By Ed Moosbrugger

February 12 -- Downtown Santa Monica’s retail leasing market continues to be very healthy, but it will take some preventive care measures to keep it that way.

Most of Downtown is enjoying solid retail leasing activity.

“It’s booming,’” said Barbara Tenzer, head of Tenzer Commercial Brokerage. “We need another block of the Promenade. I don’t know when it’s ever been better.”
It’s not just the Promenade, where there is little space available, that is attracting businesses.

“Fourth Street has really come into its own,” said Robert O. York, a consultant to the Bayside District Corporation, which oversees Downtown. “The cross streets are doing well.” But Second Street is still lagging a bit.

Even with Downtown’s success, however, there are still major challenges to keep it that way.

Downtown faces much more intense competition from other shopping venues than a decade ago, and there’s more to come, York noted. That includes the current redevelopment of the portion of Westside Pavilion west of Westwood Boulevard. That makeover will include a large art house theater complex and restaurants.

Each new development takes a bit of business from Downtown. If someone decides, for example, to go to a new movie theater at Westside Pavilion instead of to Downtown Santa Monica, it will affect not only Santa Monica theaters but also restaurants and stores these moviegoers would patronize.

Indeed, new state of the art movie theaters will be a key piece of the puzzle for Downtown to stay competitive, York said.

Other key issues include improving the condition of public spaces, replacing surface parking lots with development and moving forward with the remake of Santa Monica Place.

“We will start to feel it sooner than people expect if we don’t get a handle on these big issues,” York said.

Among issues Tenzer would like to see addressed better are the problem with vagrants, the loss of valet parking and the need to improve operations at the parking structures.

One strong plus for the Downtown is the extensive investments businesses are making in their facilities – such as the remodel of the Puma store on the Promenade to its new prototype, York said. This is keeping the area looking fresh.

The healthy situation is reflected in rising rents. While typical rents on the Promenade are $8 to $10 a square foot, some prime smaller spaces are commanding $20 or more, York said.

Downtown continues to prosper because its core is “one of a rare group of very desirable, very successful street retail environments,” York said.

Fourth Street has been helped by the success of the new REI and West Elm stores, but the challenge now is to develop more activity moving north, York said. That could include developing on surface parking lots and redeveloping of the public parking structures.

Santa Monica Boulevard, Arizona Avenue and Wilshire Boulevard are all doing well now.

Second Street and parts of Broadway face challenges.

“It looks like the problem street is Broadway between Second Street and Ocean Avenue,” Tenzer said. “Outside of that everything is pretty good.” The closure of the Robinsons-May and O’ My Sole stores at Second and Broadway didn’t help the situation.

Along Second Street there are several ground floor offices that York would like to see changed to pedestrian friendly uses to help revitalize the street.
And while there is potential on Second Street, it’s been a bit difficult to get retailers to commit.

“There’s a bit of a chicken and egg situation,” York said.

He believes the prospective redevelopment of the Mayfair property on Santa Monica Boulevard near Second Street could help bring more pedestrians toward Second.

Even with these soft spots and some turnover among tenants – such as the impending closure of Todd Bracken Jewelers on the Promenade after 25 years in business and the shuttering of Tower Records on Santa Monica Boulevard – retail leasing remains healthy.

“There is strong demand and very limited supply,” York said.

SANTA MONICA HOTELS continued their strong performance during November, with the occupancy rate jumping 5 percent from a year earlier to 76.5 percent and the average room rate rising 6.5 percent to $260.42, according to a report by PKF Consulting.

Through the first 11 months of 2006, the occupancy rate rose 3.9 percent to 83.3 percent, and the average room rate moved up 8.4 percent to $254.15.
Santa Monica’s occupancy rate through November was well ahead of the 78.9 percent for Los Angeles area hotels tracked by PKF, and its average room rate was about $110 higher.