Los Angeles and its surrounding submarkets continue to reopen amid the COVID-19 pandemic, and industry experts say Santa Monica could be leading the way. According to representatives of brokerage firm Kennedy Wilson, Santa Monica has been largely successful due to its large population and tourism scene helping keep retail and commercial office spaces afloat.
“Santa Monica has always been one of the submarkets when coming out of difficult or recessionary times that does well, so we are not surprised during this period of COVID that we’re seeing a lot of interest in retailers and tenants wanting to open their doors in anticipation of COVID times coming to an end. We’re very optimistic that this will be one of the leading submarkets moving forward,” Lee Shapiro, executive vice president and director of retail brokerage for Kennedy Wilson, said.
With more than 91,500 individuals residing in Santa Monica, according to the most recent census data, as well as tourists beginning to come back to the area, Kennedy Wilson Senior Vice President Christine Deschaine said businesses likely are seeing a major increase in traffic.
“The state of the market today has been very positive,” Deschaine said. “We are seeing an uptick in tourism for sure…They’re able to stay and enjoy the ocean and the Santa Monica Pier. If you go on most weekends since the vaccinations, the pier is as busy as it ever has been.”
According to citywide data, there has been a significant increase in pedestrians throughout downtown Santa Monica. Pedestrian activity during the first week in May at Santa Monica’s Third Street Promenade has increased by 549 percent since the same time last year. That week, 401,000 pedestrians came to the pier.
With Santa Monica’s large population and steady foot traffic, one area that has grown in particular, according to Deschaine, is the amount of medical facilities.
“We think that is a very big need in the Santa Monica trade area. They should have some options such as being able to walk to their medical care, so I would say medical is definitely a category we’re seeing an increase in interest,” she said.
Deschaine said another area of growth, when compared to nearby submarkets, is Santa Monica’s commercial office space. According to a recent report from Colliers International, there was 57,240 square feet of leasing activity in Santa Monica’s commercial office market and an additional 61,367 square feet currently under construction. In comparison, some submarkets, including Century City, Beverly Hills and Brentwood saw zero square feet of development in the first quarter.
With numerous developments underway, the vacancy rate in Santa Monica’s commercial office market was at 18.5 percent. In comparison, the highest vacancy rate in Los Angeles’ submarkets was seen in West Los Angeles at 39.4 percent. The lowest vacancy rate was at 9 percent in Century City.
“Santa Monica has always had a large office population,” Deschaine said. “The office buildings that have been in Santa Monica for many years, and really in the last 10 to 15 years, there’s been a huge growth in vertical mixed-use developments. The residential area has grown exponentially to support the number of food, beverage and fitness operators.”
As well as in the commercial office market, Los Angeles’ submarkets have reported a slight increase in vacancy rates in its retail space, according to a report from Kidder Mathews. In the first quarter of 2021, vacancy rates were at 5.2 percent. At the same time last year, the vacancy rate was at 4.5 percent. During the first quarter of 2021, Los Angeles’ retail market also saw several transactions, including one in Santa Monica, which sold for $13.2 million. The 13,400-square-foot retail space is located 1527-1533 Lincoln Boulevard.
With an abundance of retail space in Santa Monica, Kennedy Wilson reported activity on all its available properties, noting the importance of returning to in-person tours which they said helped with the increase in activity.
“That’s been great going back to doing that. Videos are great, visuals are great but there’s nothing like physically having people walk in,” Deschaine said. “We’re fortunate that that piece of our business is back.”
Kennedy Wilson has several available properties throughout Santa Monica, including three mixed-use retail spaces at The Lincoln Collection, which is located at 1601-1604 Lincoln Boulevard in Santa Monica’s Business Improvement District. The properties include 26,507 square feet of commercial space below 349 residential units. Other available properties include a 24,000 square foot commercial building at 2929 Pennsylvania Avenue and 1,248 square feet of restaurant space at 2200 Colorado Avenue.
Looking ahead, Deschaine and Shapiro said they anticipate Santa Monica will continue to make a full recovery in 2021.
“I do see a very positive end of the year for Santa Monica. I think things are going to get even better in that particular downtown market of California,” Deschaine said.