No twometro areas have as much and as little in common as Los Angeles and Hollywood.
Downtown Los Angeles is the city's financial center, and Hollywood an entertainment and tourist destination. However, both have visions of being urban meccas attracting foreign and local pedestrians to their respective mix of urban retail 24-7.
With an infusion of an estimated $4 billion, Hollywood is bouncing back with upscale shopping, world-class dining, and sizzling entertainment venues keeping streets active day and night, notes Martin McDermott, vice president in the Los Angeles office of Grubb & Ellis, specializing in investment sales.
Downtown, on the other hand, which has seen $17.6 billion invested still has a ways to go. Local developer Mark Weinstein, president of Santa Monica, Calif.-based MJW Investments, which repositioned eight historic manufacturing buildings in the Fashion District to residential, retail and creative space, believes the area is 75 percent there, noting some areas where dining and entertainment are springing up.
“We're not a 24-7 market yet,” says Carol Schatz, president and CEO of the Central City Association, which operates the Downtown Center Business Improvement District (BID), “but places are rocking all day into the early morning hours.”
In the late 1990s the city began adopting policies that encourage adaptive reuse and mixed-use, generating a plethora of new projects that brought residential and retail uses catering to an inter-generational mix of professionals. They are predominately hip, creative young adults seeking an urban lifestyle.
Traditionally an employment center with a very small residential community downtown has had a steeper climb than Hollywood, which though blighted, had continued to be a densely populated district of working-class neighborhoods and home to the entertainment industry, a number of educational institutions and two hospitals.
New cultural facilities like the Disney Concert Hall, along with the revival of the city's theater district and proliferation of restaurants, eclectic nightclubs and bars has made downtown residency so desirable, Weinstein notes, there are now significant numbers of reverse commuters.
L.A. Live, a $2.5 billion retail-entertainment complex opening this fall in the Entertainment District next to Staples Center, will boost downtown's around-the- clock visibility with a collection of signature restaurants and entertainment venues luring visitors and locals alike and potentially boosting the number of events booked at the Los Angeles Convention Center.
“Now if you come to L.A. for a convention, you'll be able to see a Lakers or Kings game, catch a Sting concert, or hear bands like the Eagles or Aerosmith, says Lew Feldman, the Los Angeles attorney who structured the, noting the city has been losing up to $4 million a year keeping the convention center doors open.
Billed as “Times Square West,” this 5.6-million-square-foot project encompasses six city blocks incorporating office, residential and retail. The project includes a JW Marriott Hotel and Ritz-Carlton Hotel & Residences; a Grammy Museum; radio and television broadcast studios, including ESPN's West Coast home; Nokia Theatre and 40,000-square-foot Nokia Plaza, which will serve as a gathering spot for the community to watch events from the Staples Center broadcast on giant LED screens. It is a joint venture of locally based Anschutz Entertainment Group, North Carolina-based Wachovia Corporation and the San Francisco-based MacFarlane Partners.
The Entertainment District has more than thirty residential projects, eight hotels and thirteen office buildings planned, all with ground-floor retail.
Figueroa Plaza mall's owner, New York-based Brookfield Properties, plans to renovate the Macy's-anchored, three-level, subterranean center. It also plans to retenant the property, adding national retailers and high-end specialty boutiques.
However, Scarlett Williams, a broker with Grubb & Ellis, says, “delays are worrying a lot of retailers who had planned to expand into downtown. There's … some hesitation.”
Williams notes that retail vacancy varies by district, from less than 5 percent in the Financial District up into the teens for the emerging historic and theater districts, which still have some less than desirable areas. Marcus & Millichap's vice president for investments in Los Angeles, Chris Maling says the slowdown in the retail transactions reflects the national economic downturn in response to retailers closing stores and abandoning previously announced expansion plans.
Hollywood is rocking for retailers who have seen an increase in purchases by foreign tourists benefiting from the weak dollar and an influx of new residents to the area.
The transformation of Hollywood to a 21st-century update of its star-studded past from a seedy, crime-infested area involved restoring tourist landmarks like El Capitan Theater, the Roosevelt Hotel and Grauman's Chinese Theater. The revitalized Hollywood is also drawing local professionals and craftspeople who work in the entertainment industry. Evidence of the renaissance is people seen working on laptops in cafes day and night, says Jose' Malagon, a Hollywood property owner and vice president of the Hollywood Entertainment BID.
Whole Foods Market is planning a flagship-size store near Hollywood and Vine. Nearby, Philadelphia-based Urban Outfitters has plans to introduce a new retail concept and relocate its corporate headquarters. Adidas is moving its Celebrity Store from Santa Monica, Calif., to join an array of Hollywood boutiques that cater to a celebrity clientele.
The influx has improved the area's profile, piquing the interest of national and international retailers, notes Jeff Kreshek, principal in charge of leasing for locally based CIM Group, owner of the one-million-square-foot Hollywood & Highland retail-entertainment center, venue for the Academy Awards.
CIM acquired Hollywood & Highland several years ago and retenanted the 687,000 square feet of retail space with retailers including Guess, Lucky Brand Jeans and Louis Vuitton. It also acquired a number of storefronts along Hollywood Boulevard and is retenanting with a mix of fashion, dining, and entertainment. By owning a multitude of properties, Kreshek says, CIM was able to implement a merchandising strategy, which located fashion retail on one block and necessity retail on another.
Large East Coast players are entering the market, notes Carl Muhlstein, a broker in the Los Angeles office of Cushman & Wakefield. CIM was the pioneer, but now Apollo Real Estate, Commonfund, Broadreach and the Clarett Group are doing multimillion-dollar deals.
Projects in development will add more than one million square feet of new retail space, including 61,500 square feet at Hollywood and Vine, which includes a W Hotel & Residences and apartment complex by Gateway Capital and Legacy Partners; a 60,000-square-foot Whole Foods Market on the ground level of a $225 million, 300-unit apartment complex by Camden Property Trust; 175,000 square feet at Boulevard 6200, a $350 million mixed-use project by Clarett Hollywood LLC; and a Target. Hollywood Chamber President Leron Gubler says, “There's enthusiasm in the area now, things are improving, and in five years this area will probably be hot.”
City population: 4 million
County population: 10.3 million
Los Angeles County: 8.1%
Los Angeles region retail vacancy: 10.1%
Average rent: $30.42 per sq. ft. — asking, $27.73 — effective
Average Asking Rent: $35.52 per sq. ft.
Vacancy rate: 4.7%
Under construction: 600,000 sq. ft.
Hollywood Boulevard rents: $72 to $96 per sq. ft.
Sources: Marcus & Millichap; U.S. Census; City of Los Angeles; U.S. Labor Department, Cushman & Wakefield