New Retailers Braving the L.A. Boutique Scene

Friday, June 12, 2009

Call it signs of life after the deep freeze.

Many retailers said business came to a standstill during the 2008 holiday season, when shoppers drastically curtailed spending and many shop owners called it quits. But six months after a Christmas where overall sales declined 1.7 percent, a handful of entrepreneurs is willing to take risks again. They’re opening stores.

On May 15, Norwegian fashion label Moods of Norway opened a 2,500-square-foot store on Los Angeles’ high-profile retail street Robertson Boulevard. Moods co-founder Stefan Dahlkvist said his up-and-coming label would not have had a chance to raise its flag on the coveted real estate on this street had the struggling economy not compelled some retailers to close their doors and subsequently convince some landlords to lower their rents.

“A few years ago, nothing was available,” said Dahlkvist, who first looked for Los Angeles retail space in the relative boom times of 2005. “The retail decline allowed us to get into the retail space we wanted.”

Michelle Macis also is getting into the search for suddenly affordable properties. In late 2006, she founded successful boutique/bistro Java Jean Bar in a well-off suburban section of Anaheim, Calif. This summer, she said, she will be wrapping up a deal to open a flagship store on a premier retail street in Beverly Hills.

“When you walk retail streets, you can see a lot of places are gone,” Macis said. Like Dahlkvist, she said the price was right to move onto a new street that she believes has a lot of cachet. “It’s pennies on the dollar compared to where it was two years ago,” she said.

Veteran commercial real estate executive Chuck Dembo said commercial real estate has dropped 20 percent to 40 percent since November in Santa Monica, Beverly Hills and West Hollywood—the Los Angeles County neighborhoods he serves for Dembo & Associates.

In the past year, rents have tumbled on Los Angeles’ Robertson Boulevard. In May 2008, prices ranged from $17 to $25 per square foot on the premium blocks of Robertson. Recently, rents have ranged from $8 to $10 per square foot, Dembo said.

Matthew May, another real estate executive, said the commercial real estate business only started picking up last month. Few fashion entrepreneurs are gambling on space now. “There is no big momentum,” May said. “But you’re seeing entrepreneurial deals. Those who could not get into better areas might try their luck now.”

Lately, his company, May Realty Advisors in Sherman Oaks, Calif., has been fielding calls from people hoping to find space for restaurants and nightclubs. The No. 1 one call he is fielding is from people looking to open a medical-marijuana business. “We get hundreds of them,” he said.

Jay Luchs, another real estate executive, said rents for the most-coveted retail spaces are going up again, but they will not climb to the high levels of the recent past. Luchs is an executive vice president with CB Richard Ellis.

Lower rents have also helped shift the prospects for neighborhoods that were once considered poor candidates for fashion stores. Take downtown Los Angeles, for example. In the past year, two fashion boutiques, Apartment 3 and Candice Held, moved away from downtown, and early pioneer Push Emporium closed its doors in late 2007.

But on April 29, fashion label Skingraft opened a 1,800-square-foot boutique and company headquarters at 125 W. Fourth St. in downtown Los Angeles. According to Skingraft co-founder Jonny Cota, the company took over a lease from the former tenant, a furniture-design studio. The fashion label’s rent hovers around $1.50 per square foot.

Skingraft co-founder Cassidy Haley thought the lower rents will change the neighborhood. “The developers were hoping downtown would be a place for the higher-echelon, white-collar people,” Haley said. “But rents have dropped, and more artists and designers have been able to move in. It is shifting what downtown was supposed to be.”

This new investment follows a painful period in which several high-profile, leading boutiques closed in Los Angeles. The celebrated Tracey Ross boutique on Sunset Boulevard closed on Dec. 31. Many others scaled back their services or plans for expansion. However, retail vacancies for the first quarter of 2009 were described as moderate in some of the state’s most prominent counties, according to real estate information company CoStar Group Inc., based in Bethesda, Md.

In Los Angeles County, retail vacancy was 4.5 percent in the first quarter of 2009, compared with 3.7 percent in the fourth quarter of 2008, according to CoStar.

In Orange County, retail vacancy was 4.7 percent in the first quarter of 2009, compared with 3.8 percent in the fourth quarter of 2008. In San Francisco, retail vacancy was 2.7 percent in the first quarter, compared with 2.5 percent in the fourth quarter of 2008.

Still, new opportunities and hints of an improving economy do not change the challenges with which many retailers continue to struggle during tough economic times. High-profile boutique owner Fraser Ross said the fashion game has changed for his business on Robertson Boulevard, where he runs four Kitson boutiques. “It is not as great as it was last spring,” he said. “But it’s not like we have a knife at our throats either.” Neighborhoods to Watch: Roundup of Some of Southern California’s Best Retail District, click here.