tiffanys and other top-of-the-line stores on the street are going away. High-end designers Tom Ford and Lanvin recently opened shops on Rodeo, and their predecessors are renewing leases and investing in interior upgrades.

Jay Luchs, executive vice president of West L.A.-based CBRE Group Inc. and a real estate broker for the majority of the properties on Rodeo, including the space G-Star Raw has taken, said he doesn’t think the inclusion of contemporary stores has compromised the street’s reputation.

“(G-Star Raw) is really going to make money there,” said Luchs. “But it’s not the kind of level that the entire street is going to be. The entire street is at the highest level it has ever been.”

Rodeo topped a list of America’s Best Shopping Streets published by U.S. News and World Report this month. The magazine noted that the public still views the street as being “iconic, gorgeous and pricey as ever.”

Neither the city of Beverly Hills nor merchant associations such as the Rodeo Drive Committee has any say on who can move onto Rodeo, as an article about the street in California Apparel News recently noted. The city’s Architecture Commission helps to ensure a certain standard of luxury in the buildings and facades in the area, but the landlords have the ultimate say in who might be moving in next. For the most part, the market works its magic: It’s the high-price rents that keep tenant standards at a premium.

Newest tenant

Luchs acknowledged that it might look to an outsider like G-Star Raw is a step down from neighboring high-end luxury stores. But the shop is a step up for the storefront it is filling.

The space, which was once home to a Chinese cosmetic company called GP Deva, has sat empty for almost two years. The vacancy was due in part to the stagnant economy but also because of its odd shape.

The space, which sits between Guess and Stefano Ricci, had a narrow hallway entry with only about eight feet of storefront that sat back from the sidewalk.

“It’s not the kind of space that would have gone to a high-level brand,” said Luchs. “So I went to (G-Star Raw) and said, ‘Here’s your chance to get on Rodeo.’”

Space on the street typically goes for between $30 and $45 per square foot per month. Luchs said G-Star Raw’s landlord asked for about $25.

In comparison, space on Robertson Boulevard, a somewhat less high-end retail street, typically goes for $12 to $17 per square foot, said Luchs.

G-Star Raw invested in renovating the space, adding a second level and extending the storefront five feet to the sidewalk. Now the space is about 4,600 square feet.

Every year, millions of tourists walk the sidewalks of Rodeo for a glimpse of luxury and maybe a celebrity or two. They window-shop and walk through the fanciest stores, but may not spend money. However, they’re more likely to buy something at the contemporary brand stores.

“A lot of tourists can’t afford to go into Prada or Gucci, but they can afford to go into Guess,” said Luchs.

However, Stuart Millar, chief executive of G-Star Raw North America, said he wasn’t going to rely on tourists for the store’s success.

“I think tourist traffic is an important part of a lot of people’s business now,” Millar said. “But I think it would be a dangerous business model to rely on it. We need to have a balance between tourist and local customers.”

Millar hopes to tap into the growing market of what the industry has dubbed the “aspirational” shopper: a young, generation-Y shopper who appreciates high-end brands but cannot always afford them. With prices between $140 and $250, the jeans G-Star Raw sells are comparable with those by J Brand and Seven for All Mankind. But they’re more affordable than a pair of True Religion jeans, which come in closer to $300 a pair.

Millar said G-Star Raw expects to get its share of wealthy customers, too. He believes that shopping on Rodeo has become less about spending money on a few outrageously priced items than about buying products that complement each other from different brands, no matter the price.

“If you look at shopping trends now, I think you’d see there’s a bigger crossover between the pricing of products,” Millar said. “People will wear $200 jeans with a $5,000 handbag, for instance.

Luxury prevails

Luchs said that at one point during the recession there were up to 10 vacancies of about 100 total spaces on Rodeo.

“In 2008, no one knew what was going on,” Luchs said. “We had to convince everyone that it was OK to do deals again. It’s taken almost three years to gain confidence back in that world, but now it’s back in a strong way.”

Luchs said that today there are only three vacancies, thanks in part to stores like G-Star Raw.

Two new luxury tenants – Tom Ford and Lanvin – moved in this year and signed 10-year leases. Missoni, which signed a lease in 2008, opened recently.

Other high-end designers are renovating or expanding their spaces. Italian fashion house Valentino signed a 10-year lease on a new, larger shop across the street that is slated to open this month. Jewelry and watch-maker David Yurman is moving to a space three times bigger at Rodeo and Brighton Way that will open in the spring. Stefano Ricci is moving from its location next to the new G-Star Raw shop to the more prestigious red-bricked slope of the Two Rodeo block. Boutiques Hermes, Christian Dior and Roberto Cavalli are all undergoing same-space renovations and two of them – Dior and Cavalli – also renewed 10-year leases.

Luchs said that for the first time in Rodeo’s history, the Two Rodeo block is 100 percent leased by long-term tenants. (In the past, some spaces were filled by temporary tenants – or stores that moved in while their regular addresses were undergoing renovations.)

So while G-Star Raw’s arrival does continue the trend of contemporary brand stores moving onto Rodeo, it doesn’t signal the end of the shopping mecca’s luxury days.

“It’s not that Rodeo Drive is becoming anything other than the highest-end street in the world,” said Luchs. “These high-end brands need to be there, want to be there, are making money there.”

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