Down and Out: Store Closings Spread in L.A.

The shutdowns and consolidations are multiplying at Los Angeles boutiques.

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Empty storefronts of Melrose Place.

Photo By Stefanie Keenan

Empty storefronts of West Third Street.

Photo By Stefanie Keenan

Active Ride Shops, a Mira Loma, Calif.-based surf and skate chain, which filed for bankruptcy last month, closed stores in Westwood, Simi Valley, Irvine and Mission Viejo.

The latest developments come a few months after painful local retail losses such as the exit of Tracey Ross’ iconic boutique on Sunset Plaza and the shutdown of Kira Plastinina, the teen chain that closed its U.S. stores seven months after opening 12 units, including six in Southern California, on Robertson Boulevard, Beverly Drive and the Third Street Promenade.

On Robertson Boulevard, high rents negotiated at the peak of the retail real estate boom are haunting merchants and driving out tenants such as American Apparel, as well as contemporary stores Madison and Diavolina, which have relocated to nearby Third Street.

Throughout the Los Angeles area, “for lease” signs are proliferating in empty storefronts, a stark reminder of the troubled market conditions. The stretch of West Third Street between the Beverly Center and The Grove shopping centers, once a bustling boutique corridor, has suffered a wave of closings. At least 18 retail spaces were listed for lease this month.

“These trendy retail streets have high rents and the merchants are, in turn, selling expensive merchandise, so customers are turning away because they’re still concerned about what’s going on with the economy, to say nothing of their employment prospects,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “We will continue to see the smaller, single owner or mom-and-pop stores close and it’s quite sad. The bombs are just starting to fall in commercial retail world.”

By the end of 2008, the retail vacancy rate was 3.5 percent compared with 2.3 percent the previous year, according to NAI Global figures.

The Golden State’s economy, the eighth largest in the world, has suffered a steep dive during the economic downturn. California’s 11.2 percent unemployment rate in March was the fourth highest in the U.S., topped only by Michigan, Oregon and South Carolina. Joblessness in Los Angeles County shot up to 11.4 percent last month, and retail was among the hardest-hit sectors, losing 18,000 jobs year-over-year. Manufacturing saw even steeper losses at 31,000 jobs.

California has the nation’s third highest foreclosure rate after Nevada and Arizona, median home prices are falling, tourism is declining and container traffic at the ports of Los Angeles and Long Beach, the world’s largest, has plummeted. State legislators in February raised taxes and cut spending to close a $42 billion budget deficit, but the state is forecasting another $8 billion gap for the fiscal year ending in July 2010.

The retail upheaval reflects a segment of the fashion business that’s particularly vulnerable, said Erin Armendinger, managing director of the Jay H. Baker Retailing Initiative at the University of Pennsylvania’s Wharton School.

“The small businesses are hanging by a thread right now,” she said. “It was bound to happen when everyone plays in the same space, and contemporary is the most tenuous, as consumers were always of the aspirational variety. Aspirational customers don’t have the money to spend — it’s not just that they’re not in the mood, as some people say. They don’t have the money.”

High rents mean punishing overhead for store owners now struggling with razor-thin margins, declining foot traffic and sales volume, slashed budgets and unstable relationships with vendors.

“Our Robertson [Boulevard] store has been hit hard because so many people have moved out because the rents got so high,” said Stacey Bendet, co-founder of Alice + Olivia. “That whole area is in flux. People are shopping differently and spending differently and it’s no longer apropos to go into a store and buy 20 things.”

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