Twenty-five years ago, the city of Santa Monica paid $13 million to redevelop a dingy pedestrian promenade in the heart of its downtown that had failed to draw crowds as an outdoor shopping mall.
Randy Starr, a real estate broker who got his start in the area around that time, said he used to pay homeless people a few dollars each to clear out before giving a tour of a property.
“I’m very pro homeless, but before the city put certain panhandling laws in place, they’d walk with you and be very aggressive,” he said.
Today, Third Street Promenade, a three-block district between Broadway and Wilshire Boulevard, is a global tourism destination with stores and eateries that attract millions of visitors each year. Retailers now routinely clamor for the opportunity to pay close to $30 a square foot a month for frontage on the pedestrian route, and dozens of technology companies have signed up to pay big bucks for offices overhead.
Its transformation from derelict downtown to vibrant city center has been so remarkable, said Kathleen Rawson, chief executive of Downtown Santa Monica Inc., that it has often been used as a model for other communities.
“I can’t tell you how many city planners, government officials and property owners from all over the world – Japan, Germany, everywhere – want to know how to do what we did,” she said.
The Downtown Santa Monica business improvement district is kicking off a 25th anniversary celebration with a media roundtable this week to discuss the past and future of the promenade. Those who lobbied for its vitality and growth remember that it took decades of thoughtful work.
Denny Zane served on the Santa Monica City Council in the 1980s, including one term as mayor. Now executive director of transportation advocacy group Move LA, he is credited with initiating the revitalization of the promenade and, by extension, downtown Santa Monica. He said efforts to bring life to the promenade began in earnest more than 30 years ago, in 1981. By then, it was clear that the outdoor mall, built in 1961, was not working.
“Certainly some people felt unsafe back then,” he said. “It was clearly way below its potential, showing no signs of any kind of reversal or recovery. That’s when we started to develop a strategy to revitalize that part of downtown without having to bulldoze it.”
In 1989, San Francisco architecture firm Roma Design Group completed construction and landscaping on the promenade, including the creation of a couple of topiary dinosaurs that remain key features. But turning the promenade into a welcoming place was not just about aesthetics. Perhaps the biggest challenge in its transformation was coordinating a successful retail strategy between more than 60 different property owners along the street.
“While individual views may differ, ultimately they know the success of the promenade is in everybody’s best interest,” said Downtown Santa Monica’s Rawson.
The city also ensured the promenade’s success by continuously refining zoning and land-use rules in the area through the last several decades. Some of the first ordinances put in place with the economic viability of the promenade in mind encouraged outdoor dining but put limits on alcohol sales to discourage bars. Restaurants flourished, eventually attracting retailers to the area. The retailers, which were willing to pay higher rents and had lower development costs, soon began edging out eateries along the promenade. The city then attempted to balance things out by adopting an ordinance to preserve existing restaurant space in the area.
Former Mayor Zane said another important ordinance the city put in place in the ’80s was one that would later prove prescient. The city prohibited movie theaters from opening anywhere in Santa Monica but downtown. It also limited the number of screens and seats theaters could have in order to keep the area from being too dependent on the industry.
“At first the (theater) operators were really mad, but I took them for a walk through downtown and they all agreed it was the right thing to do,” he said.
As retail and restaurants flourished along the promenade, so too did small upstairs offices. Average Class A asking rents in Santa Monica were $4.48 a square foot a month in the first quarter this year, second only to Beverly Hills, according to data from Jones Lang LaSalle Inc., and creative office rents average even more.
So much activity has property prices soaring, too. A year ago, the Clock Tower office building on the promenade sold for $34.3 million, about $642 a square foot, and in 2012, the modern glass-fronted retail building Apple Inc. now leases sold for $60 million, a whopping $3,419 a square foot. Only retail properties on Rodeo Drive have gone for more.
Zane said that while the promenade is doing better than he ever thought it would, he’s concerned continued development could go too far.
“There’s a lot of worry in the community now – and I share this worry – that the area is starting to go too upscale,” he said. “Some new hotel proposals in downtown Santa Monica include very expensive condominium projects that could really shift the balance of the demography.”
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