Cooper building is becoming center of apparel clustering.

Kim Holbrook and Terry Weaver are crazy about their new 800-square-foot workspace on the fourth floor of the downtown Cooper Building.

The loft had boarded-up windows and dingy carpets when they first saw it in May. Still, they knew it was the perfect place to house their new company, KST Design Studio, which creates and sells clothing for young women.

Holbrook and Weaver are part of a growing number of clothing designers setting up shop in the 12-story Cooper Building, which is reinventing itself as a home for small apparel firms.

"This is a way that designers, manufacturers and sellers can quickly form relationships and get immediate results," said building owner Steve Hirsh, whose father Stanley Hirsh bought the structure in the early 1970s.

In less than a year, 21 new design tenants have moved in, including Max & Mable, Shameless and Sandra McCray. The influx represents a 25 percent increase in total occupancy. About 20 retail tenants also lease space in the building, which is 60 percent full.

At a time when firms pursue low-cost manufacturing options in Mexico, industry officials believe that this type of clustering is the key to future growth.

"It's very smart of them," said Ilse Metchek, executive director of the California Fashion Association. "It's the ideal incubator."

Decades ago, the 67-year-old Cooper Building housed only apparel manufacturers. But when CaliforniaMart opened in 1963, many Cooper tenants moved to the new 13-floor structure.

Stanley Hirsh responded by recruiting retail tenants to fill the vacant space, and the building thrived until the mid-1980s, when competition from suburban retail outlets began to take its toll. With the situation at its worst in 1995, Hirsh and a group of property owners launched a business improvement district that now generates $3 million annually for maintenance, security, homeless outreach and marketing. The move had a significant impact on the entire Fashion District, which some observers believe is poised for rebirth.

"We're finally seeing vacancies being absorbed," said Brad Luster, managing partner of Major Properties. "Occupancies were at 70 to 80 percent in recent years and some are now hovering at 100 percent. The development of the Staples Center is injecting confidence in the area."

Neither Steve Hirsh nor any of his tenants would disclose lease rates at the Cooper Building, but Luster said they could easily be $1.50 or more per square foot.

Eletra Casadei, the first designer to move in last year, projects sales this year of $5 million, up from $1.8 million in 1998.

"This is a great way for us to come together," said Casadei, who moved downtown from Santa Monica. "We get to know all the designers here. We run into each other and it's like a dorm. We're able to share ideas and concepts and bounce things off each other. We even hope to create a fashion show."