Third Street Promenade’s New Retail Strategy

To combat growing vacancies, the Third Street Promenade is shifting to focus on restaurant and food service tenants. In general, the retail industry has favored restaurant tenants in recent years as a way to combat online shopping. The Third Street Promenade—once a major retail destination in Southern California—has certainly been impacted by ecommerce and the shift to more experiential retail concepts. Focusing in dining options will help to both fill vacancies as well as drive foot traffic.

“The Promenade is going through a transition trying to cater to the interests of local residents and businesses while remaining a tourist destination,” Greg Briest, an associate at JLL, tells GlobeSt.com. “As retailers with flagship stores look to occupy less space, niche retailers, restaurants and service companies with local appeal are moving in, creating a live, work, shop environment.  The completion of the Expo Line, which connected downtown Los Angeles and other Southern California areas to Santa Monica also contributed to the interest from L.A. area residents.  Finally, as businesses continue to relocate to the area, new multifamily housing developments are driving daily needs retail and dining to the Promenade.

The Promenade increase in available spaces has been driven by big box closures. “For the most part, the vacancy has been caused by the decrease in available retail tenants to fill the large box store formats on the Promenade,” Briest says. “The vacancy has created opportunity for tenants unable to previously enter this niche market but willing to pay the price of admission. In the end, less efficient retail is being replaced by daily needs retail and services like massage centers, virtual retail experiences, fitness centers and nutrition stores.”

Restaurants are being added daily to the Promenade, and the Gallery Food Hall is getting an overhaul with new tenants like Wally’s Wine and Spirits. Other restaurant concepts are appealing to families and locals. “Restaurants that appeal to families and healthy living are highly desired,” adds Briest. “We expect to see a continued balance of dining that appeals to tourists, residents and businesses while focusing on quality to appeal to affluent visitors.”

Restaurants are becoming a staple at retail shopping centers and destinations, and there has been some talk about over-leasing to restaurant tenants. However, Briest says that isn’t an issue at the Promenade. “The influx of restaurants to the Promenade does not have us worried at the moment as the Millennial generation’s spending patterns are very focused on food and experiential concepts,” he explains. “Additionally, Los Angeles has recently surpassed New York in the eyes of many as the number one restaurant city in the United States.