DOWNTOWN SANTA MONICA Market Report Edition: First Quarter, 2018
ABOUT DOWNTOWN SANTA MONICA, INC. Downtown Santa Monica is a dynamic, urban environment located on the bluffs overlooking the Santa Monica Bay and is the proud home of the world-famous Third Street Promenade, a beloved and celebrated destination. The district features retailers for all age groups, hip casual dining options and sophisticated fine dining restaurants. Ranked as one of the most walkable neighborhoods in the Los Angeles region, Downtown Santa Monica welcomes 16 million people annually and generates more than $1 billion in taxable sales for the City of Santa Monica each year. Downtown Santa Monica, Inc. is a private 501c(3) non-profit organization that works with the City of Santa Monica to manage services and operations in Downtown Santa Monica while promoting economic stability, growth, and community life within this unique neighborhood. The organization is governed by a 13-member Board of Directors. Six members are appointed by the Santa Monica City Council, six are directly elected by property owners within the district, and one is the Santa Monica City Manager or his/her designee. The board and staff of DTSM, Inc. focus their work around 5 priorities: DOWNTOWN COMMUNITY PLAN IMPLEMENTATION CIRCULATION & MOBILITY INFRASTRUCTURE IMPROVEMENTS RETAIL SUPPORT COMMUNITY CONNECTIONS Downtown Benefit Zones DOWNTOWN SANTA MONICA IS BOUNDED BY THE 10 FWY TO THE SOUTH, WILSHIRE BLVD. TO THE NORTH, OCEAN AVE. TO THE WEST AND LINCOLN BLVD. TO THE EAST. THE DIS- TRICT IS DIVIDED INTO 5 BENE- FIT ZONES. PROPERTY OWN- ERS ARE ASSESSED ANNUALLY 2 1 3 L BASED ON THE ZONE IN WHICH THEIR PROPERTY IS LOCATED. 0 02
TABLE OF CONTENTS Consumer Snapshot Executive Summary 04 04 Market Updates RESIDENTIAL OFFICE RETAIL HOSPITALITY In Development MAP & FEATURED PROJECTS 06 07 08 09 10 11 Market Happenings Co-working firm Work Well Win plants flag in Santa Monica (The Real Deal) The popularity of coworking continues, with the announcement that coworking company Work Well Win will move into the top two floors of 1201 Third Street Promenade, formerly Barnes & Noble. CBRE Announces the Sale of Adidas & Burn Fitness Building in Santa Monica, CA for $30.3 Million (CBRE) 1231-1233 Third Street Promenade was sold to Golden West Properties and Starpoint Properties from San Diego Promenade Investors LLC at $995 per square foot. Seritage Growth, Invesco Partner to Own the $145M Development in Former Sears Santa Monica Space (Los Angeles Business Journal) Invesco Real Estate paid $50 million to enter a joint venture with Seritage Growth Properties to redevelop the Sears building at 302 Colorado Avenue. The landmarked Sears will be given a new life with over 50,000 square feet in office space and over 60,000 square feet in shops and restaurants. 03
CONSUMER SNAPSHOT Promenade Pedestrian Impressions ( 2018) 2,336,850 25,965 AVG PER DAY Promenade Pedestrian Impressions change vs. 2017-0.9% TOTAL * SOURCE: SPRINGBOARD. DATA REPRESENTS THE FREQUENCY OF PEDESTRIANS PASSING A FIXED COUNT LOCATION AND SHOULD NOT BE INTERPRETED AS A COUNT OF UNIQUE/INDIVIDUAL PEDESTRIANS. DTSM Consumer Profile (2017) SPEND BY ORIGIN SPEND BY CONSUMER AGE DISTRIBUTION SPEND BY CONSUMER INCOME DISTRIBUTION 14% Santa Monica 45% Los Angeles 41% US, Outside LA 24% < 35 17% 35-45 20% 45-55 19% 55-65 20% 65-75 27% <50k 26% 50-100k 28% 100-200k 19% >200k TRANSACTIONS BY BUSINESS TYPE 31% Restaurants 20% 15% 11% Apparel Department Stores Hotels 7% 6% 5% 4% Specialty Sports Computers Fast Food * SOURCE: BUXTON, US-BASED VISA TRANSACTIONS FOR 2017 04
EXECUTIVE SUMMARY While the number of residential units has remained steady over the past ten years, average rent has seen a slow increase and occupancy is up from this quarter last year. New development underway on Lincoln Boulevard will bring significantly more units to downtown in the coming years. Developers broke ground on the Lincoln Collection, which will house 280 units, and the City approved plans for mixed-use buildings at 1318 and 1650 Lincoln. Average Monthly Gross Rent this Quarter for... $4.76 Office Downtown Santa Monica continues to be one of the most sought-after office locations, with a 95% occupancy rate and net absorption of 81,270 square feet this quarter. RESIDENTIAL Retail In retail, occupancy rate for downtown is up from last year, at 93.9%, though occupancy on the Promenade is down from last year, now at 90.5%. On the Promenade, Adidas relocated with a new store prototype from the 1200 block to the 1300 block of the Promenade. On the 1300 block, Armani A/X closed and Sketchers moved in. Tumbi Craft Indian Kitchen, serving modern pan-indian fare, opened on Santa Monica Boulevard between Second Street and Ocean Avenue. The Gateway, a virtual reality studio, opened at 716 Colorado Avenue. $5.32 ALL OFFICE $5.72 Hospitality This quarter saw an average hotel occupancy rate of 83.3% and average revenue per available room (RevPAR) of $261.07. Construction of Santa Monica Proper, at 710 Wilshire, topped out in February. The hotel, with 271 guest rooms and 7,000 square feet of retail and event space, is due to open in early 2019. CLASS A OFFICE $7.36 ALL RETAIL (NNN) $11.86 * ALL RENTS REFLECTED IN THIS REPORT ARE MONTHLY. PROMENADE RETAIL (NNN) 05
MARKET UPDATE: RESIDENTIAL 2018 93.3% change vs. 2017 2.3% 3,167 TOTAL UNITS Average Rent per Square Foot $4.76 Average Rent per Square Foot change vs. 2017 3.5% 0% TOTAL UNITS PERCENT CHANGE VS. 2017 What I love about living in Downtown Santa Monica is the energy here - the vibe. There isn t a day that passes when I don t wake up and feel inspired to be here. And for somebody that works in a creative space, in a creative field like myself, it s very important to me to wake up feeling inspired. WELLINGTON MORENO Downtown Santa Monica resident $5 3,500 $4.50 $4 3,000 $3.50 $3 2,500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Average Rent per Sq. Ft. 10 year trend * SOURCE: COSTAR Total Units 10 year trend 06
MARKET UPDATE: OFFICE 2018 95% change vs. 2017 1.7% 81,270 NET ABSORPTION SQUARE FEET Average Gross Rent per Square Foot (CLASS A) $5.72 Average Gross Rent per Square Foot (ALL PROPERTIES) $5.32 62,920 TOTAL LEASING ACTIVITY SQUARE FEET Average Gross Rent per Square Foot change vs. 2017 (ALL PROPERTIES) -0.2% Downtown Santa Monica is hands down the best place to work! Super walkable! Abundant food choices (for before, during, and after work), shopping, and of course the BEACH all within a few blocks. Easily accessible from the freeway, major back streets, and the Metro. Extra points for being so bike and scooter friendly too! JESSICA VAZQUEZ Tala App $6 4,350,000 $5 4,300,000 $4 4,250,000 $3 4,200,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Average Rent per Sq. Ft. (All Properties) 10 year trend * SOURCE: COSTAR Total Square Feet 10 year trend 07
MARKET UPDATE: RETAIL 2018 THIRD STREET PROMENADE Promenade 90.5% Promenade Occupancy Rate change vs. 2017-7.4% Promenade Average NNN Rent per Square Foot $11.86 Promenade Average NNN Rent per Square Foot change vs. 2017 12.8% DOWNTOWN SANTA MONICA (TOTAL) 93.9% change vs. 2017 0.6% -36,610 2,500 NET ABSORPTION TOTAL LEASING SQUARE FEET ACTIVITY SQUARE FEET Average NNN Rent per Square Foot $7.36 Average NNN Rent per Square Foot change vs. 2017-6.6% $8 2,800,000 It s been really neat to see the food scene grow in Santa Monica. We have the best restaurants and the best small shops. There s nothing unattractive about being near the beach, and having the best weather, and slightly more relaxed people than the $6 $5 $4 $3 $2 $1 rest of Los Angeles. 2009 2011 2013 2015 2017 KATHRYN COKER Co-owner of Esters Wine Shop & Bar $7 2010 2012 2014 2016 2018 Average NNN Rent per Sq. Ft. 10 year trend Total Square Feet 10 year trend 2,775,000 2,750,000 2,725,000 2,700,000 2,675,000 2,650,000 2,625,000 * SOURCE: COSTAR 08
MARKET UPDATE: HOSPITALITY 2018* Room Supply Average Daily Room Rate RevPar 491,962 83.3% $261.07 $313.06 * JAN & FEB 2018 $400 $300 90% 80% Average Daily Room Rate by QTR 10 year trend Occupancy % by QTR 10 year trend * SOURCE: STR $200 2016 2016 2016 2016 2017 2017 2017 2017 2018 * 70% $400 90% $300 80% $200 2014 2014 2014 2014 2015 2015 2015 2015 70% $400 90% $300 80% $200 2012 2012 2012 2012 2013 2013 2013 2013 70% $400 90% $300 80% $200 2010 2010 2010 2010 2011 2011 2011 2011 70% 09
IN DEVELOPMENT ADDRESS STATUS RESIDENTIAL UNITS HOTEL ROOMS OFFICE SQ. FT. COMMERCIAL SQ. FT. COMMUNITY/ CULTURAL SQ. FT. 1 710 Wilshire Blvd. Santa Monica Proper Hotel Under Construction 271 7,000 2 1601 Lincoln Blvd. Mixed Use Under Construction 89 10,617 3 1613 Lincoln Blvd. Mixed Used Under Construction 191 11,498 4 1626 Lincoln Blvd. Affordable Housing Under Construction 64 2,208 5 1318 Lincoln Blvd. Mixed Use 43 3,224 6 1430 Lincoln Blvd. Mixed Use 100 5,910 7 1443 Lincoln Blvd. Mixed Use 43 3,598 8 1560 Lincoln Blvd. Mixed Use 100 13,775 9 1641 Lincoln Blvd. Mixed Use 66 6,000 10 1650 Lincoln Blvd. Mixed Use 98 7,135 11 500 Broadway Mixed Use 249 63,690 12 1415 5th St. Mixed Use 64 7,535 13 1437 5th St. Senior Affordable Housing 43 1,001 14 1325 6th St. Mixed Use 64 6,557 15 302 Colorado Ave. The Mark 302 (Sears Building) 52,183 62,277 16 601 Wilshire Blvd. Mixed Use 43 6,589 17 1337 7th St. Firestation 1 26,270 18 1133 Ocean Ave./101 Wilshire Blvd. Fairmont Miramar Hotel Up to 120 265 49,384 19 101 Santa Monica Blvd. Ocean Ave. Project 79 115 24,700 45,000 20 120 Colorado Ave. Wyndham Hotel 25 211 17,284 21 4th/5th and Arizona Ave. The Plaza at Santa Monica 48 200 209,000 40,000 12,000 22 603 Arizona Ave. Hotel 63 1,128 23 1323 5th St. Mixed Use 24 3,341 24 1342 5th St. Mixed Use 51 54,564 25 1425 5th St. Mixed Use 75 9,689 26 1437 7th St. Mixed Use 60 10,140 27 1543 7th St. Mixed Use 62 3,617 28 501 Broadway Mixed Use 65 6,040 29 525 Colorado Ave. Mixed Use 55 3,677 30 601 Colorado Ave. Mixed Use 100 9,525 31 1235 5th St. Mixed Use 23 1,873 32 1238 7th St. Mixed Use 7 854 10
Development Map Under Construction Featured Projects RENDERING VIA OCEANAVENUEPROJECT.COM In January, Developer Jeff Worthe and architect Frank Gehry introduced a new design for their Ocean Avenue Project, which includes hotel, museum, residential, and commercial space. RENDERING VIA CENTURYWESTPARTNERS.COM In February, Century West Partners broke ground on the Lincoln Collection, with 280 units and 25,000 square feet of ground-floor retail. * DOWNTOWN SANTA MONICA, INC. MAKES NO REPRESENTATION AS TO THE LIKELIHOOD OF ANY SPECIFIC OUTCOME FOR INDIVIDUAL PROJECTS. 11
@DTSantaMonica DTSantaMonica DowntownSantaMonica DOWNTOWN SANTA MONICA, INC. 1351 Third Street Promenade, Ste 201 Santa Monica, CA 90401 www.downtownsm.com