Downtown Deluge.

Shoppers, Developers Flock To Evolving Fashion District

WHEN it comes to the nascent renaissance of downtown Los Angeles, the areas grabbing all the headlines are Bunker Hill, the historic core and the neighborhood around Staples Center. But another neighborhood is emerging as an equally powerful force.

It's the Fashion District.

Developers have pulled 650 building permits for projects in the district over the past five years, and most of that space is already occupied. Last year alone, another 150,000 square feet of speculative retail space was completed in the district, and 200,000 more square feet is being built this year.

While the accelerating pace of activity is raising eyebrows, possibly more significant is the nature of that activity. Much of it is retail and residential, a dramatic departure from the area's wholesale/light manufacturing roots.

"There is a tremendous amount of creative talent in the area that is bringing the district back," said Ed Rosenthal, an investment broker at Grubb & Ellis Co. "By that I mean the designers and entrepreneurs and small firms concentrated in the area taking advantage of the availability of small industrial spaces."

Indeed, many of the projects involve conversions of former industrial facilities into retail and/or residential uses.

Among the projects in the pipeline:

* Real estate investor Mark Weinstein's $72 million residential/retail development called Santee Court. The city within a city, which includes tunnels connecting most of his 10-building project, is in the 700 block of Los Angeles Street.

* A&H Management's Maple Fashion Walk, a three-level retail center with 21 stores, now under construction at 15th Street and Maple Avenue.

* The City Market of L.A., at Olympic Boulevard and Wall Street, which is slated to open in September and is designed to house 55,000 square feet of women's wholesale apparel and finishing businesses.

* Wholesale Plaza, at Sixth and Los Angeles streets, with 30,000 square feet of wholesale and retail space.

The emergence of the submarket started with wholesalers who had been in business there for years. Taking advantage of the ability to conduct first-hand focus groups, many of these businesses started selling factory seconds literally out of their back doors. While designers and manufacturers can see which merchandise moves, they have also created a culture of thrift that lures shoppers seeking duds.

The results have been dramatic:

* Saturday crowds of as many as 21,000 people have been recorded shopping at Santee Alley storefronts.

* The volume of foot traffic along 12th Street between Santee Street and Maple Avenue last year was up 338 percent from 1996 levels, and volume along Eighth Street between Main and Los Angeles streets was up 129 percent, according to the city Department of Transportation.

* By some reports, the district already is home to 5,000 businesses, 90 percent of which are family-owned and mainly oriented around the clothing and accessories industries that draw shoppers to the area.

Walking around money

According to the Fashion District of Los Angeles Business Improvement District, the district has some of the highest pedestrian counts in downtown, particularly on the weekends. Weekend crowds at Santee Alley, where garage sized storefronts are loaded to overflowing with bargain-priced T-shirts, jeans, backpacks, hats and other sundries, have been a driving force.

BID Executive Director Kent Smith credits the wholesalers-turned-retailers of Santee Alley with providing at least some of the fuel for the district's success.

"This is one place where, as a wholesaler, you can have a built-in focus group," Smith said.

District spokeswoman April Elgas said the increased foot traffic, and the better-heeled clientele increasingly among it, have led to development projects such as the recently opened L.A. Collection. With its white-stone facade, the $1.8 million, 24,000-square-foot, 34-unit retail development in the 900 block of Los Angeles Street wouldn't look out of place on a shopping strip in Beverly Hills.

"Our idea was to build an exceptional, one-of-a-kind place in downtown," said project owner Sina Kangavari.

As evidence of the neighborhood's vitality as a retail destination, Kangavari pointed out that he's fetching monthly rents of $3.50 to $4 per square foot for the units -- and there are only two left.

By comparison, landlords on the Third Street Promenade in Santa Monica--one of the most sought--after stretches of shops in Southern California -- are getting about $7 per foot.

Luring residents

The development in the district is not all about fashion, though. Weinstein's Santee Court was conceived two years ago because the developer felt the market was undervalued.

"The Staples Center hadn't quite been done, but I knew that something was going to hap pen," he said. "It's one of the last great values in L.A. real estate that had promise, as opposed to a wish. Staples proved my point - that downtown could be something."

Proof, he said, can be found in the presence of national chains coming in the area, including Coffee Bean & Tea Leaf and McDonald's Corp. Kangavari said he's leasing space to a Subway sandwich shop franchise. All signs, Weinstein said, are of a palpable momentum.

"Since we started, we're getting a higher end tenant in our space," he said. "We're able to attract a larger variety of tenants and we have more choices than before."

BID Executive Director Smith said Weinstein's residential component would add another facet to the diverse community that already includes produce and flower markets. He said it also would give designers -- the creative personalities that drive the fashion industry -- a place to stay close to their work.

"Residential is just another addition to the mix," Smith said. "It's just going to make this district more comfortable and more interesting."

Another key to the district's success has been the willingness of its business owners to cater to the rapidly increasing Latino population in the inner city. Deardan's department store at 700 S. Main St., for example, has directed 100 percent of its marketing at Latinos.

"This is one of the first places to embrace the demographic changes of the last 10 years," Smith said.

While the conventional wisdom might be that high fashion flies from the racks of Melrose Avenue, Rodeo Drive and Montana Avenue, many fashion buyers make their decisions at California Mart showrooms.

Trish Moreno, executive director of creative marketing and public relations for CaliforniaMart, said the center brings in as many as 35,000 buyers annually to its seven seasonal markets. Moreno said the increase in buyer traffic mirrors the increase of shopping traffic on the streets outside.

Grubb & Ellis' Rosenthal said that Smith and other Fashion District stakeholders have played a key role in the area's charge.

"The BID has been instrumental in keeping a secure and clean environment for those entrepreneurial businesses to thrive," he said.

Smith said the BID picks up five tons of trash daily in the district, in addition to providing graffiti removal and pressure washing of sidewalks. Smith said the reason the Fashion District is coming on is a favorable aligning of the community's planets - L.A. emerging as a global fashion capital at the same time that district merchants are reaching out to accommodate the booming local demand for bargain-priced clothing.