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Downtown Santa Monica Officials Share Successes, Challenges


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SMTT tourism and economy

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Kutcher & Kozal, LLP

By Jorge Casuso

August 17, 2018 -- Downtown Santa Monica continues to drive the beach city's economy, generating more than $1.1 billion in taxable sales last year, but it faces challenges -- from an increase in homelessness to competition from online retailers.

That was the prognosis Downtown officials presented during an annual meeting Thursday that focused on the successes and challenges facing the Santa Monica's Central Business District.

Of the total sales -- which dipped from nearly $1.6 billion the previous year -- restaurants accounted for 31 percent of the money spent, apparel for 20 percent and department stores for 15 percent.

Downtown officials have attributed the lagging sales to competition from online shopping and business turnover that left a dozen spaces vacant last year ("Retail Vacancies on Santa Monica's Promenade Offer Opportunities, Downtown Officials Say," July 26, 2017).

The Third Street Promenade continued to be the area's shopping, dining and entertainment hub, averaging 28,658 "pedestrian impressions" per day and contributing $472 million, or 41 percent, of the total sales.

Still that was down from $485,877,500 the previous year.

"Recognizing the Third Street Promenade is in a period of transition, as are retail centers all around the world, our board of directors created a retail recruitment action plan," said Kathleen Rawson, CEO of Downtown Santa Monica, Inc., at the annual meeting.

The plan outlined strategies that include promoting "opportunities for unique businesses that differentiate downtown from other regional destinations" and facilitating pop-ups shops, temporary markets and retail incubation programs.

The plan also calls for evaluating "potential guest services like package delivery, parking validation programs and valet to encourage consumer spending," Rawson said.

DTSM this year hired economic development and data managers to oversee the action items and unveiled a retail recruitment website, she said.

The price of renting a retail space on the Promenade grew by 7 percent to an average monthly rent of $11.64 per square foot, while vacancies increased by 4 percent.

Across the Downtown as a whole, rents decreased 8 percent to $7.22 per square foot, while the occupancy rate held steady at just under 95 percent.

Last year, nearly one third of Downtown shoppers were fairly evenly divided between wealthy families living in prestigious suburbs and young up-and-coming urban singles, according to an analysis of visa credit and debit card transactions.

Another 13.5 percent were mature upscale couples and singles in
suburban homes, the analysis found.

Santa Monica residents accounted for 14 percent of spending, while LA residents contributed 45 percent of the total. Visitors from San Francisco, New York and Seattle also contributed.

Downtown continues to be the city's major employment center, with 27,000 workers, with hotel and restaurant-related jobs accounting for nearly 5,000 jobs and the retail sector 4,000.

The highest paid workers earned an average of $153,000 per year in information services, followed by employees in the professional, scientific and technical services with average annual salaries of $109,000.

The Downtown office market "held firm" with monthly rents of $5.31 per square foot and an occupancy rate of nearly 94 percent.

There were 4,367 people living Downtown last year, mostly renters, with 42 percent under the age of 35. The average rent was $3,323 per month, making Downtown one of the most expensive rental markets in the country.

More than 50 percent of downtown residents earned less than $50,000 per year, with most living in affordable housing.

While Downtown remains a popular destination, the area is tackling a series of social problems, Downtown officials said.

"There is no doubt that we have seen an increase in homelessness and antisocial behavior in our downtown," Rawson said.

"DTSM has focused on eliminating the damaging side effects of this national crisis like drug dealing, public intoxication and violence by replacing it with active uses that bring new life to our underutilized spaces."

A case in point was the corner of Ocean and Colorado, where a small shaded plaza had been drawing the homeless for more than three years.

"The small plaza was littered with trash and you could often find people drinking, shouting or experiencing the effects of drugs while sitting on the bench," Rawson said.

In a "groundbreaking" arrangement with the City last year, DTSM revitalized the area with vendors and outdoor seating, officials said.

"We now have a place that is enjoyed by everyone, with delicious fries to boot!" Rawson said in her speech.


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