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It's looking up downtown

The L.A. district's long-awaited revival appears to be picking up steam as national retail chains scout for store sites to serve the growing residential population.

March 30, 2007|Cara Mia DiMassa | Times Staff Writer

The construction cranes that are roosting all over downtown these days are one thing. But the real hints that the neighborhood is changing come in more subtle forms -- such as the tours Derrick Moore has been giving around downtown recently.

Moore, a senior associate in CB Richard Ellis' Urban Development Group, has been helping representatives from national chain stores such as Walgreen's and the Outback Steakhouse group -- who have long shied away from downtown -- search for properties in the area. He has wined and dined potential retailers at local hotspots -- and found their reaction a distinct shift from even a few months ago, when most took a wait-and-see attitude toward the neighborhood.

What has changed, downtown backers say, is how the burgeoning neighborhood is being perceived. After years of being not quite there, retailers seem to think that the area has reached -- or is near reaching -- a tipping point.

Residents have moved in, with the population now at 30,000. Some of downtown's long-anticipated, large-scale projects -- including a supermarket and a movie theater -- are only months from opening.

It's this trend that is behind much of the debate over the city's proposal to sell the air rights above the Los Angeles Convention Center, allowing developers to build larger and denser residential buildings downtown.

Because the Convention Center was originally zoned for towers, the city wants to sell the unused airspace as a way of boosting development elsewhere in downtown beyond what current zoning laws allow.

Backers argue that selling air rights would boost downtown's residential population even more. The more residents downtown can lure, the thinking goes, the larger the market for upscale retail. Until now, retail development has lagged behind residential development, with some merchants waiting to see whether the downtown boom is for real.

Questions about downtown's future have heightened with the recent cooling of Southern California's real estate market. But downtown so far doesn't appear to be suffering much, and there are growing signs that retail is actually strengthening.

Bars and restaurants are opening at a fast clip in the area, and big-name chefs are signing leases on spaces downtown -- especially along a stretch of 7th Street that has been the symbol of downtown's tangled history as a retail destination.

Retail sales in downtown ZIP Codes have been rising steadily since the late 1990s, according to the California Board of Equalization. In fiscal year 2005-06, the last year for which statistics are available, retail sales totaled $1.7 billion -- up 7% from the year before.

Still, there are concerns about how the downtown area will do on weekends and evenings, the make-or-break time for many of the new businesses. Parking and transportation around the urban center also could become concerns, because many of the lots used by businesses are unavailable or could be too pricey for evening and weekend use.

And many say the area cannot reach its full potential until certain neighborhood amenities are in place.

"You are at a point where there's a critical mass down here now, in terms of the residential component," said Andrew Myron, owner of the Edison club and lounge. "You are going to reach a point where more people won't move downtown unless you have the amenities downtown."

In the decades before World War II, downtown was a retail destination. But after World War II, the rise of the suburbs -- and the shopping malls that came with them -- began the steep decline of downtown's retail core.

Though downtown continued to be a destination for office workers, the area had little success as a retail center. And even after the passage several years ago of an ordinance that enabled developers to convert long-vacant historic buildings into residential loft spaces, retail continued to falter.

Downtown leaders at the time decided to concentrate on bringing housing to the area first, figuring that retail might follow the new residents. And it did, to a point. Bars and art galleries began to dot the neighborhood.

Those businesses, developer and entrepreneur Cedd Moses said, "were the first people willing to take a chance. I think restaurants have a much tougher business model. It's harder for them to survive than a bar or art gallery; the overhead is substantially higher."

The historical conversions, along with the construction of several residential high-rises, the Cathedral of Our Lady of the Angels, Walt Disney Concert Hall and two mega-projects in the works -- L.A. Live near Staples Center and Grand Avenue on Bunker Hill -- have meant that "the world has changed," said Hal Bastian, senior vice president and director of economic development for the Downtown L.A. Business Improvement District.

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