@DTSantaMonica DOWNTOWN SANTA MONICA, INC.

DTSantaMonica 1351 Third Street Promenade, Ste 201 Santa Monica, CA 90401 DowntownSantaMonica www.DowntownSM.com

Edition: Second Quarter, 2018 DOWNTOWN SANTA MONICA SANTA DOWNTOWN Report Market About Downtown Santa Monica, Inc. Table of Contents

Downtown Santa Monica is a dynamic, urban envi- The organization is governed by a 13-member Board Executive Summary 03 ronment located on the bluffs overlooking the Santa of Directors. Six members are appointed by the Monica Bay and is the proud home of the world-famous Santa Monica City Council, six are directly elected Transportation Snapshot 04 Third Street Promenade, a beloved and celebrated by property owners within the district, and one is Consumer Snapshot 05 destination. The district features retailers for all age the Santa Monica City Manager or his/her designee.

groups, hip casual dining options, and sophisticated The board and staff of DTSM, Inc. focus their work Market Updates 06 fine dining restaurants. Ranked as one of the most around 5 priorities: Residential 06 walkable neighborhoods in the Los Angeles region, Office 07 Downtown Santa Monica welcomes 16 million people · Downtown Community Plan Implementation annually and generates more than $1 billion in taxable · Circulation & Mobility Retail 09 sales for the City of Santa Monica each year. · Infrastructure Improvements Hospitality 11 Downtown Santa Monica, Inc. is a private 501c(3) non-profit organization that works with the City of · Retail Support In Development 13 Santa Monica to manage services and operations in · Community Connections Map & Featured Projects 14 Downtown Santa Monica while promoting economic stability, growth, and community life within this unique neighborhood.

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 district is divided into 5 benefit zones. Property owners are assessed annually based on the zone in which their property is located.

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01 02 Q2 Executive Summary Transportation Snapshot

Residential Average Monthly Promenade Pedestrian Impressions (Q2 2018)

According to Realtor.com, zip code 90401, within which Downtown San- Gross Rent this ta Monica sits, saw the greatest increase in median home listing price Quarter for: in the country since last year. With a 60.7 percent year-over-year in- crease, the median home price rose to $3 million. This was likely driven Promenade Pedestrian by houses along and near the beach, just out of the Downtown district. Impressions change since In Downtown, where apartment renters dominate, rents and occupancy Q2 2017 rates remain consistent. $4.80 2,507,063 27,550 -8.3%

Office Q2 2018 RESIDENTIAL AVG PER DAY Globally, the office market is strong and strengthening, particularly in prime office locations. With its concentration of tech and creative Q2 2018 TOTAL businesses and its amenities, Downtown is counted among these prime locales. In Q2, however, the office occupancy rate was down slightly from the previous quarter and net absorption was -66,850 square feet. $5.20 TOTAL PEDESTRIAN IMPRESSIONS PER MONTH

2,000,000

Retail ALL OFFICE In the retail world, occupancy rates held relatively steady from last quarter, but occupancy continues to be lower than last year. Aver- 1,500,000 1200 Block age rent lowered significantly on both the Promenade and the rest of 1300 Block Downtown. Leasing activity hints that we may see stronger occupancy 1400 Block rates next quarter. This spring saw a flurry of openings, closings, and $5.81 1,000,000 relocations (for more on this, see the Retail pages).

* SOURCE: SPRINGBOARD. DATA CLASS A REPRESENTS THE FREQUENCY 500,000 OF PEDESTRIANS PASSING A Hospitality OFFICE FIXED COUNT LOCATION AND Tourism in Downtown Santa Monica is looking quite healthy this year: SHOULD NOT BE INTERPRETED comparing hotel occupancy rates over the past ten years reveal this Q1 AS A COUNT OF UNIQUE/INDI- 0 VIDUAL PEDESTRIANS. and Q2 had record highs. 7/17 9/17 11/17 1/18 3/18 5/18 6/18 $6.59

ALL RETAIL (NNN)

Parking Data

* SOURCE: CITY OF SANTA MONICA, $10.98 PARKING OPERATIONS 6,194 65%

PROMENADE PUBLIC PARKING AVG DAILY PEAK * ALL RENTS REFLECTED IN THIS REPORT ARE MONTHLY. RETAIL (NNN) STRUCTURE CAPACITY OCCUPANCY

03 04 Consumer Snapshot Market Update: Residential

DTSM Consumer Profile (2017) Q2 2018

SPEND BY ORIGIN SPEND BY CONSUMER AGE DISTRIBUTION

24% < 35 14% Santa Monica 17% 35-45 45% Los Angeles 20% 45-55 Occupancy Rate Occupancy Rate change 41% US, Outside LA since Q2 2017 19% 55-65 92.5% 20% 65-75 0.8% 3,167 TOTAL UNITS SPEND BY CONSUMER INCOME DISTRIBUTION 0% 27% <50k TOTAL UNITS PERCENT 26% 50-100k CHANGE SINCE Q2 2017 Average Rent per Average Rent per Square 28% 100-200k Square Foot Foot change since 2017 19% >200k $4.80 1.7%

It doesn’t get better than living in sunny Downtown Santa Monica — I can walk to the beach, the pier, and the Third Street Promenade. What more can I ask for? There are so many upbeat and happening SPEND BY BUSINESS TYPE bars and restaurants on every street corner. I love calling Santa Monica home.

—BRANDON SHAPIRO Downtown Santa Monica resident

31% 20% 15% 11% $5.00 100% Average Rent per Sq. Ft. Restaurants Apparel Department Stores Hotels 10 Year Trend

$4.50 95% Occupancy Rate 10 Year Trend

2015 reduction in Occupancy 90% $4.00 Rate was due to new units becoming available for rent.

$3.50 85% 7% 6% 5% 4% Specialty Sports Computers Fast Food

$3.00 80% * SOURCE: BUXTON, US-BASED VISA TRANSACTIONS FOR 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 *SOURCE: COSTAR

05 06 Market Update: Office

Q2 2018 Q2 Market Comparisons

Avg Gross Rent per Sq. Ft. $5.20 $5.11 $5.46 $4.87 -2.7% $4.16 2.0% 9.2% -2.1% $4.09 Occupancy Rate Occupancy Rate change Downtown Beverly Hills 0.8% Santa Monica Santa Monica West -4.3% since Q2 2017 Culver Hollywood 93.7% City Westwood Business 1.3% -66,850 Improvement District NET ABSORPTION SQUARE FEET

107,974 TOTAL LEASING ACTIVITY Average Gross Rent per Average Gross Rent per SQUARE FEET Occupancy 93.7% 90.6% 90.2% 84.3% 86.5% 88.4% Square Foot (CLASS A) Square Foot (ALL PROPERTIES) 1.3% 0.0% -1.6% -3.3% 0.3% 4.6% $5.81 $5.20

I love working in Downtown Santa Monica for the fresh ocean air while I walk to my favorite lunch spots around the city. On lunch breaks I can get my errands done at local shops, which is amazing! I also love work- Office News ing in Santa Monica during the fall for the Twilight Concert Series, so I Average Gross Rent per can just walk to the pier for an absolute party! “Macerich Renews Lease in Santa Monica Headquarters” (The Real Deal) Square Foot change since —BRIDGET FAY Q2 2017 (ALL PROPERTIES) Major shopping center owner and operator (including Santa Monica Place) Macerich has renewed its lease Community Lead, WeWork of 82,000 square feet of office space at 401 Wilshire. -2.7% “ICX Media Opens Los Angeles Office to Better Serve Media & Entertainment Industry Clientele” (Business Wire) $7.00 100% Average Rent per Sq. Ft. Downtown Santa Monica is a central piece of the tech and startup influx to the Westside, which led to the 10 Year Trend nickname “Silicon Beach.” In April, video intelligence platform ICX Medio announced the opening of its third (ALL PROPERTIES) office, after Washington D.C. and New York City, at 520 Broadway. $6.00 95% Occupancy Rate 10 Year Trend “ZipRecruiter Moves to New 45,000 SF Space in Santa Monica” (Los Angeles $5.00 90% Business Journal)

Online employment company ZipRecruiter has consolidated from two offices into a single headquarters of 45,000 square feet at 6th and Arizona. $4.00 85%

$3.00 80%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 *SOURCE: COSTAR

07 08 Market Update: Retail

Q2 2018 Q2 Market Comparisons

Avg NNN Rent per Sq. Ft. THIRD STREET PROMENADE $6.59 $6.73 33.0% -17.1% $6.42 $6.15 $5.91 Westwood Business Downtown -6.8% -11.9% $3.88 -8.0% Improvement District Santa Monica Beverly Hills Santa Monica 3.1% West Hollywood Promenade Promenade Occupancy Rate Promenade Average Promenade Average Culver City Occupancy Rate change since Q2 2017 NNN Rent per Sq. Ft. NNN Rent per Sq. Ft. 90.2% -6.4% $10.98 change since Q2 2017 -5.3%

DOWNTOWN SANTA MONICA (TOTAL)

Occupancy 93.2% 95.3% 95.1% 98.8% 95.7% 92.9% 1.9% -0.8% -1.8% 0.4% -0.8% -0.5%

Occupancy Occupancy Rate change Rate since Q2 2017 93.2% -1.9% -14,447 Store Openings and Closings NET ABSORPTION SQ. FT. Gourmandise School of Sweets & Savories, which teaches culinary classes, reopened in a larger location with two kitchens in Santa Monica Place. 20,855 Mel’s Drive-In opened on Lincoln, bringing 24-hour diner vibes to Downtown and maintaining the penguin sign from the 1950s-built Penguin Coffee Shop. Being in business in Downtown Santa TOTAL LEASING ACTIVITY SQ. FT. Monica since 1991 has been rewarding On Fourth Street, West Elm relocated next door to create a modern, sun-filled Average NNN Average NNN Rent per Sq. space that features a rotating set of local artisans. and inspiring on so many levels. From Rent per Sq. Ft. Ft. change since Q2 2017 working at America’s greatest beach The Refinery, a coffee shop at 413 Santa Monica Boulevard, has closed, but at 631 $6.59 -17.1% Wilshire a new cafe arrived: Bluestone Lane, serving Australian coffee and treats. destination to working on important issues such as greening businesses In Promenade accessory news, Converse, Fossil, and Crocs have shut. Developers plan to add a second floor of retail to 1437 3rd Street Promenade, and diminishing our carbon footprint which previously housed Converse. by collaborating with City officials,

$7.00 100% Average NNN Rent per Sq. Ft. Abercrombie & Fitch is relocating to another location on the Promenade, and DTSM employees, the Chamber, and 10 Year Trend lifestyle store Muji will open a flagship store in its previous spot. the Travel and Tourism board, Santa Monica pioneers as a leader in the $6.00 95% ON DECK: Occupancy Rate 10 Year Trend hospitality business & we are thrilled · Cycle Bar (1221 Second St) · Ritual Gym (315 Wilshire Ave) to be a part of this business community. *SOURCE: COSTAR · Elephante Beach House · The Gables (331 Wilshire Blvd) $5.00 90% (1332 2nd St, rooftop) · Halo Top Scoop Shop · Burgerim (1237 3rd St Promenade) (304 Santa Monica Blvd) —MEGAN HERITAGE · Casa Martin (relocation to · Blue LA (331 Santa Monica Blvd) General Manager, Locanda del Lago 1251 Third Street Promenade) · Hi De Ho Comics and Caffe Bella $4.00 85% · Silverlake Ramen (1319 3rd St Promenade) (relocation to 412 Broadway) · Clayton Children’s Museum · Burton Snowboards (1460 4th St) (Santa Monica Place) · Custom T-Shirt Design Studio $3.00 80% · Tesla (relocation to Santa Monica Place) (720 Santa Monica Blvd) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 · Wally’s Wine & Spirits (214 Wilshire Blvd) · Dainese (1418 Lincoln Blvd)

09 10 Market Update: Hospitality

Q2 2018 DTSM Hotel Map Hotel News

“ Santa Monica Prevails over Airbnb in Court” (The Real Deal)

In June, a U.S. District Court judge dismissed Airbnb’s legal challenge to the City’s requirement that home sharing renters must 5 register with the City of Santa Monica in OCCUPANCY RATE AVERAGE DAILY ROOM RATE REVPAR order to rent their homes to guests through 1 the site. March 86.1% March $335.65 March $288.98 3 10 April 88.3% April $328.68 April $290.35 2 8 7 May 84.8% $319.73 4 May May $271.26 6 9

*SOURCE: STR GLOBAL, LTD. SCALE BASED ON STR REPORT AND INCLUDES AVERAGE DAILY RATE AND OTHER FACTORS.

$400 90% Fairmont Miramar 1 Luxury 302 Rooms

Georgian Hotel 2 Luxury 84 Rooms

Hotel Shangri La 3 Luxury 70 Rooms $300 80% Ocean View Hotel 4 Luxury 70 Rooms

Huntley Santa Monica Beach 5 Luxury 204 Rooms Shore Hotel $200 70% 6 Luxury 164 Rooms 2010 2011 2013 2015 2018 Q1 Q4 Q4 Q4 Q2* Hotel Carmel 7 *APRIL & MAY 2018 Upper Upscale 100 Rooms Courtyard Santa Monica 8 Avg Daily RoomRate Occupancy % by QTR Upscale 136 Rooms by QTR 10 Year Trend 10 Year Trend Wyndham Santa Monica Beach @ The Pier 9 Upscale 132 Rooms Hampton Inn & Suites Los Angeles Santa Monica 10 *SOURCE: STR Upper Midscale 143 Rooms

11 12 In Development

RESIDENTIAL HOTEL OFFICE COMMERCIAL COMMUNIT Y/ ADDRESS STATUS UNITS ROOMS SQ.FT. SQ.FT. CULTURAL SQ.FT. Development Map 1 1337 7th St. Firestation 1 Under Construction

Pending 2 710 Wilshire Blvd. Santa Monica Under Construction 271 7,000 Proper Hotel Approved 3 1560 Lincoln Blvd. Mixed Use Under Construction 100 13,775 Residential Under Construction 4 1601 Lincoln Blvd. Mixed Use Under Construction 89 10,617 Residential

5 1613 Lincoln Blvd. Mixed Use Under Construction 191 11,498 Residential

6 1626 Lincoln Blvd. Affordable Housing Under Construction 64 2,208

7 1641 Lincoln Blvd. Mixed Use Residential Under Construction 66 6,000

8 1318 Lincoln Blvd. Mixed Use Residential Approved 43 3,224

9 1430 Lincoln Blvd. Mixed Use Approved 100 5,910 Residential

10 1443 Lincoln Blvd. Mixed Use Approved 43 3,598 Residential

11 1650 Lincoln Blvd. Mixed Use Approved 98 7,135 Residential

12 1201 3rd St. Promenade Commercial Approved +3,154 Building Addition

13 302 Colorado Ave. The Mark 302 Sears Approved 52,183 62,277 Building

14 1415 5th St. Mixed Use Residential Approved 64 7,535

15 1437 5th St. Senior Affordable Housing Approved 43 1,001

16 500 Broadway Mixed Use Residential Approved 249 63,690

17 1325 6th St. Mixed Use Residential Approved 61 10,214

18 601 Wilshire Blvd. Mixed Use Approved 43 6,589 Residential

19 1133 Ocean Ave/101 Wilshire Blvd Pending up to 108 +11 +9,783 Fairmont Miramar Hotel Redev. Featured Projects

20 101 Santa Monica Blvd. Pending 79 115 24,700 45,000 Ocean Ave Project

21 120 Colorado Ave Wyndham Hotel Pending 25 211 17,284

22 1437 3rd St. Promenade Commercial Pending +6,211 Building Addition

23 4th/5th and Arizona Ave The Plaza Pending 48 200 209,000 40,000 12,000 at Santa Monica

24 1235 5th St. Mixed Use Residential Pending 23 1,873

25 1323 5th St. Mixed Use Residential Pending 24 3,341

26 1342 5th St. Mixed Use Residential Pending 51 54,564

27 1425 5th St. Mixed Use Residential Pending 75 9,689

28 501 Broadway Mixed Use Residential Pending 65 6,040

29 525 Colorado Ave. Mixed Use Residential Pending 55 3,677

30 601 Colorado Ave. Mixed Use Residential Pending 100 9,525 RENDERING VIA OCEAN AVENUE LLC RENDERING VIA COMMUNITY CORPORATION OF SANTA MONICA 31 711 Colorado Ave. Mixed Use Residential Pending 56 1,983 Developers proposed a new plan for the redevelop- Construction of Community Corporation of Santa 32 603 Arizona Ave. Hotel Pending 63 1,128 ment of the Fairmont Miramar Hotel. The new design Monica’s five story affordable housing project on 33 1238 7th St. Mixed Use Residential Pending 7 854 lowers the building from the previously-proposed Lincoln Boulevard is well underway. The building will 34 1437 7th St. Mixed Use Residential Pending 60 10,140 21-stories to 10, which wrap around the historic fig house 64 apartments for low-income tenants.

35 1543 7th St. Mixed Use Residential Pending 62 3,617 tree. The proposal includes hotel rooms, condomini- ums, basement parking, restaurant and cafe spaces, 36 1447 Lincoln Blvd. Commercial Building Pending +1 +3,934 Addition and affordable housing across the street on 2nd.

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