Boulevard Blues : Hollywood Retailers Squeezed as Redevelopment Plan Sends Rents Soaring
For seven years, Raymond Mann struggled against the elements on Hollywood Boulevard, trying to keep open his gift shop.
He dealt with vagrants and trash on the sidewalks. He roamed his aisles every day, shooing away shoplifters and panhandlers. He was burglarized three times.
“People . . . obviously weren’t coming there to buy anything,” Mann said. “They were there to steal, to bother people, to bum off people.”
But in January, Mann finally faced a problem he could not handle: The price for his trouble jumped from $4,000 to $8,000 a month. The lease was so costly that he was forced to move his store, La Galleria, to a smaller shop on Las Palmas Avenue, a block from the world-famous thoroughfare.
“I think the property owners there think those places have gold doorknobs,” he said sarcastically.
As Los Angeles begins a $922-million redevelopment effort to restore Hollywood, the same sentiment echoes from other merchants along the once-golden, but now seedy boulevard. Lease prices on Hollywood Boulevard are rising sharply, largely the result of the slowly accelerating redevelopment effort.
Despite the pain to merchants, redevelopment officials see the changes along one of the city’s most historic, architecturally important streets as promising evidence of renewed investor interest in the boulevard.
Its decline had been reflected in a virtual halt in commercial growth and escalating joblessness and crime. Now it is the commercial core of the city’s 1,100-acre Hollywood redevelopment plan, which was approved in May.
Two years after planning for the effort began, investor interest in the boulevard has reached heights unseen in at least a decade, according to Diana Bradford Webb, project manager for the city’s Community Redevelopment Agency.
At least two major projects--a $150-million hotel and commercial center near Mann’s Chinese Theatre and a two-block Hollywood Plaza commercial development at Hollywood Boulevard and Highland Avenue--are expected to dramatically change the face of the street in the next four years.
Land values have risen $10 to $50 a square foot for retail property in the last year, said Scott Milano, a Merrill Lynch real estate representative. Further increases are expected as developers jockey for key boulevard parcels.
“It’s like everyone is out there playing chess with Hollywood,” Webb said. “All the land barons are making their moves.”
In the long run, redevelopment officials expect the scramble to turn Hollywood Boulevard into a thriving commercial center. They imagine more restaurants, more upscale boutiques, fewer of the cheap T-shirt stores and electronics shops that now dominate the strip.
But in the meantime, merchants and real estate brokers say retail profits are in a tailspin because of rising rents. A number of merchants have already fled the street, and the outlook is for continuing hard times for many others.
Ground-floor vacancies in the 12-block area between La Brea Avenue and Vine Street numbered 11 in February, said Tim Bower, a broker for Coldwell Banker Real Estate Services. A similar survey showed 15 vacancies in May, and the number may be higher today.
“You don’t see that kind of vacancy on Melrose (Avenue),” Bower said. “You don’t see it downtown on Broadway. And you don’t see it in Westwood.
“There’s the thought, ‘Hollywood is coming back,’ ” he said. “And the tenants say, ‘Sure, it’s coming . . . but we haven’t seen (the improvement) on the street yet.’ ”
Storefronts on Hollywood Boulevard are still relatively cheap. Choice storefronts on Hollywood Boulevard near Highland Avenue rent for $1.75 to $3 a foot, reflecting a sharp increase over two years ago, leasing agent Greg Seltzer said; those prices compare to $3.50 to $5 a foot on Broadway and in Westwood.
Yet merchants must do business on a street where the homeless sleep on bus benches and wild-eyed men walk about flapping their arms.
“When you take a client out to lunch, you don’t want to see some goon walking down the sidewalk with swim fins and a mask on,” said Bill Maxson, owner of Millers Stationers and Printers, which moved in July after 50 years on the boulevard. “We think we were pretty tough to survive. It’s a dirty, disgusting boulevard.”
Maxson had occupied a building he owned, constructed near Highland during the town’s heyday. He said the area’s changing dynamics prompted him to keep the two-story structure, which he now leases to another tenant, and to move his own business to a smaller storefront on La Brea Avenue.
The arrangement has given him a relatively high lease income, an investment in Hollywood and more affordable, suitable surroundings for his own business, Maxson said.
“Hollywood has stood still for 20 years,” he said. “It’s just beginning to change. This is what I and quite a few other speculators believe.”
Other merchants, less lucky, complain that the soaring leases have left them at the whims of their landlords. Three- to five-year leases that happen to expire this year are increasing by 150% to 200% because of the anticipated boom, some said.
Hank Kroops, who closed Star Sporting Goods in September, said his lease was to jump from $4,000 to $7,500 a month. He called it a good time to get out.
“I was a landmark--39 years in the same spot,” said Kroops, 65, who retired with mixed emotions.
“It should come back,” he said of the community. “I hold no animosity toward my landlord. My employees are bitter. I had 15 employees. Some of them said they hope the place stays vacant for years. (But) I figure all good things have to come to an end.”
George Sousani, owner of Salon George, a hair-styling establishment on Highland Avenue just north of the boulevard, was less philosophical. He said his lease, at $475 a month, is due to expire in a year. He said his landlord has told him the bad news.
“I think it’s going to $2,000 or up,” Sousani said. “Of course I’m not happy. I don’t want to move. No way I can pay that much.”
Merchants who are struggling now may find matters even worse after the holiday season, when retailers enter their slowest two months of the year, predicted Doreet Rotman, owner of the Snow White Cafe and president of the Hollywood Boulevard Merchants Assn.
“I fear that in a few months . . . the boulevard’s going to be dead,” Rotman said. “You look in the street--the street shows people, but no spenders. (Merchants) won’t be able to survive because of the high rents and (shortage of) business.”
Even before the redevelopment plan was approved this year, Councilman Michael Woo, who represents Hollywood, was receiving reports of “horror stories,” said aide Patrick Michell.
“You could tell people were buying buildings, land-banking them,” he said. “There was starting to be turnover in property that had not turned over in maybe 20 years. We became concerned that the smaller merchants . . . were being disadvantaged by this.”
The question is what to do about it.
Redevelopment officials and members of the Hollywood Chamber of Commerce, which has pushed redevelopment, said the problem is largely unavoidable as weaker merchants make way for stronger ones. Under the pressure, some merchants have been forced to improve their stores, Michell said.
Webb of the redevelopment agency likened it to survival of the fittest. “When you find real competition, you may very well get pushed out,” she said. “Merchants will have to be more astute.”
Yet even some stronger merchants fear evictions as small landlords sell to major developers, said Rotman of the merchants group. Some who own their stores fear the redevelopment agency will use its power of eminent domain to buy out their property--at bargain prices.
“I’m afraid . . . only a certain type of people will do business in Hollywood,” she said. “The rich, the famous and the known.”
Landowners said the doldrums should not last long. To many, the only question is how fast the world will flock to the newly gleaming Tinseltown--with its Walk of Fame, its Chinese Theatre, its refurbished Roosevelt Hotel, its improving image.
Woo aide Gilda Haas noted that recent citywide zoning actions have rendered Hollywood one of a relatively few places in Los Angeles where major commercial construction is still permitted. That may be all the more true if voters next month approve Proposition U, the growth-limitation initiative.
The $150-million project at Highland, which is due to include a 400-room hotel and a motion picture museum when it opens in 1989, could represent a milestone in the transformation, said Merrill Lynch’s Milano. “In two years, you’re not going to recognize the boulevard,” he said.
Tom, a tobacco store owner, was not so sure, voicing a perennial skepticism about a “new” Hollywood.
“They’re putting in something new, and that’s good,” he said, declining to give his full name. “(But) I’ll be dead 20 years before they revitalize Hollywood. . . . The street is too rough, it’s just too rough.”
