California Apparel News

Retail leases on the Third Street Promenade in Santa Monica, Calif., are hitting an all-time high as big-name chain stores compete for space on the three-block-long pedestrian mall.

As old leases come up for renewal, retailers such as Levi Strauss & Co. and Victoria’s Secret are spending big money to set up shop on the street, where retail space goes for $9 to $11 a square foot.

In the next few months, a host of new outlets will replace smaller, independent stores that cannot afford the high-rent district.

“What is happening is the mass retailers are hitting this area because of the enormous amount of foot traffic,” said Randy Starr, a principal with Tenzer Commercial Brokerage Group Inc. in Santa Monica. “They are paying higher rents to have marquis value.”

San Francisco-based Levi Strauss & Co. expects to open a store on the Promenade as early as June. The company is leasing 4,000 square feet at 1409 Third St., a space once occupied by the Rag Factory, at $10.50 a square foot. The new space will become one of 15 concept stores the company is opening across the country that will feature only Levi’s products.

American Eagle Outfitters, based in Warrendale, Pa., is opening a 10,500-square-foot outlet at Third Street and Arizona Avenue.

United Colors of Benetton, headquartered in Ponzano, Italy, is taking over the store once occupied by Midnight Special, an independent bookstore that has been in the same location for years.

Hollister Co., the surf-themed subsidiary of New Albany, Ohio-based Abercrombie & Fitch Co., is hunting for space on the Promenade, said Starr of Tenzer Commercial. Hollister has been on a major expansion spree and has opened 93 stores since launching the concept in July 2000. The store targets 14- to 18-year-olds.

Abercrombie & Fitch executives have been looking at 1254 Third St., a retail outlet that for years has been the longtime home of Hennessey + Ingalls, an art and architectural bookstore that is moving to Wilshire Boulevard.

The store’s owner, Mark Hennessey, said he has been paying $5 a square foot for retail space. But when his lease expires this summer, the Wells Fargo Bank Trust Department, which manages the building for the Hunt Family Trust, will be asking for $9 to $10 a square foot.

At press time, Hollister, with only two outlets in Los Angeles County, was uncertain as to whether it would sign a lease for the space or search for another Promenade location.

Abercrombie & Fitch already has a store at 1345 Third St.

Other chains scheduled to open on the Promenade include Victoria’s Secret, Apple Computer and Reebok.

Not everything on the Promenade has been rosy. Right after the terrorist attacks of Sept. 11, the popular mall saw a big dip in international tourists. A few restaurants and small retailers closed when foot traffic declined.

But things are slowly improving as more locals are frequenting the pedestrian mall and tourism is beginning to rebound.

“We have been very successful in retaining the number of bodies walking down the street,” said Kathleen Rawson, executive director of the Bayside District Corp., the private/public group that oversees the downtown Santa Monica area.

The flood of big-name retailers, however, is causing some concern. The city already has a moratorium on converting restaurant space into retail space, which will be in effect until September.

Now city officials are deciding whether to place a moratorium on the mass merchandisers snapping up space on the Promenade.

“One of the concerns on the Promenade has been the preponderance of formula retail stores at the cost of independent retailers who can’t afford the high rents,” said Michael Feinstein, a Santa Monica city councilman. “I don’t think we’re going to say there should be no corporate chains, but we’re trying to figure out how to maintain the mix.”

The Promenade Uses Task Force—a seven-member group comprising city-council members, planning officials and one property owner—met March 4 to discuss a report about how to limit chain stores.

The city has been examining how other tourist towns have restricted the influx of chain restaurants and formula stores.

But Promenade observers note the pedestrian mall has always had its chain stores and restaurants. J.C. Penney, Woolworth and Sears stores had lined the thoroughfare before it became a popular tourist destination.

“Chains are not new to the Promenade,” said Rawson of the Bayside District Corp.