High office vacancy rates may slow recovery
There has been little economic recovery for Santa Monica since the economy took a nose dive last year.
Sales citywide dropped 8 percent in the first quarter of this year while nearly 5,000 tech-related jobs were eliminated in fields such as entertainment and health-care, according to a city report.
Businesses that have been most affected are department stores, business-to-business merchants, office equipment dealers, tourism-related industries and small retailers, the report states.
“We’re facing the same troubles as the rest of the country, perhaps a little more poignantly with the tech crash and tourism drop-off, but I think we can see recovery coming,” said Gwen Pentecost, senior administrative analyst for the city’s economic development division.
The city recently cut millions of dollars from its budget as it deals with an $8 million shortfall last year and is facing another $8 million in lost sales tax revenue this year.
City officials believe Santa Monica’s 18 percent vacancy rate for commercial office space may be slowing down a local economic recovery. With those spaces empty, there are less workers shopping at local stores and eating in local restaurants.
“We have a very diverse and smart workforce here and we will bounce back,” Pentecost said. “But the key will be getting some of those vacancies filled.”
“We have a very diverse and smart workforce here and we will bounce back. But the key will be getting some of those vacancies filled.” — — GWEN PENTECOST Economic Development Division
According to the Santa Monica Chamber of Commerce more business are leaving the city than moving in.
“These are trends that are likely to continue,” said Kathy Dodson, the chamber’s executive director. “We need to work harder to attract and retain... companies.
We need them because they provide high skilled, high paying jobs.”
Small businesses and at least two corporations are in the process of leaving Santa Monica, Dodson said. MGM’s corporate headquarters and BAE Systems are reportedly leaving. Officials say cities like Culver City and West Hollywood are luring regional businesses away, Dodson said.
“We’ve had employers say they have put employees in other cities rather than expand in Santa Monica,” she said.
Business owners who are chamber members have been complaining that the local recovery has been excessively slow, Dodson said.
“It’s not really a surprise,” she said. “It really just confirms what we are hearing from our membership all along.”
Additionally, officials said there has been an 11 percent decrease in tourism-related sales compared to the same January-to-March business quarter last year. The city has recently launched a $200,000 foreign media campaign to drum up more visitors.
Department stores located in Santa Monica Place Mall had a nearly 20 percent drop-off in business, the largest loss among the city’s retailers, according to the city’s report. However, almost every retail sector throughout the city posted atleast single-digit losses.
“Though consumers are still spending, there has been a substantial drop-off in income for people,” Pentecost said. “It’s all catching up with them now.”
The only winners were the city’s automobile dealerships, which continue to lead local businesses in sales. Dealerships made up 15 of the city’s “Top 25 producers.” The industry posted a 13 percent increase in sales compared to the same business quarter last year.
“Automobiles have held well, though they are not doing as well as their counterparts in other cities,” Pentecost said. “But they have held up the most because of their intelligent, aggressive financing.”
“Automobiles have held well, though they are not doing as well as their counterparts in other cities.” — — GWEN PENTECOST Economic Development Division
However, not all of the prosperity from the nation’s decade-long economic expansion starting in the early 1990s has been lost. Sales and jobs are still higher than they were reported in 1999, both locally and nationally.
And Pentecost said some early economic reports tentatively paint a stronger economic picture for Santa Monica and the Los Angeles region next quarter.
“Remember this is just the first quarter and we’re comparing it to the first quarter of 2001 (before the recession was in full swing),” Pentecost said. “The rest of the year may tell a completely different story.”
Originally published in the Santa Monica Daily Press print edition on August 6, 2002. Read the original PDF.