As a boulevard of conspicuous consumption, Rodeo Drive in Beverly Hills has few peers. The storefront signs carry names that have become as famous as the celebrities they serve, a gallery of glitz featuring such players as Gucci, Cartier, Hermes, Tiffany, Chanel, Ralph Lauren and Giorgio Armani.
But some other signs have turned up on the elite shopping street in Beverly Hills that reflect a different reality. "For lease" notices have sprouted up next to several of the international designer outlets, symbols of a sluggish economy.
Even the merchants who have created the street's free-spending image say there's no getting around it: The recession has found a space on Rodeo Drive.
"The recession has hurt the whole country," said Fred Hayman, the dapper owner of the Rodeo Drive store that bears his name. "And the last time I checked, Rodeo Drive was still in the United States. Everyone has been affected."
Merchants on the most famous shopping street in the West say the length of the recession has surprised them more than the failure of some smaller designers who sought gold on Rodeo. With rents for large stores ranging annually between $150 to $200 per square foot, Rodeo Drive is one of the five most expensive retail districts in the nation, according to a study by Hirschfeld Cos., a New York-based real estate firm.
And when sales decline rapidly, analysts say only those retailers with deep pockets--such as the majority of international stores on the street--can manage to weather the rocky times.
Since most of the big-name designer stores on Rodeo are privately held or subsidiaries of multinational corporations, exact sales figures are not available. But the city's share of sales tax revenues is about $4 million less than was projected in its budget for the current fiscal year, and city officials say its safe to say that a large share of the shortfall can be attributed to lean times on the fabled street.
Commercial brokers say the vacancy rate on Rodeo hovers between 10% and 15%, a figure they say is relatively high for such a small shopping district. And if the figure included numerous empty stores on the streets that cross Rodeo, the vacancy rate for the area would jump considerably.
Analysts say that although some turnover is inevitable, the vacancy rate reflects the fact that the bucks even stop on Rodeo Drive during a steep economic downturn. When there is less cash in hand, merchants are just not going to see as many customers lining up for a $4,000 leather jacket, a $2,400 sport coat or a $900 small handbag.
"The retail market has been saturated and stores are having a problem because people are just buying less," said Tam Antebi, a retail leasing specialist with Grubb & Ellis Co. "The high-end boutiques especially have suffered because people can go into department stores now and get many of the same things marked down."
Retailers on Rodeo say some of the vacancies are not so much recession-related as a reflection of the special nature of retailing in such a high-rent district. For example, they point to the Torie Steele boutique, a collection of four stores that is vacant only because the new owners are extensively remodeling the property.
Likewise, a Baby Guess outlet will soon fill a long-vacant, high-profile store near Santa Monica Boulevard that a developer left unoccupied until he found the proper tenant. And the corporate owner of the huge Elizabeth Arden store at 434 Rodeo is reportedly asking $1.5 million up front before any lease agreement is signed.
Change has been constant on the street. Many of the stores that were on Rodeo in the 1980s have disappeared, including such outlets as Mr. Guy, Gunn Trigere, Kurt Geiger, Right Bank Clothing Co., Tommy Hilfiger and Elizabeth Arden. Recently, several art galleries, such as Mayer Schwarz and the National Heritage Gallery, have been unable to cope with high rents and slow sales, and other stores have succumbed as well.
A well-publicized, $200-million retail complex called Two Rodeo Drive is almost 90% leased, according to project managers, but nearly half of the stores remain unoccupied. The result is that some of the tenants who moved in early were granted economic concessions by the owner to offset complaints and slow sales blamed on inactivity at the complex. Even the center's flagship store, owned by Sogo, the Japanese department store chain which bought a 90% stake in the project, remains empty, much to the chagrin of neighboring tenants.
"It's been very disappointing to us," said Jon McGowan, a consultant with Porsche Design. "We would not have opened the store on Dec. 1 if we had thought it was going to be like this.