Santa Monica's retail sales have fallen by about one-third from pre-pandemic levels and are still declining, while its storefront and office vacancy rates remain among the highest in the region, according to a new RAND Corporation study.
The report, "Santa Monica's Recent Economic and Social Trends: A Case Study with Regional Comparisons," found that taxable sales at Santa Monica businesses recovered to only 89% of their 2015 level in mid-2021, after adjusting for inflation, then fell to almost 60% of that level by early 2026. Beverly Hills, Culver City and West Hollywood all returned to pre-pandemic sales by late 2021. By the end of 2025, Beverly Hills and West Hollywood were down 10% to 15% from 2015, and Culver City was down 25%.
The decline hit nearly every category. In 2015 dollars, taxable sales fell 32.8%, from $3.24 billion in 2015 to $2.18 billion in 2025, a loss of about $1.06 billion, according to California Department of Tax and Fee Administration data analyzed by RAND. Clothing and accessories sales fell 75%, or $327.7 million, the largest drop in both dollars and percentage. Restaurant and bar sales fell 23.8%, or $151.7 million. Home furnishings fell 66.9% and gas stations 48%. Only building materials and garden stores grew. The authors said business closures, including the departure of large retailers from the Third Street Promenade and Santa Monica Place, are likely a major source of the decline.
Vacancies tell a similar story, the researchers concluded. Santa Monica's retail vacancy rate has been the highest of the four cities since late 2021, according to CoStar data. It was rising before the pandemic, as in peer cities, but kept climbing afterward while the other cities leveled off or improved. RAND estimated that at least 45% of the city's retail vacancy is tied to the Promenade and Santa Monica Place.
The Promenade's vacancy rate was 31% as of August 2026, based on 37 retail properties, the report said. Empty space is concentrated in large buildings: Those over 30,000 square feet are 47% vacant, compared with 12% for those under 10,000 square feet. Four properties are completely vacant, including three of the largest spaces on the street.
On offices, Santa Monica had the second-highest vacancy rate of the four cities, at more than 20% in June 2026, behind Culver City's 25%, according to RAND. Culver City added a large amount of new office space from 2021 to 2024. Santa Monica has the most office properties and the largest volume of office space available for rent among the four.
Interviewees from both city government and the private sector attributed high vacancies to an oversupply of retail and hospitality space. A local architect described multiple jobs converting vacant specialty spaces back to generic layouts or subdividing large spaces. Interviewees said the Promenade's many separate owners make coordination hard, and one business owner said the city and owners needed a "come to Jesus" moment. The authors warned that a "vacancy spiral" may exist, in which closures and remote work reduce foot traffic, leading to more closures.
Nearly all interviewees described a past "extractive mindset" toward business at City Hall, though most agreed it has changed. Business owners said the sanitation and transportation departments still make costly, unexpected demands for upgrades during tenant improvements, even when a new business has the same use as the previous tenant. The report also cited a new right-to-rehire and labor peace law for businesses on city-owned land as a potential obstacle to growth.
Researchers Jason M. Ward, Roland Neil and Lizhong Liu analyzed state sales tax data, CoStar retail and office vacancy data and DataAxle business data, comparing Santa Monica with Beverly Hills, Culver City and West Hollywood. They also interviewed 14 of the 19 people they invited between March and August 2026, including city staff, elected officials, business owners and development professionals in Santa Monica and peer cities. The authors call the study descriptive; it cannot establish causation and did not analyze tenant improvement projects or commuting patterns. Interviews were organized by theme with help from an AI tool, according to the report.
The report’s findings mirror previous reporting from various sources. Downtown Santa Monica Inc. counted 346,147 Promenade visitors in March 2026 about half the amount counted in 2019. Ground-floor occupancy was 75% in April, ranging from 62% on the 1200 block to 83% on the 1300 block and 78% on the 1400 block.
Santa Monica Place went to a receiver in the first quarter of 2025 after owner Macerich defaulted on a $300 million loan. Nordstrom closed and the mall's vacancy rate was almost 70%. The mall now has new owners who have begun a series of events to draw customers back alongside promises of new businesses including a recently opened high-end gym.
The most recent HdL Companies sales tax report posted by the city shows adjusted sales fell 4.5% in the first quarter of 2025, during the Palisades Fire, and 1.6% in the second quarter, with fine dining down 11.3%. City staff project growth of 2.1% in fiscal 2025-26 and 3.6% in fiscal 2026-27.
In March 2026, the council approved an eight-point economic development package that includes a $3 million recruitment fund, eliminates the $1,000-per-seat wastewater fee for restaurants and expands the Entertainment Zone to Main Street and Montana Avenue. The city closed fiscal 2025-26 with an $8.95 million surplus, a year after declaring fiscal distress.
RAND recommended that the city expand its business concierge service so it systematically addresses recurring problems, and develop clear guidance for sanitation and transportation staff to reduce "idiosyncratic judgments" about compliance during tenant improvements. To cut vacancies and draw foot traffic, the authors suggested temporary "pop up" stores, which West Hollywood has used to incubate permanent businesses, along with more events and festivals, large redevelopment such as the Civic Auditorium and courting employers in target industries.
The authors also urged incentives beyond the city's 2024 adaptive reuse ordinance to convert offices and other commercial buildings to housing, and a comprehensive review of the labor law for leases on city-owned land, which they said the council appears to have adopted "without substantial research" into its benefits or costs.