Never lacking vision, revival's success proves elusive. (Whatever Happened to Hollywood?).

THE plan was grand, and as the vanguard for an expected flood of development, so too were the pronouncements.

The $300 million mixed-use project with retail, hotel and office components would turn Hollywood around after nearly 20 years in decline.

"Under the tarnished patina of Hollywood is a legacy waiting to be rediscovered," the developer told the Chicago Tribune. "Hollywood is a state of mind rather than a state of being."

That the developer, Melvin Simon & Associates, failed to usher in a new era with its 1989 proposal for the site now occupied by the much-ballyhooed Hollywood & Highland says a lot about the lure of sprucing up L.A.'s best-known neighborhood.

"I've been hearing that all my life," said 40-year-old Chuck Dembo, partner at Beverly Hills-based real estate brokerage Dembo & Associates.

A little more than a year after the opening of the Hollywood & Highland retail/entertainment complex, revitalization efforts continue to be a star-crossed affair.

There is some encouraging news. Pockets of retail activity are flourishing - typified by the overnight success of Amoeba Records. The club scene continues to sizzle, the Kodak Theatre at Hollywood & Highland keeps drawing customers - and generally good reviews - and crime fell last year by 6 percent while increasing in Los Angeles as a whole.

"There has been a tremendous amount of people wanting to locate within Hollywood," said Darlene Heskamp, retail specialist with L.A.-based Beitler Commercial Realty Services. She estimated that asking rates for restaurant and nightclub space in the area range from $2.75 to $3.50 a foot, about double the rates in 1999. "There haven't been (many closures)," she said. "They all seem to be doing well."

But signs of a Hollywood renaissance are fleeting at best. It's not only the disappointing retail numbers at Hollywood & Highland or the continuous presence of the homeless. It's the 37,000 square feet sitting empty at the ArcLight Hollywood complex at Sunset and Vine a year after its opening. It's also the high-profile Hollywood & Vine Diner, which remains open but was forced by creditors to file an involuntary bankruptcy petition -- and the nearby Ex Incendo, which closed in 2002 after four years in business.

Optimism still rules

So is Hollywood still on an upward path or will the promises of the late 1990s prove to be just that?

For now, cautious optimism rules the day. Developers and city officials note that economic woes over the last 18 months have delayed -- and in some cases derailed -- redevelopment efforts, just as they were supposed to hit their stride. The Sept. 11, 2001 terrorist attacks practically wiped out international tourism, an important mainstay for the area. At some point, they maintain, the economy will get better and the overseas travelers will come back.

Another cause for optimism: residential development. One project is Sunset & Vine, which broke ground last July and will include 300 loft-style apartment units when completed next year. Another is a proposed $350 million development above the Metro Rail station just east of Hollywood Boulevard and Vine Street that could include 300 apartments and condominiums and a 350-room W Hotel.

"What's going to make this area come back is high-end residential," said Rob Langer, managing partner at Meringoff Equities, which owns 600,000 square feet of office and retail space in Hollywood.

Or as 13th District Councilman Eric Garcetti put it, "The Big Kahuna is going to be at Hollywood and Vine. Bringing a W Hotel to the heart of Hollywood is going to raise everything to a whole new level."

Skeptics might allow that such talk is hardly new.

When Hollywood & Highland broke ground in October 1998, it was with great assurance. The mix of retail, hotel, restaurants and entertainment venues at the 645,000-square-foot complex was viewed as a surefire antidote to Hollywood's decline.

"It's finally turning a corner. That whole end of the boulevard is becoming hot again as people realize that it's not all talk; there's action," Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., was quoted in a November 1998 Times article.

Contacted last week, Kyser confessed.

"We all got caught up in the hype," he said, noting that of the 18 entertainment companies with $1 million-plus expansions last year, none were in Hollywood. "Things will happen, but not quite the way we all imagined," he said.

Weak office market

If there is any aspect of Hollywood where investors and developers have turned their backs on, it's offices. Hit by a combination of entertainment company consolidation and a lack of interest from more traditional office tenants, office buildings have been in steady decline.

Fourth quarter vacancy rates for the 3.6 million-square-foot Hollywood/West Hollywood market was more than 22 percent, up from 18 percent at year-end 2001 and 11.4 percent in the fourth quarter of 2000, according to Grubb & Ellis Co.

The lack of demand for Hollywood office space is typified by two recent incidents. With 95 percent of the office space of Hollywood Equitable Building now vacant, developer Tom Gilmore plans to convert the 93,000-square-foot building into apartments.

Meanwhile, Clear Channel Communications Inc. bypassed more than a half-dozen potential Hollywood sites for a 95,000-square-foot facility in Burbank's new Pinnacle development--and with it, new construction, freeway access and plenty of parking. "Clear Channel has sophisticated needs," said Christopher Cooper, executive vice president at Jones Lang LaSalle, who represented the media chain.

"The tenants are happy to look at space but they're not really finding the same quality of building as on the other side of the hill or in the Miracle Mile area," said Paul Stockwell, corporate managing director for Julien J. Studley Inc.

Part of the problem, of course, is the overall leasing environment. But there are additional issues that hurt Hollywood: namely, the large number of entertainment companies either consolidating or leaving the area--many to Santa Monica--coupled with the dearth of new businesses coming in.

"Hollywood is a very central, natural location, but it doesn't have the new quality buildings that any tenant would demand," said Stockwell.

Sluggish movie business

The retail picture is more mixed.

By most any measure, Hollywood & Highland has been a disappointment (see related story, page 27), not only on its own merits, but for its inability to spur additional development. The poor results are a striking contrast to the wildly successful, smaller-scale Grove at Farmers Market, which is located close enough to have drawn away potential shoppers and moviegoers.

Movie theater receipts illustrate the problem. For the week ended Jan. 9, the combined gross for the ArcLight, Mann Chinese 6, Grauman's Chinese Theatre and Hollywood Galaxy's 27 screens was $322,000, just $9,000 more than the Grove's 14 screens alone, according to L.A.-based Reel Source Inc.

The theater overload was illustrated when Laemmle Theatres and Landmark Theatres pulled out last year as anchor tenants of CIM Group LLC's 60,000-square-foot Hollywood Cherokee project.

The developer and the Community Redevelopment Agency are downscaling the project to a 34,000-square-foot renovation of the existing buildings, according to Donna Hemer, project manager of the Hollywood and East Hollywood redevelopment zones.

"The market didn't bear it," said Hemer, alluding to the 20 screens added in Hollywood last year with the opening of Hollywood & Highland's Mann Chinese 6 as well as ArcLight across the street from Amoeba. "The window closed."

Still, there have been bright spots, starting with increased convention business at Hollywood & Highland's Renaissance Hollywood Hotel.

While Hollywood's 2002 occupancy rate was 61 percent, down from 66 percent in 2001 and 74 percent in 2000, the hotel nearly doubled the area's room supply, bringing down rates in the process, according to PKF Consulting.

"We're showing about a 75 percent increase in demand," said Bruce Baltin, PKF senior vice president, who projected a 66 percent occupancy rate this year. "Tourism is down to some extent but conventions are on the upswing. There were essentially none before."

Amoeba's success

While Hollywood long has been derided for its seediness and crime, it has always had a vibrant nightlife--now more so than in many years.

Nearly two dozen restaurants and nightclubs have opened up in the past four years along the Cahuenga Corridor, the six-block area on or near Cahuenga Boulevard between Hollywood and Sunset boulevards. Clubs like the Sunset Room, Ivar, Beauty Bar and Burgundy Room all continue to thrive while White Lotus, which opens this week, has already generated considerable buzz.

Then, there's the stunning success of 45,000-square-foot Amoeba Music, which has been perpetually busy since its opening a year ago with a customer base that is drawn from all over town. "We pull from all over L.A.," said Amoeba Manager Karen Pearson, who notes that the store sells 20,000 compact discs a week. "There are people coming from the Westside but there are also a great number of tourists."

Perhaps the most critical phase of Hollywood's comeback effort involves residential development. Up to now, much of the housing stock in the immediate Hollywood area has been lower-end, so local developers are looking at both Sunset & Vine and the Metro Rail project as a chance to up the ante. That, in turn, would help drive businesses when the tourists or the Amoeba customers aren't around.

"Hollywood's a place where permanent residents can stabilize a community," said Garcetti. "When people live in a community, they make it safer--it's very different than a tourist who may never come back."

Sunset & Vine, with 300 loft-style apartment units and a substantial retail component, is slated for completion early next year.

The structure of the rail station project is still being negotiated by the Community Redevelopment Agency, the Metropolitan Transportation Authority, and developers Legacy Partners (for the apartments) and Gatehouse Capital (for the hotel.)

"The next wave of development is residential-over-retail mixed-use," said Leron Gubler, president of the Hollywood Chamber of Commerce. "You'll see a lot of developers jump into it if they see that market is there."

But Gubler, Garcetti, Kyser and all the others should be careful what they say. The databases are loaded with old newspaper stories about Hollywood's renaissance that was supposed to have bloomed five, 10, 15 years ago--take your pick. At this point, the story can go either way.

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RELATED ARTICLE: Entertainment District

Boundaries: One block on either side of Hollywood Boulevard extending from La Brea Avenue on the west to Gower Street to the east.

Gross business receipts: $701 million, up 8.5 percent from $647 million in 2000 and up 44 percent from 1997.

Box office receipts: El Capitan, Grauman's Chinese Theatre and Hollywood Galaxy brought in a combined $9.8 million, up 16 percent from 1997.

Average daily room rates: $121, an increase of 53 percent over 1995.

* Data for 2001, most recent available.

Source: Economic Research Associates