DRAFT – April 2011
2 EXECUTIVE SUMMARY
EXECUTIVE SUMMARY 3 TABLE OF CONTENTS Executive Summary 6 Introduction 19 Fashion Industry Overview 22 Industry Definitions 22 The Fashion Industry Today 25 Los Angeles Fashion District Overview 32 Fashion District Study Area 32 Sales in the Fashion District 33 Industry Trends in the Fashion District 33 Additional Fashion District Industry Factors 38 Fashion District Employment 39 Sub-District Analysis 44 Fashion District Real Estate Analysis 64 Commercial Real Estate Characteristics 64 Commercial Real Estate Overview by Sub-District 74 Creative Office Space 85 Commercial Demand Analysis 90 Hotel Analysis 95 Residential Demand Analysis 101 Economic Opportunities 110 Physical and Economic Infrastructure Improvements 110 Industry Opportunities 112 Promotion of the Los Angeles Fashion District 114 Real Estate Opportunities 117 Special Thanks 119 General Limiting Conditions 120 APPENDIX 1: Fashion Industry Case Studies 122 New York, NY 122 São Paulo, Brazil 125 Tokyo, Japan 128 APPENDIX 2: Design Profile 132 PROFILE: Design in the Los Angeles Fashion District 132
4 EXECUTIVE SUMMARY LIST OF FIGURES Figure 1 . Apparel Industry Official Employment Share – Los Angeles vs. New York (2009) 26 Figure 2 Global and Domestic Fashion Industry Trends (1990 – 2009) 27 Figure 3 . Fashion-Related Official Employment by Category (2001 – 2009) 27 Figure 4 Los Angeles County Share of . Employment by Category (2001 – 2009) 29 Figure 5 Overview of Fashion District Study Area 32 Figure 6: Summary of Sales Volume by Industry Category (2009) 33 Figure 7: Flower Wholesale Industry Sales 35 Figure 8 Port of Entry for . Flower Imports (2010) 36 Figure 9 Los Angeles County Flower Wholesale Industry Trends (2001 – 2009) 37 Figure 10 Comparison of Previous Study Area and Current Study Area 39 Figure 11 Fashion District Officially Reported Employment by Category (2003 – 2009) 40 Figure 12 Fashion District Employer Firms by Category (2003 – 2009) 41 Figure 13 . Fashion District Share of County Officially Reported Employment 41 Figure 14 Fashion-Related Employer Firms by Type in . Fashion District 42 Figure 15 Summary of Estimates of Sole Proprietorships in Fashion District (2009) 43 Figure 16 Summary of Total Jobs in the Fashion District by Sub-District (2009) 43 Figure 17 Map Overview of Sub-District #1 44 Figure 18 Overview of Study Area Sub-Districts 45 Figure 19 Distribution of Officially Reported Employment in Sub-District #1 (2009) 46 Figure 20 Distribution of Employer Firms in Sub-District #1 (2009) 46 Figure 21 Employment and Establishments in Sub-District #1 by Category (2003 – 2009) 47 Figure 22: Composition of “Other (Non-Fashion or Flower)” Employment Category 47 Figure 23 Map Overview of Sub-District #2 49 Figure 24 Distribution of Officially Reported Employment in Sub-District #2 (2009) 50 Figure 25 Distribution of Employer Firms in Sub-District #2 (2009) 50 Figure 26 Composition of “Other (Non-Fashion or Flower)” Employment Category 50 Figure 27 Officially Reported Employment and Establishments in Sub-District #2 (2003 – 2009) 51 Figure 28 Map Overview of Sub-District #3 53 Figure 29 Officially Reported Employment and Establishments in Sub-District #3 (2003 – 2009) 54 Figure 30 Distribution of Officially Reported Employment in Sub-District #3 (2009) 54 Figure 31 Distribution of Employer Firms in Sub-District #3 (2009) 54 Figure 33 Officially Reported Employment and Establishments in Sub-District #4 (2003 – 2009) 56 Figure 32 Map Overview of Sub-District #4 56 Figure 34 Distribution of Officially Reported Employment in Sub-District #4 (2009) 57 Figure 35 Distribution of Employer Firms in Sub-District #4 (2009) 57 Figure 37 Distribution of Officially Reported Employment in Sub-District #5 (2009) 59 Figure 38 Distribution of Employer Firms in Sub-District #5 (2009) 59 Figure 36 Map Overview of Sub-District #5 59 Figure 39 Officially Reported Employment and Establishments in Sub-District #5 (2003 – 2009) 60 Figure 40 Available Real Estate in Fashion District by Type (2010) 64 Figure 41 Fashion District Rentable Building Area (2006 – 2010 Q2) 65 Figure 42 Total Available Office Rentable Building Area (2010) 65 Figure 43 Fashion District Office Buildings by Number of Stories (2010) 66 Figure 44 Total Available Office Rentable Building Area (2010) 66 Figure 45 Retail Properties by Type (2010) 67 Figure 46 Total Available Industrial and Flex Rentable Building Area (2010) 67 Figure 47 Industrial Properties by Type (2010) 68
EXECUTIVE SUMMARY 5 Figure 48 Vacancy Rate Index of Commercial Space in Fashion District (Indexed to 2005) 69 Figure 49 Fashion District Commercial Sales Transactions (2006 – 2010) 69 Figure 50 Major Mart Property Characteristics 71 Figure 51 Map Overview of Major Marts in Fashion District 72 Figure 52: Fashion District-Wide Vacancy Estimate 73 Figure 53 Type of Real Estate in Sub-District #1 74 Figure 54 Characteristics of Real Estate in Sub-District #1 by Type 74 Figure 55 Recent Real Estate Transactions in Price/SF in Sub-District #1 75 Figure 56 Select of Real Estate Transactions in Sub-District #1 (2008 – 2010) 76 Figure 57 Type of Real Estate in Sub-District #2 77 Figure 58 Characteristics of Real Estate in Sub-District #2 by Type 78 Figure 59 Summary of Recent Real Estate Transactions in Sub-District #2 (2008 – 2010) 78 Figure 60 Recent Real Estate Transactions in Price/SF in Sub-District #2 78 Figure 61 Type of Real Estate in Sub-District #3 80 Figure 62 Characteristics of Real Estate in Sub-District #3 By Type 80 Figure 63 Recent Real Estate Transactions in Price/SF in Sub-District #3 80 Figure 64 Type of Real Estate in Sub-District #4 81 Figure 65 Characteristics of Real Estate in Sub-District #4 by Type 81 Figure 66 Summary of Recent Real Estate Transactions in Sub-District #4 (2006 – 2010) 82 Figure 67 Recent Real Estate Transactions in Price/SF in Sub-District #4 82 Figure 68 Type of Real Estate in Sub-District #5 83 Figure 69 Type of Real Estate in Sub-District #5 83 Figure 70 Summary of Recent Real Estate Transactions in Sub-District #5 (2008 – 2010) 84 Figure 71 Recent Real Estate Transactions in Price/SF in Sub-District #5 84 Figure 72 Fashion District and Downtown Creative Office Space Trends (2005 – 2010) 85 Figure 73 Fashion District Creative Space Properties 86 Figure 74 Map of Fashion District Creative Office Buildings 87 Figure 75 Profile of Creative Office Properties in Greater Downtown Los Angeles 89 Figure 76: Historical Annual Employment Compound Annual Growth Rate (2003 – 2009) 91 Figure 77: Estimated Future Employment Compound Annual Growth Rate 91 Figure 78: Employment Projections Total Fashion District 92 Figure 79 Total Fashion District Baseline Commercial Baseline Demand Projections 94 Figure 80 List of Downtown Los Angeles Hotels 96 Figure 81 Map Overview of Major Downtown Hotels 97 Figure 82 Downtown Los Angeles Hotel Occupancy 97 Figure 83 Los Angeles County Overnight Visitor and Hotel Information 98 Figure 84: Room Nights per Employee Calculation 99 Figure 85 Adjusted Hotel Occupancy Target 99 Figure 86 Hotel Room Demand Analysis 100 Figure 87: Estimated Fashion District Room Absorption 100 Figure 88 Summary of Residential Developments in Fashion District 102 Figure 89 Residential Demand Analysis 106 Figure 90 Downtown Student Housing Demand Analysis 106 Figure 91 City of Los Angeles Regional Housing Needs Assessment Allocation (2006 – 2014) 107
6 EXECUTIVE SUMMARY EXECUTIVE SUMMARY The Fashion District of Los Angeles occupies 20 percent of the City’s downtown. For nearly one hundred years, the District has been a center of garment-related economic activity. Notwithstanding the cyclical ups and downs of the industry and the changing global dynamics of garment design and production, the Fashion District continues to be an economic engine in Downtown Los Angeles and for the entire region. It is one of the few commercial districts in downtown Los Angeles that has not experienced substantial decline over the last generation, and in fact, has thrived. The Fashion District today continues to grow and evolve. The Economics practice at AECOM, formerly known as ERA, has led a comprehensive market study of the Fashion District as the first component of a larger 18-month Design for Development effort undertaken by the Community Redevelopment Agency of the City of Los Angeles (CRA/LA). The underlying premise of the DFD effort is one of preemptive regeneration. It recognizes the existing strength of the District and is proactively taking the steps to prevent future decline. The DFD will facilitate and manage the natural evolution of the District, while ensuring its identity is preserved and sustained. The Fashion District is an invaluable asset to Los Angeles and its continued success and longevity are closely tied to that of the City. This market analysis report examines the key global and domestic fashion industry trends and the impacts of these trends on employment and real estate in the Fashion District. Based on those findings, AECOM presents a series of opportunities to help promote economic growth in the District. FASHION INDUSTRY OVERVIEW AND TRENDS Fashion Supply & Product For purposes of this study, it is important to understand the economic activities involved in commercial fashion product—design, manufacture, display and presentation, market, wholesale, distribution and retail. Almost all of these activities are found within the Fashion District, but the three major activities in order of employment are wholesale, manufacturing, and retail. Fashion product first moves from design, the 1concept creation of the product, to manufacture, the production of the finished fashion product. Wholesale refers to the sale of fashion product to buyers of retailer stores in large quantities, while retail refers to the sale of fashion product to the final end user. Fashion design does not currently make up a large share of employment in the Fashion District, but it is the linchpin of the fashion industry. Fashion can also be categorized by type of fashion, which ranges along a spectrum of basic commodity 23products on one end to haute couture on the other. Los Angeles has designers and brands representing everything from designer collections to basic commodities, but the bulk of the Los Angeles Fashion District’s lines would be categorized between contemporary fashion and fast fashion. While haute couture is considered most prestigious, it is worth noting that fashion produced for large audiences, such as contemporary fashion, comprises a much larger share of economic activity in the global fashion industry. US Fashion Trends Major trends in the fashion industry include the globalization of fashion garment production and the rise of fast fashion. Due to improvements in technology and distribution, as well as changes in public policy, emerging economies are able to offer competitive, lower labor costs for reasonable quality garments. Domestic 1 It is important to note that fashion “manufacturers” often do not produce the garment they simply contract the production of the product from garment subcontractors who focus on one or more aspects of good production. 2 Basic commodities include basic underwear and socks. 3 Hand‐sewn, custom‐fitted designs from houses that must meet rigid collection requirements.
EXECUTIVE SUMMARY 7 garment production has had to compete with the global market place, particularly regions with emerging economies like Mexico, Central America, China and other parts of East/Southeast Asia, and, in result, manufacturing-related employment has contracted since 2001. According to the Bureau of Labor Statistics, the number of manufacturing-related jobs has declined at an average annual rate of percent since 2001. While manufacturing-related jobs have declined, other fashion-related sectors, such as design, have experienced growth. The design sector, however, is still comparatively smaller than other sectors, comprised of approximately 14,200 jobs in 2009 nationally (versus the million retail-related jobs or 202,000 manufacturing-related jobs). Another major emerging trend in the fashion industry is the rise of “fast fashion.” Fast fashion typically bases its garment styles on those of major fashion houses, but produce those styles much more quickly and cheaply. Fast fashion aspires to meet consumer trends, rather than setting the trends. The influence of fast fashion on the greater fashion industry is evidenced in the ability of fast fashion labels, such as Forever 21, to penetrate historically difficult fashion markets, such as Japan. LOS ANGELES FASHION TRENDS The Los Angeles fashion industry has been markedly impacted by these wider fashion trends. Los Angeles has seen major reductions in garment production since 2000, but has also seen substantial expansion of wholesalers of contemporary women’s fashion. Los Angeles has several competitive advantages to other fashion locations, but also faces daunting status challenges. Many of the 4+ story high-rise buildings throughout the District were originally built in the early part of the 1900s to house a clustering of apparel manufacturers. For the reasons described above, manufacturing has decreased substantially throughout Los Angeles County and the District since 2000. The number of manufacturing firms in the Fashion District has fallen from approximately 1,200 in 2003 to 600 in 2009, a decline of 50 percent in six years. Despite these reductions, garment production in the greater Los Angeles region has not declined to the same extent as in New York and the industry is quite active throughout Los Angeles County. While new manufacturers are not likely to locate in the Fashion District’s high-rise buildings, the number of accessible garment manufacturers located throughout the Southland is a major asset to Los Angeles fashion industry. While most fashion industry categories were contracting across the past decade, wholesale grew by percent annually between 2001 and 2009 and design grew by 8 percent annually in the District. Los Angeles is a fashion leader in denim and contemporary women’s fashion, and the Fashion District is characterized by its high density of garment wholesalers, many selling denim and contemporary women’s fashion. The types of garments sold by wholesalers in the area are diverse, ranging from high-end brands such as Trina Turk to unmarked garments going to small, local boutiques. Within the US, New York County is the focal point for fashion design with almost 20 percent of US design employment. Los Angeles County maintains a significant share of manufacturing employment, 25 percent of US manufacturing employment, and a lower, but comparable share of wholesale employment relative 4to New York. With a large concentration of established fashion houses, press, and the highly successful Mercedes-Benz Fashion Week productions, New York is well known for its fashion industry. Los Angeles, on the other hand, has had challenges producing an organized, cohesive Fashion Week in recent years 5and has not received its due press or media attention. Los Angeles has several competitive advantages that should place the Fashion District as a major global capital of fashion: (1) there is moderately-priced real estate available throughout the county; (2) the District is conveniently located near major transportation lines, with access to major freeways, cargo rail lines, shipping ports and air cargo ports; (3) there is access to a large base of skilled and unskilled labor, including designers, skilled technicians, sewers and cutters; (4) there is a strong concentration of fashion- 4 US Employment Shares—Design: LA County %, NY County %. Manufacturing: LA County 25%, NY County %. Suppliers: LA County %, NY County %. Wholesale: LA County %, NY County %. 5 This, likely impacts the whole market, but none so severely as Los Angeles designers who need to showcase their products and get the attention of the media and buyers.
8 EXECUTIVE SUMMARY related businesses representing every step of the fashion supply chain; and, finally, (5) a diversity of fashion product is currently produced and sold in the District. Los Angeles is currently the headquarters of well-known fast fashion brand Forever 21 and has positioned itself at the forefront of the fast fashion trend by capitalizing on these existing strengths. To expand on a greater scale as a “fashion capital,” the Los Angeles fashion industry and public institutions will have to come together to revitalize the District physically and build a stronger platform to promote the assets of Los Angeles fashion. LOS ANGELES FASHION DISTRICT INDUSTRY AND COMMERCIAL REAL ESTATE These sections of the report look at study area metrics and the various nodes of activity identified within sub-districts. One of the advantages of the Los Angeles Fashion District is the clustering of fashion-related businesses; it is important to understand that though all inter-related, various business nodes in the district may serve different market audiences. Sales Estimates. Based on a survey data from InfoUSA, the Los Angeles Fashion District is estimated to generate $ billion in sales annually. Given that many of the activities in the district are cash based, such as the flower industry, this figure is likely to somewhat underestimate the sales by the industries within the Fashion District. Jobs Estimates and Employment Trends. Overall, we estimate that approximately 19,200 persons 6work throughout the Fashion District. Official employment is reported at approximately 14,600. We estimate that sole proprietors and undercounted workers make up another 4,600 workers in the District. As shown the Fashion District has followed broad US fashion trends, the number of retail firms has steadily declined across the past decade, partly due to the economic recession and drop in consumer spending. Los Angeles-based manufacturing firms have steeply declined in number and consequently the supplier firms which provide materials and raw goods to manufacturers have been slowly declining. Fashion wholesale firms, as well as fashion design firms have risen in number across the last decade. Commercial Real Estate. Figure ES-1: Fashion-Related Employer Firms by Type . Fashion DistrictCoStar, a widely-used real estate 1,000data source, estimates that there 900is approximately million 800square feet of office space within the Los Angeles Fashion District. 700The comprehensive District is 600almost evenly split between 500industrial (39%), office (32%), and 400retail space (28%), but these 300categories do not well represent 200uses. For example, there are 100numerous wholesalers selling 0garments in bulk out of 200320052009showrooms that look like retail YEARstorefronts and are often categorized as retail or industrial. Source: CA EDD Due to the fluidity of uses within the District and dynamic nature of the fashion industry, real estate properties require greater flexibility to reposition spaces. There is healthy demand for ground floor spaces in most areas throughout the District, but there is substantial under-utilized space on upper floors. Upper floor lease rates may be as low as 20 percent of the lease rates for bottom floors, . multi-story buildings can achieve rents of $ to $ for ground 6 While we do estimate that there was an approximately 20% decrease in employment between 2005 and 2009, the 2009 employment estimate is smaller than previous estimates primarily because more geographically precise data was reviewed in 2011 that was not previously available. FIRMS
EXECUTIVE SUMMARY 9 floor spaces, but only $.40 for upper floors. Currently, there are substantial vacancies throughout the District, primarily on upper floors. Based on estimates of vacancies in major marts and an assumption of 8 percent vacancy throughout the rest of the District, we estimate there are approximately million square feet of vacant space in the Fashion District. As Southern California pulls out of the recent recession, some of this vacant space can be reabsorbed by the fashion industry, but other spaces may need to be repositioned to other uses.
10 EXECUTIVE SUMMARY LOS ANGELES DESIGN INDUSTRY PROFILE While a relatively small portion of employment within the District, design is the foundation of the fashion industry and is a key element in maintaining a thriving fashion cluster in the Los Angeles Fashion District. Los Angeles County 7has approximately 10 percent of US fashion design jobs; design makes up less than 5 percent of total jobs within the Los Angeles Fashion District. There are a number of designers in Southern California, but they are dispersed throughout Los Angeles and Orange County and are often overlooked in the global fashion scene. We estimate that there are approximately 200 fashion designers and brands based in the Los Angeles Fashion District and another 700 designers and brands spread throughout Los Angeles and Orange County. Advantages and Challenges of Design in Los Angeles As part of this analysis, we received input from designers to better understand the advantages and challenges of locating in Los Angeles and the Fashion District in particular. Many of the designers we spoke to describe Los Angeles as a great place to be a start up designer. The Los Angeles market is open to fresh talent and it is easier for new designers to find their voice and get noticed in Los Angeles relative to New York. Los Angeles has a strong fashion niche for contemporary women’s fashion and breeds good designers, but since media and buyers are largely based in New York, designers will often leave Los Angeles as their business grows. Los Angeles has not received its fair share of fashion media attention. Attention is focused on entertainment, not fashion, and it is difficult for Los Angeles designers to get taken seriously by the global fashion media. Those within the fashion industry contend that it has been years since there was a successful professionally-produced Fashion Week in LA. There has been more success in Market Weeks, but even here Los Angeles suffers because our Market Week falls after the market weeks of New York, Paris, and the Magic Marketplace trade shows in Las Vegas; many of the buyers have spent their budget and are “burnt out” in purchasing product. In addition to industry challenges, designers also conveyed that the current physical environment within the Fashion District is a challenge, as well as garnering respect for the fashion industry among other industries in the region. Designers felt like the Los Angeles region did not respect the fashion industry as a viable economic engine and that relative to New York, the City of Los Angeles had not provided substantial support to the fashion industry. Strategies to Increase the Presence of Designers in the Los Angeles Fashion District Designers and educational representative provide a number of strategies for expanding the fashion design industry in the District. Physically Improving the District. Many of the Los Angeles fashion industry professionals we spoke to describe the existing atmosphere in the Fashion District as a major reason it is difficult to grow fashion design in the area. One designer summed up her thoughts stating “Fashion is supposed to be fun and inspiring; we need a little more of that infused into the community”. It was suggested that if the Fashion District had the basic physical environment improvements, as discussed above, and one solid designer could put their faith into the Fashion District by opening a major brand store, then everything would follow. Media Attention / LA Fashion Week. Designers believe that if you can get a few strong industry people from Los Angeles and New York to collaborate, in addition to a major publication (Elle, Lucky, Vogue, Bazaar) we can attract the leadership and talent to produce a professional level show. One show can help initiate a successful Fashion Week across time. A key element to a successful Fashion Week is finding a way to secure sufficient investment support. Connections with Hollywood. Creating better professional linkages between Hollywood and the Los Angeles Fashion District could help to attract A-list celebrities and the media attention that follows. Manpower to promote the Fashion District. Designers also believe the Fashion District needs additional dedicated manpower, educated and experienced in the fashion industry, to help promote the Fashion District and industry. Staff could be used to aggressively market and promote Los Angeles fashion designers and generate positive attention for Los Angeles designers. They could help to create and update industry resources to better navigate the Fashion District, develop internet platforms for designers and fashion businesses, and could help in the creation of a design incubator to help support and retain fashion designers as they grow. 7 Office employment count for design (as defined in this profile, design is distinct from manufacturing)
EXECUTIVE SUMMARY 11 Figure ES- 2: Fashion District Sub-District Map th6 Street th8 Street Olympic Bl th12 Street Washington Source: AECOM Spring Main Los Angeles Wall San Pedro Stanford Griffith
12 EXECUTIVE SUMMARY Fashion Sub-District Analysis The report analyzes specific industry activities and the real estate characteristics of various nodes within the District to better understand market opportunities and challenges. The section below describes five sub-districts and provides the highlights of our analysis. The sub-districts were created for the purposes of the report only, as a temporary analytical tool. In the reality, the nodes of activity are fluid. Thus, these sub-districts have not been adopted by any official entity and are not intended to be used as official boundaries. Sub-District #1is recognized for its concentration of well-known, branded fashion showrooms and mixed-use infrastructure. The marts clustered at Los th Angeles Street and 9th Street, the California Market Center, the New Mart, the 6 Street Cooper Building, the Gerry Building and others, are the epicenter of high-end fashion in the District. th7 Street This sub district, as well as the San Pedro wholesale area, is the destination for fashion buyers in the West Coast. However, the sub- district lacks amenities for buyers, such as conveniently-priced overnight accommodations, restaurants, etc. Buyers, wholesalers, designers and property owners throughout the sub-district want to see the physical environment improved to better represent the artistic, creative industry it houses. Currently, the various marts and Fashion District institutions generally work independently. Better promotion of the Fashion District’s assets and appeal as a center of fashion will help to raise the profile of all District businesses. Opportunities to collaborate between public and private institutions should be explored. While the showrooms are still doing well, the sub-district has felt the loss of garment manufacturers. There are opportunities to reposition many of the major vacant spaces within the District. Sub-District #2 is characterized by a major cluster of flower-related activities. ththThe roughly 4 to 6 block area between 7 and 8 Street and San Pedro and Maple Street represents one of the largest concentrations of flower wholesalers in California and the nation. The sub-district also serves as a junction between the textiles and other related industries, such as arts and crafts. th7 Street Employment trends describe growth in Fashion District flower businesses between 2003 and 2005, but contraction within the last few years with the recession. Despite these trends and overall decreases in the flower industry across Los Angeles County, there has been substantial expansion in fresh flower wholesale real estate. Three marts have been added since 2000 and growth continues along San Julian and Wall Street. The Flower District is a regional destination within the flower industry, but the area has the capacity to be developed as a greater shopping destination. The City Market, a -acre agglomeration of parcels, is located in this sub-district. Built in 1907, the City Market was the original produce market of the city. The City Market was closed in 2009, and the main market site is largely vacant. The ancillary parcels contain wholesale space, vacant space and surface parking. Main San Pedro
EXECUTIVE SUMMARY 13 Sub-District #3, especially Santee Alley, serves as the “public face” of the Fashion District. The area is characterized by the small-format retail stores and wholesale stores that sell to the both the public and buyers. During the thweekends there is extremely high foot traffic in the Santee Alley vicinity. 9 St Lease rates for stores located in Santee Alley are as high as $ to $ per square foot for 1,500 square feet spaces, comparable to rents for retail space in Santa Monica. Despite its retail success the area still struggles with a number of physical and competitive challenges. The Fashion District has Pico structural issues, such as poor signage, crowded streets, and required street and storm drain improvements. There are limited and expensive parking options for shoppers, food truck issues, and limited public transit access. Better marketing to strengthen the areas reputation for bargain- hunting shopping and way-finding for visitors, as well as the physical and competitive improvements in the areas mentioned above, will help the sub-district to continue to grow. Additionally, many community stakeholders suggest developing a safe evening shopping environment as well as events, akin to the Art Walk in the Historic Core, to help the success of retail and to create a stronger, 24-hour activity within the District. While Santee Alley retail and wholesalers sprinkled throughout the District are growing, storefronts along Los Angeles Street, the original men’s wear street in the district, have been lagging. Wholesalers in the area have been moving eastward closer to the San Pedro Wholesale Mart. Sub-District #4 is characterized by its clustering of wholesale shops which sell less expensive versions of popular, trendy, contemporary fashion items which can be purchased for more rapid delivery. There has been tremendous growth in the wholesale industry in the Fashion District, particularly in this sub- district. 900,000 square feet of space have been added to the Fashion District across the last five years, with almost all of this growth in Sub-District #4. The San Pedro Wholesale Mart, built in the mid-90s was a “game changer” for this sub-district. This two-story wholesale mart is configured into wholesale showroom condos, which look much like storefront retail spaces. This mart has become the focal point of the more inexpensive fashion found in the area. Buyers typically choose Pico to park their cars near this mart and will walk from showroom to showroom, and mart to mart, to make their purchases. Condos have been priced as high as $1,000 per square foot on average in this area. Rents on other showrooms in the area depend on their proximity to this focal point for buyers. Except for Santee Alley, the sub-district’s average lease rates of $3 to $4 for ground floor spaces are the highest in the Fashion District. There are many new marts throughout this sub-district and, similar to Sub-District #1, upper floors of existing buildings have high vacancies. Based on a quick window-survey, there is approximately 600,000 square feet of vacant space in marts throughout Sub-District #4. As this sub-district grows, the area may have the most opportunity to attract sewing contract work and to support domestic manufacturing throughout Los Angeles County. San Pedro Stanford San Pedro Griffith
14 EXECUTIVE SUMMARY Sub-District #5 is located at the southern most edge of the study area, extending beyond the I-10 Freeway towards Washington Boulevard. While approximately 45 percent of employment in this sub-district is fashion related, there is a greater diversity of users within this area. Washington Most of the fashion-related jobs in the area are manufacturing, wholesale or retail oriented. The sub- district includes a large mart that specializes in home goods and furnishings. The freestanding buildings in this sub district have better loading areas and access roads than other parts of the Fashion District and are typically one to two stories. These buildings are more desirable to manufacturers and contractors. The sub-district is home to many industrial users who are taking advantage of affordable space and the adjacency to Downtown Los Angeles One of the major strengths of the area is that the Blue line light rail runs along Washington Boulevard through the sub-district. Opportunities may exist to establish transit-oriented developments along the line. The challenge will be in balancing a mix of uses with the maintenance of industrial users. Commercial Projections Baseline projections of demand were developed based on knowledge of current long-term trends within the District, but they represent only the direction and overall likely magnitude of development within the District based on the District’s current trajectory. As part of the Design for Development, we will later present certain economic opportunities that may help to catalyze significant jumps in growth beyond what is quantified in the baseline projections. Historical employee growth rates between 2003 and 2009, as well as industry growth trends based on stakeholder interviews, are used to estimate future employment projections. Employment projections are then translated into space projections based on average square foot per employee employment density factors. Based on historical employment growth rates, we project that there is demand for million square feet of commercial space throughout the District. Much of the growth is anticipated in Sub-District #4 from growth in the wholesale industry. Wholesale will support approximately million square feet, other non-related fashion uses (which includes non-fashion-related retail and restaurants, etc) is projected to support million square feet of space. Fashion retail growth is anticipated to support approximately 550,000 square feet of space. This commercial demand is likely to be absorbed in both current available space as well as new space. If projected demand absorbs into 60 to 80 percent of the existing vacant space ( to 2 million square feet), then demand across the next 20 years will support to million square feet of new commercial space. HOTEL AND RESIDENTIAL LAND USES In addition to fashion- and flower- related commercial uses the report also takes a close look at potential support for hotels within the District and additional residential development.
EXECUTIVE SUMMARY 15 Hotels Downtown Los Angeles has approximately 21 hotels with 7,200 rooms. There are no 3+ star hotels in the Fashion District study boundaries and most of the Downtown hotels are located on the west side of Downtown. Businesses typically support some level of business travel and Fashion District stakeholders desire a new hotel to serve the District. Analysis of average Los Angeles County hotel rooms demanded per employee suggests that the Fashion District currently supports approximately 120 rooms throughout the Los Angeles area. Based on baseline estimates of projected employment growth, business may support another 60 hotel rooms across the next 20 years. Assuming the Fashion District can capture this demand it can likely support a 75-room hotel today and another hotel during the next 10 to 20 years. The type of hotel supported is defined by the buyers. Buyers shopping for branded lines are likely to prefer a higher-priced, unique boutique hotel, while buyers shopping for less expensive goods are likely to want a more basic, 3-star hotel, such as a Courtyard by Marriot. Residential 89Since the passing of the Adaptive Reuse Ordinance (ARO) in 1999, the Downtown has experienced tremendous residential housing growth. The Downtown area has increased its housing supply by over 17,000 units, an overall growth of approximately 150 percent. In addition, there are an estimated 15,000 additional residential units either permitted, under plan check, or under consideration by the City of Los Angeles. The Fashion District has approximately 725 market rate units which represent approximately 4 percent of the available units in Downtown. Currently, there is a high vacancy rate of approximately 60 percent due 10to unoccupied units in Santee Village. Residential demand projections were estimated based on historical Fashion District capture rates of Downtown growth. Based on this analysis, we estimate that there is support for 960 to 1,340 new market rate units across the next 30 years. In addition to this demand, we also consider demand for student housing and affordable housing. Demand for student housing may support another 300 to 600 student housing units in the near term. There is also strong demand for affordable housing in the City of Los Angeles. We estimate that if public dollars are available to support affordable housing, that this segment can represent another 10 to 25 percent of additional housing, or roughly 150 to 500 units. In total, the Fashion District may be able to capture 1,400 to 2,440 residential units across the next 30 years based on historical capture rates. If the Fashion District is substantially improved in terms of physical infrastructure, residential amenities, and perceptions of safety, and can achieve better connections to areas of Downtown with recent residential development, such as the Historic District and South Park areas, the Fashion District may be able to capture a much higher growth trajectory. It can also be noted that if residential development were able to grow by 8 percent a year, similar to growth at the height of the market, the District could achieve 1,000 new units by 2020. This is likely to be an upward-bound estimate of residential growth. ECONOMIC OPPORTUNITIES While Los Angeles is a significant US fashion center, the Fashion District has been undervalued as an important employment engine and center of fashion by the fashion industry and public. A major 8 A public policy that allows for the conversion of certain commercially‐zoned property to residential in Downtown. 9 Bounded to the north by the 101 Freeway, to the south by the 10 Freeway, to the East by Los Angeles River and to the West by Lucas Street. 10 The three buildings that make up Santee Village were recently sold to a new property owner.
16 EXECUTIVE SUMMARY opportunity for the Fashion District is to raise the profile of the Fashion District as an important, exciting, economically-vital center to the Los Angeles region and the global fashion industry. AECOM has organized these opportunities into four categories: (1) Physical and Economic Infrastructure Improvements; (2) Industry Opportunities; (3) Promotion of the Los Angeles Fashion District; and (4) Real Estate Opportunities. These are described in more detail in the following matrix of opportunities. Many economic opportunities can be undertaken by private or non-governmental entities, but private investment may be better encouraged with focused public investment. AECOM lists physical and economic infrastructure improvements as an economic opportunity because it is very important to recognize that place and quality of place plays a role in the vitality of an economy. The physical environment of a location and available amenities are important business location drivers. Buyers, shoppers, and, in result, fashion retailers and designers, will choose to locate in places that provide a pleasant and dynamic environment. With the evolution of the fashion industry, there are various industry opportunities that the Fashion District should be considering. It is important to maintain some level of apparel production in the Los Angeles region because manufacturing is important to designers and the fast fashion industry, but it should be recognized that garment contractors are not likely to move back into the multi-story buildings in the Fashion District they were previously housed. This leaves substantial available upper floor spaces to be filled. The design industry should be encouraged within the Fashion District, as it is an essential element to the Los Angeles fashion industry. It would also be advantageous to draw other creative industries, such as photography, publishing, internet, and media, into vacant upper floor spaces. The opportunities suggested in the “Promotion of the Fashion District” are the key opportunities for the Los Angeles fashion industry. Promotion and marketing of the Fashion District will help both public and private industry to have a better understanding of the activities taking place in the different nodes throughout the District. Segmentation of the market and improved marketing messages about the assets of the Fashion District will help attract the attention and dollars of the market audience. Finally, we touch upon the major real estate opportunities within the Fashion District. Redevelopment opportunities exist with repositioning vacant spaces around the District, making better connections to the real estate growth in other parts of Downtown and through catalytic developments at particular sites in the Fashion District. The Fashion District should aggressively seek to retain and attract major fashion labels and other creative industry businesses to the Fashion District. For this to happen many of the pieces discussed above—physical improvements and industry promotion—need to take place.
EXECUTIVE SUMMARY 17 Figure ES- 3: Opportunities Matrix Physical and Economic Infrastructure Improvements Improving the Physical Streetscape and Much of the Fashion District was initially Improve basic infrastructure, such as street paving, sewer developed in the early part of the improvements, lighting, storm drainage Environment of the Fashion District twentieth century and the District has Improve the streetscape and general environment not captured the necessary share of Build stronger pedestrian environment public investment to modernize its Improve security and perception of security infrastructure Additional Amenities Most area stakeholders agree that the Improvements in the physical design and amenities can Fashion District lacks typical business help build the Fashion District as an industry “fashion amenities such as restaurants and destination” hotels Other amenities to attract include: public spaces for fashion functions, brick and mortar restaurants, increased open space, convenient and affordable accommodations, less expensive and convenient parking, better transit access, and well-maintained restrooms for retail customers Industry Opportunities Maintain apparel production in the Los Local apparel production helps Identify spaces within the Fashion District to proactively Angeles Region Opportunities designers incubate and grow and is maintain manufacturing necessary infrastructure for the fashion Educate the public about buying local industry Encourage green apparel industries that can achieve a premium for domestic production Supporting LA Designers Designers and brands are not able to Garner more support for a fashion designer incubator attract necessary press and media Encourage collaboration and investment for an organized, attention professional Fashion Week Encouraging Creative Industries Contraction of manufacturing has left Work to attract other creative industries, such as multi-story buildings with vacant upper photography, media, music, or entertainment businesses floor spaces Market the historic buildings and open floor plans that exist within the Fashion District for creative office space Create better connections with the Downtown Art Walk, Arts District, and Old Bank District Promotion of the Los Angeles Fashion District Segmentation and promotion of the Will help customers and buyers better The Fashion District should still function as a complete different areas within the Fashion District navigate the Fashion District and attract physical district yet there is a need for better promotion more businesses and acknowledgement of various activities Segmentation can be produced through streetscape and marketing
18 EXECUTIVE SUMMARY Creating entity with prime purpose to Important to raise the profile of the Will require substantial resources and may require one or promote the comprehensive Fashion Fashion District on the global stage more full time staff District Promote a “Created in Los Angeles” Need to bring more attention to Leverage the California lifestyle to help promote LA brand designers and manufacturers in LA products Creating better connections with Despite the proximity to Hollywood, Stronger connections with television and the movie Hollywood there are limited direct relationships industry could provide intrinsic marketing and promotion opportunities. Would major studios, such as Sony, have an interest in sponsoring fashion events in connection with new films? Raising the quality of Fashion Week Currently, Los Angeles has successful Improved Fashion Weeks may encourage more designers market weeks, but has been lacking in and brands to stay and/or locate in the Fashion District Fashion Week presentations Fashion week is in essence a major publicity event and serves to provide knowledge of the creativity of Los Angeles fashion designers to the industry and greater public Real Estate Opportunities thReposition vacant spaces for office and New or expanding garment contractors Upper floor spaces near 9 and Los Angeles Street may residential uses in 4+ story buildings are not likely to want to move back to be repositioned for other fashion related uses, such as the 4+ story buildings. These spaces design, support services, and showrooms will need to be repositioned for fashion- Major marts with significant vacancy could carve out related or other uses space for a boutique hotel or educational uses With improvements in the District, there may be opportunities to capture office tenants looking for interesting and unique spaces th Other buildings further away from 9 Street and Los Angeles or the San Pedro Wholesale Mart can capture for other uses, such as residential Connecting to growth in the South Park Tremendous growth has occurred in Fashion District should position itself to integrate with and Historic Core Downtown in the last decade that has Downtown growth, while maintaining its identity as a not quite occurred in the Fashion fashion and flower commercial district District This includes physical manifestations of better orienting the District towards South Park and the Historic Core as well as forging relationships with other Downtown events and industries Catalytic development opportunities on There are a few large parcels ripe for The LAUSD site offer an opportunity for a large scale large parcels redevelopment within the District mixed-use residential development (though residential is not allowed under current zoning) The City Market is another site that offers a lot of opportunity for development Property owners may require the flexibility on a zoning/code level to make renovations happen
FASHION INDUSTRY OVERVIEW 19 INTRODUCTION Los Angeles has long been considered one of the world’s major fashion cities, yet little is known about the fashion industry in the city. Many Los Angeles residents are aware of Santee Alley, but are not aware 11that more than $6 billion in wholesale sales are conducted in the Fashion District each year. Within the industry, fashion professionals often overlook the merits and talent of Los Angeles fashion. The Fashion District in Downtown Los Angeles is the center of Los Angeles’ fashion industry; as the heart of a viable economic engine in the region, it is essential that we raise the profile of both the Los Angeles Fashion District and Los Angeles’ fashion industry. The Los Angeles Fashion District is a focal point of mass consumer fashion, with hundreds of showrooms featuring the latest styles from high-end designers like Trina Turk and Rodarte, to nameless designers working behind the scenes. Despite the many changes in fashion and garment manufacturing, Los Angeles, and in particular the Fashion District, has been able to maintain its position at the forefront of the fashion industry. Los Angeles Fashion District continues to expand its success in high-end denim and contemporary women’s brands, while the greater Los Angeles area has emerged as the “Fast Fashion Capital,” providing the latest fashion trends at low-cost to the mass public. The Los Angeles Fashion District is also home to other industries, including the fresh flower industry. Similar to the fashion industry, the fresh flower industry in Los Angeles is a major player in the domestic and international flower industry and major fresh flower wholesalers have marketed their product in the District since the early 1900s. AECOM is conducting an intensive 18-month study to produce a Design for Development (DFD) for the Los Angeles Fashion District. The first of its kind in the Fashion District, the overall Design for Development will consider and inform the types of development that will occur in the district in the future. The Fashion District DFD will focus on strengthening the District as a unique neighborhood, fully integrated with the rest of Downtown Los Angeles, while also reinforcing the Fashion District’s position as a preeminent fashion center. As the first component of the larger Design for Development, the Economics practice at AECOM, formerly known as Economics Research Associates (ERA), has led a comprehensive market study of the Fashion District. This study follows a 2006 study prepared by ERA in partnership with the Los Angeles Economic Development Corporation (LAEDC), the “Economic Contributions of the Los Angeles Fashion District.” The current market analysis looks to provide an in-depth overview of the industry and real estate trends in the Fashion District. Utilizing data from the California Economic Development Department, CRA/LA, other third party data providers, as well as extensive focus group meetings and interviews, AECOM evaluates the business activity in the Fashion District in terms of key industry trends, business activities and employment. In addition, AECOM examines the existing commercial and residential real estate markets in the Fashion District and explores future demand for commercial, hotel and residential land uses. The following report is organized into four major sections, along with appendices. The four sections and two appendices include: Fashion Industry Overview - Provides a brief explanation of the fashion industry supply chain and then reviews current fashion industry trends Los Angeles Fashion District Overview – Analyzes the Fashion District study area, evaluating sales, fashion and flower-industry sectors, and employment trends Then examines industry trends within Fashion District five sub-districts Fashion District Real Estate Analysis – Reviews Fashion District-wide and sub-district commercial real estate trends, hotel trends, and residential trends; baseline demand estimates, based on historical growth rates, are presented to understand the scale of future development 11 InfoUSA 2009 data.
20 FASHION INDUSTRY OVERVIEW Economic Opportunities – Presents a series of opportunities to help promote economic growth in the District Appendix 1: Case Studies – Presents three case studies of other fashion districts: including New York, São Paolo, Brazil, and Tokyo, Japan Appendix 2: Design Profile – Provides detailed analysis of the Los Angeles fashion design industry
FASHION INDUSTRY OVERVIEW 21 FASHION INDUSTRY OVERVIEW
22 FASHION INDUSTRY OVERVIEW FASHION INDUSTRY OVERVIEW 12Fashion is a major global industry, with far reaching economic impacts. A $612 billion industry, cities around the world compete to take claim to both the cultural and economic benefits of being a major fashion center. New York City, Paris, Milan and London are at the forefront of the fashion industry with annual fashion shows and housing some of the most well-renowned fashion designers. At the other end of the spectrum, Hong Kong is known for being the entryway to the burgeoning market of garment manufacturers throughout China and South/Southeast Asia, the regions where most mass market clothing is being produced. Los Angeles’ role in the global fashion industry has changed over time. Across the last 30 to 50 years, Los Angeles has been the center of domestic garment manufacturing and wholesaling, supplying many of the retail stores throughout the United States and the world. However, as the global industry has shifted, Los Angeles has cemented its role as the hub for distributing fashion product designed and produced in the Pacific and around the world. This section first describes the fashion supply system and product markets then discusses the major trends within the fashion industry on the global, national, and local scale. INDUSTRY DEFINITIONS FASHION INDUSTRY SUPPLY SYSTEM Typically, a fashion product follows a certain flow of activities to be transformed from a concept to a sellable product: Design: refers to concept creation and execution (creation of sample products) of a fashion 13product. Designers may be associated with well-branded fashion houses or smaller design shops, which produce original designs and/or mass-manufacturing businesses which follow fashion trends in the marketplace. Designers may or may not rely on trend-forecasting services (trend scouts), magazines, runway shows, retail stores, sales data, trade shows, street style, and contemporary culture to inform the design process. Typically, designers will attend textile markets and meet with suppliers of fabric, notions, and trim to source materials to create the collection and then work with yet other firms to produce the finished goods. A few higher-end firms may design their own fabrics. Manufacture: refers to the production of finished fashion products per the directions of the designer. Production quantities for each style/color/size combination are based on “cutting tickets” that aggregate confirmed and projected orders to meet demand by retail store buyers and consumers. Today, most businesses identified as “manufacturing” may no longer design and produce the product; they simply contract the production of the product. The garment sub-contractors are typically firms that focus on a single aspect, or several aspects, of the actual production such as making and grading (scaling by size) patterns, washing, dyeing, or treating fabrics, knitting, embroidering, cutting, sewing, and finishing assembled garments. Display and Presentation: refers to the coordination and production of promotional activities to generate demand for fashion products. This includes runway shows at fashion weeks, market and trade shows, as well as advertising, PR and media-oriented outreach to market fashion products to buyers, press, and the public. Fashion Week presentations are amongst the most expensive and highly publicized means of promotion. Market: often refers to the destination where the wholesale presentation of sample goods is conducted to elicit orders from retail store buyers, ., individuals from boutique stores, large 12 Figure refers to the total exports of textiles and clothing, as reported by the World Trade Organization. 13 Fashion Product is any product that is produced in the fashion industry. This includes apparel and accessories for any gender or market group.
FASHION INDUSTRY OVERVIEW 23 retail chains or behind-the-scene wholesalers empowered to order quantities of the fashion product for resale in their establishments. This may be done through showrooms, trade shows, or direct field sales presentations in the retailer’s offices or stores. Wholesale: refers to the sale, in large quantities, of fashion products by the firm that created them to buyers of retailer stores. Distribute: refers to the process of shipping and distributing fashion products from the wholesaler to the retailer. Retail: refers to the sale of the fashion product to the final end user (the individual customer). Retailers may conduct a whole range of promotional activities as well, including advertising, PR, discount sales, unique window displays, cross-promotional partnerships, designer/celebrity personal appearances and trunk shows. FASHION PRODUCTS The fashion industry can also be categorized by the type of fashion product. It should be noted that most fashion products undergo the process described above; however, the length of each process and the number of individuals involved in each process may differ greatly between types of product, types of design firms, production process, presentation process and target customer segment. These fashion product categories can be organized along a spectrum, with basic commodity products on one end and haute couture on the other. As one moves along the spectrum (towards haute couture), garments typically command a higher price, fewer garments of a style are made and sold, and in turn, fewer employees are required to produce them. While haute couture fashion is considered more prestigious and exclusive, haute couture fashion houses sell fewer garments, employ fewer individuals, and, in result, generate a smaller economic impact. Basic commodity products and fast fashion garments, on the other hand, are produced in mass quantities and sold to as many people at as low a price point as possible, comprising a much larger share of the economic activity in the global fashion industry. Further along the fashion product spectrum are basic garments, such as dress shirts, casual slacks and commodities, such as underwear and socks. These types of products rarely refresh their designs and typically have a life cycle lasting several years. They are mass produced and can be efficiently sold through mass market retailers at lower price points. The different product types are shown in the table on the next page.
24 FASHION INDUSTRY OVERVIEW <<< More unique and one-of-a-kind garments | higher price per garment | fewer garments produced | fewer employees needed <<< Contemporary Haute Couture Designer Collection Bridge Fashion Better Fashion Fast Fashion Fashion Defined as: Defined as: Defined as: Defined as: Defined as: Defined as: Fashion products that High quality and Higher-priced, ready-to- Fashion products are Moderately-priced, Cheap (budget) ready-are exclusive, custom-expensive prêt-á-porter wear fashion products sold as a lower price ready-to-wear fashion to-wear fashion fitted designs (ready-to-wear) Serves as a “bridge” point than Bridge products products collections Made-to-order for a betwFashion products een designer Typically found in Have high attention to specific customer Generally made in collections and more Price points range department stores in trend design details, smaller quantities than moderately priced Made from highbetween that of Better the United States low attention to quality -quality, other ready-to-wear alternatives Fashion products and expensive fabric and Produced in mass Has a short product life fashion products to Bridge Fashion hand-sewn by the most Typically not as quantities, in standard cycle (typically just guarantee exclusivity products experienced expensive as designer sizes several weeks) and quality seamstresses collection products Garments are trendier, Cheaper to produce Designs are derived Shown at runway Must have a wappealing to a younger orkshop Have more unique from contemporary and Designs and styling are shows in Paris that employs at customer base styling than mass designer collections not unique to a least fifteen people full- Product life cycles are market fashion Also includes sub-and produced in a particular brand time typically one season products category of “designer variety of standard Based on trends set by denim” sizes, trendy colors and Must present a Product life cycles are more expensive Example Brands: collection to the Pain mass quantities ris typically one season designer collections Example Brands: press each season Product life cycles are Prada Example Brands:Example Brands: (Spring and Fall) typically one season Betsey Johnson Armani comprised of at least C VersaceK (Calv Forever 21 in Klein) Nanette Lapore Example Brands: 35 runs/exits with H&M DKNY (Donna Karen) Theory Gucci outfits for both daytime Marc (Marc Jacobs) Die Zara sel Liz Clairborne Louis Vuitton and evening wear Top Shop Michael Kors Jones New York Product life cycles are LA-Based BrandLA-Based Brands: s: Kenneth Cole typically one season Example Brands: LA-Based Brands: Nautica BCBG Max Azria Rodarte Example Brands: Forever 21 Max Azria Juicy Couture LA-Based Brands: Representative Cities: Miss Me Trina Turk Guess Chanel Lucky Brand Max Studio Christian Dior Milan RepLocations: resentative City: Lanvin Paris Representative City: Representative City: Los Angeles New York Givency New York London Los Angeles Stockholm New York London LA –Based Brands: A Coruña New York London None Representative City: Paris
LOS ANGELES FASHION INDUSTRY OVERVIEW 25 THE FASHION INDUSTRY TODAY The following section will discuss the significance of the fashion industry in Los Angeles, as a component of the . economy, as well as the impacts of global changes to the domestic fashion industry. AECOM examined data from the . Bureau of Labor Statistics (BLS), the Office of Textiles and Apparel, and the California Employment Development Department (CA EDD). Specifically, the share of fashion-related employment was reviewed to better understand Los Angeles’ significance in the domestic fashion industry. For the purposes of this discussion, AECOM organized fashion-related businesses and employment into the following categories: - Design: refers to businesses and employment related to the design of apparel and accessories operating as stand-alone design studios (this does not include those employed as apparel and accessory designers as part of a larger business) - Manufacturing: refers to businesses and employment related to the manufacturing of apparel and accessories and includes those employed by sewing contractors, commercial screen printers, pattern makers, sample makers, etc. - Suppliers: refers to businesses and employment related to businesses which provide raw materials and goods to apparel and accessory manufacturers, including textile wholesalers, trim and other notions wholesalers, sewing (and related) machine wholesalers, etc. - Wholesale: refers to businesses and employment related to the wholesale of apparel and accessories - Retail: refers to businesses and employment related to the public retail of apparel and accessories, specifically those who sell to the public (and not in bulk to wholesale buyers) - Fashion Support Services: refers to businesses and employment related to support services such as banking institutions, real estate agencies (commercial real estate), legal services, transportation/shipping services, etc. 14These categories are used throughout the report and refer specifically to fashion-related businesses 15and employment only. All non-fashion or flower-related businesses and employment are broadly categorized as “Other.” LOS ANGELES AND THE GLOBAL FASHION INDUSTRY Milan, Paris, and London are known for their haute couture fashion houses and for being the trend-setters with their seasonal fashion runway shows. Los Angeles’ closest competitor, New York City, serves as the intermediary, known for its own set of designer collection runway shows (New York Fashion Week), and its concentration of designers. Across the last three decades, Los Angeles has been the hub of manufacturing, wholesaling, and distributing apparel products in the United States, serving the global 14 The following NAICS codes were used to define the following fashion industry sub‐categories. It should be noted that data filed under different NAICS codes may have been used if other supporting information was found to support its inclusion in the sub‐category: Design: 541490 Wholesale: 4239, 424320, 424330, 424340, Manufacturing: 315, 3162, 3169 Suppliers: 313, 314, 3161, 424310 Retail: 448 Fashion Support Services: 522, 531, 5411, 5142 15 The following NAICS codes were used to define the fresh flower industry in the Los Angeles Fashion District. It should be noted that data filed under different NAICS codes may have been used if other supporting information was found to support its inclusion in this category. Flower Industry: 42493, 4531
26 FASHION INDUSTRY OVERVIEW fashion market. More recently Los Angeles, has been emerging as a major “fast fashion” capital, serving as the headquarters of the popular brand, Forever 21 brand, among others. The availability of physical space and low-cost labor, access to new innovations and technology for garment manufacturing and distribution, along with access to transportation lines to the rest of the world (via shipping ports in San Pedro and Long Beach), gives Los Angeles distribution advantages over other cities in the United States. Los Angeles continues to be a major fashion city in the United States, with Los Angeles County surpassing other areas of the ., including New York, as the garment manufacturing leader. According to the BLS, New York, and Los Angeles comprise a significant share of the wholesale apparel sector of the United States (approximately 35 percent). 1617Figure 1 . Apparel Industry Official Employment Share – Los Angeles County vs. New York City (2009) %%%%%%%%%%%%%%%DesignManufacturingSuppliersWholesaleINDUSTRYLos Angeles CountyNew York County Source: . Bureau of Labor Statistics, Quarterly Census of Employment and Wages (BLS QCEW) - 2009 Preliminary Data It should be noted, however, that fashion-related employment in the United States has been declining. Domestic garment production has had to compete with the global market place, particularly regions with emerging economies like Mexico, Central America, China, and other parts of East/Southeast Asia, and manufacturing-related employment has contracted since 2001. According to Bureau of Labor Statistics, the number of manufacturing-related jobs has declined at an average annual rate of percent since 2001. Emerging economies are able to offer competitive, lower labor costs. Therefore, garments which require more labor, such as those with more components or adornments or require more steps to produce, are generally made abroad, while simpler garments, such as plain t-shirts and blouses, are made domestically. With the elimination of quotas with such countries, as well as the growing number of free trade agreements, garment manufacturers are finding it easier and cheaper to produce overseas. Additionally, these countries are becoming more efficient and skilled at producing the garments. As shown below, as apparel imports have risen in the United States (indicating more is being made abroad and being imported into the .), manufacturing employment in Los Angeles County has declined. 16 The following NAICS codes were used to define the following fashion industry sub‐categories: Design: 541490 Manufacturing: 315, 3162, 3169 Suppliers: 313, 314, 3161, 424310 Wholesale: 4239, 424320, 424330, 424340 17 New York City is defined as the five boroughs (coextensive with the five counties): Bronx (Bronx County), Brooklyn (Kings County), Manhattan (New York County), Staten Island (Richmond County), and Queens (Queens County). PERCENT
LOS ANGELES FASHION INDUSTRY OVERVIEW 27 Figure 2 Global and Domestic Fashion Industry Trends (1990 – 2009) 400350300250200150100500YEARUS Imports (Apparel and Textile)Los Angeles County Employment (Apparel Manufacturing)Los Angeles County Employment (Textile Mills) Source: Office of Textiles and Apparel (OTEXA); EDD; and BLS While manufacturing-related jobs have declined across the last decade, other fashion-related sectors, such as design, have experienced moderate growth (8% annually). The design sector, however, is still comparatively smaller than the other sectors, comprised of approximately 14,200 jobs in 2009 (versus the million retail-related jobs or 202,000 manufacturing-related jobs). The retail and wholesale sectors have remained stable, experiencing only a slight decline in 2009, in part due to the current economic conditions. Figure 3 . Fashion-Related Official Employment by Category (2001 – 2009) 1,800,0001,600,000Design1,400,0001,200,000Retail (excluding department stores)1,000,000Manufacturing800,000Suppliers600,000400,000Wholesale200,0000200120022003200420052006200720082009YEAR Source: BLS QCEW EMPLOYEESGROWTH INDEX (1990 = 100)19901991199219931994199519961997199819992000200120022003200420052006200720082009
28 FASHION INDUSTRY OVERVIEW IMPACTS OF A CHANGING INDUSTRY Historically, there has been a relationship between the type of clothing sought by the consumer and the manufacturing process necessary to produce such garments. With the advent of large, mass manufacturing of garments, consumer fashion trends also changed. When the apparel supply chain 18shifted away from the small craft shop model towards the mass manufacturing model, garments could be produced in large quantities at cheaper labor costs through the aid of new manufacturing technology. Under the mass manufacturing model, constant seasonal changes with significant changes to design were not practical; rather products utilizing new colors and fabrics, rather than design, better suited the more rigid mass manufacturing model. Additional innovations in technology now allow retailers and manufacturers to better communicate consumer trends with one another, to more quickly adapt to changes in demand, in both volume of garments and styles. As manufacturers are able to provide greater choice in color and designs, consumers continue to demand this variety. Fast Fashion As a result, fast fashion continues to rise in prominence in the fashion industry. As discussed earlier, fast fashion products are characterized by short product life cycles and are closely aligned to consumer trends, rather than setting the trends. Fast fashion manufacturers are able to track consumer preferences quickly and in turn, produce garments quickly and cheaply for consumers. Fast fashion typically bases its garment styles from those of major fashion houses, but produces it much more quickly and cheaply. The influence of fast fashion on the greater fashion industry is evidenced in the ability of fast fashion labels, such as Forever 21, to penetrate historically difficult fashion markets, such as Japan (which is a dedicated consumer of haute couture and designer collections). In addition, haute couture designers and other high-end fashion designers are partnering with fast fashion brands, like H&M and Zara, to produce limited runs of high-design products for a larger, mass consumer market. Fast fashion benefits from maintaining its primary manufacturing base close to consumer markets and designers/fashion makers. Supply chains that can quickly obtain fabrics, manufacture samples, and distribute products to retailers quickly in order to test the product, before moving towards mass manufacturing have the advantage. This quick turnaround manufacturing is necessary to supply retail stores with new products in a short period of time (every few weeks, rather than every few months) to encourage repeat visitation by consumers. Los Angeles has positioned itself at the forefront of the fast fashion trend by capitalizing on its existing 19strengths. It is the headquarters of a well-known fast fashion, domestic brand, Forever 21. The concentration of major fashion label wholesale showrooms, garment manufacturers and sewing contractors, as well as proximity to ports (for exchange of garments produced overseas), allows Los Angeles-based companies to have an advantage over other businesses. Businesses specializing in fast fashion have ready access to the designs of major fashion houses, which are emulated, through the showrooms and industry-oriented buyers shows hosted in the city. Often time manufacturers and sewing contractors are located within five miles of one another, allowing for quick turnaround of merchandise to be sold to buyers through wholesale retail showrooms. Los Angeles Market Capture Trends This has allowed Los Angeles County to increase its share of manufacturing, wholesale and design-related employment in the United States. According to the Bureau of Labor Statistics, the share of all apparel manufacturing jobs in the United States located in Los Angeles County grew from 17 percent in 2001 to 25 percent in 2009. This is partly due to the more rapid decline of manufacturing-related jobs nationwide, as compared to the slower decline in Los Angeles County, but also reflects that Los Angeles County was able to retain many of its manufacturing jobs despite the national trend. Correspondingly, 18 Small Craft Shop model refers to manufacturing model where small shops produced small quantities of garments at a time. Shops tended to employee only a few employees. Garments were produced flexibly and quickly, following a seasonal product cycle. 19 Forever 21 is located outside of the Fashion District just south of Downtown Los Angeles, along the Alameda.
LOS ANGELES FASHION INDUSTRY OVERVIEW 29 according to the latest economic census compiled by the . Census Bureau, Los Angeles County comprises more than 27 percent of the total apparel manufacturing sales in the country. Los Angeles County also modestly increased its share of apparel wholesale-related jobs from 10 percent in 2001 to percent in 2009, as well as design related jobs ( percent in 2001 to percent in 2009). Despite being a small geographic area, only percent of the physical area of the county, the Fashion District study area contains a significant density of employment in the county, capturing about percent of the total employment in the county. Figure 4 Los Angeles County Share of . Employment by Category (2001 – 2009) %%%DesignRetail (excl. %department stores)%%%200120022003200420052006200720082009YEAR Source: BLS QCEW PERCENT
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LOS ANGELES FASHION DISTRICT OVERVIEW 31 LOS ANGELES FASHION DISTRICT OVERVIEW
32 LOS ANGELES FASHION DISTRICT OVERVIEW LOS ANGELES FASHION DISTRICT OVERVIEW The following section reviews industry trends within the Los Angeles Fashion District. The Fashion District is the historic hub of the fashion industry in the County of Los Angeles and continues to serve as the center of much of the fashion-related activity. Los Angeles’ fresh flower industry is also concentrated in the Fashion District. To better understand the activities taking place in the District and each activities market audience, the Fashion District has been divided into sub-districts, organized by the type of activity. These sub-districts were used only to facilitate the study and are not anticipated to be used in long-range planning. This section first reviews sales and trends by sector for the comprehensive Fashion District then drills down to analyze the strengths and opportunities of activities in each of the sub-districts. FASHION DISTRICT STUDY AREA The Los Angeles Fashion District Business Improvement District (BID) includes over 100 city blocks in the heart of downtown Los Angeles. The study area extends beyond the boundaries of the Fashion District thBID, reaching westward until slightly beyond Broadway, eastward to Stanford and Griffith, northward to 6 Street and just south of Washington Boulevard. Figure 5 Overview of Fashion District Study Area Source: AECOM
LOS ANGELES FASHION DISTRICT OVERVIEW 33 SALES IN THE FASHION DISTRICT To provide an understanding of the significance of the Fashion District, total sales of businesses within the District were estimated using InfoUSA data. The sales data reported by InfoUSA is based on data reported by businesses. Due to the size of the informal economy in the area and cash nature of many of the sectors, such as flowers, actual sales within the Fashion District are likely to be even higher than the figures reported below. Based on InfoUSA survey data, businesses in the Fashion District reported approximately $10 billion in sales in 2009. Approximately 86 percent ($ billion) is estimated to be directly fashion- or flower- related and another 14 percent ($ billion) is in other, non- related industries. Almost 60 percent of reported sales are a result of wholesale activities. As such, it should be noted that sales do not equate to economic value added, but represent the total sales of goods flowing through the District. Retail is the second highest sales activity in the District at $850 million in annual activity. Manufacturing makes up almost $800 million annually and is a significant sales generator in the District. For the manufacturing figure, it is important to remember that firms who contract the production of their goods, as well as actual garment contractors who produce the goods, may be included in the Manufacturing category. Figure 6: Summary of Sales Volume by Industry Category (2009) Total Fashion District(in Thousands)Design$11,569Fashion Support Services$125,034Manufacturing$789,703Retail$849,093Suppliers$645,853Wholesale$6,065,701Flower$264,386Other$1,385,246TOTAL$10,136,585 Source: InfoUSA; AECOM INDUSTRY TRENDS IN THE FASHION DISTRICT This section provides a broad overview of the various fashion industry activities throughout the District. Manufacturing Garment manufacturing has been an important industry for Los Angeles and the Fashion District. Historically, ground floor wholesalers and retailers would often operate in the same buildings as garment manufacturing businesses located in the upper floors of the building. The close proximity between the different players in the fashion industry proved to be beneficial, as wholesalers and retailers could quickly order and turnaround garments to customers, while manufacturers could better understand and respond to consumer demand. At a time when shipping costs were high and the supply chain was more difficult to coordinate, this proved to be a major advantage in the fashion industry. However, as the advent of newer technologies changed these key factors, it became less reasonable to conduct manufacturing in the Fashion District. Lower labor costs in developing areas such as Mexico, Central America, and China, offset the cost of shipping, and new communication technology made it
34 LOS ANGELES FASHION DISTRICT OVERVIEW easier to coordinate with businesses in other countries. Over time, the Fashion District, and the United States as a whole, has lost its share of this industry. Today, the existing garment manufacturing firms and sewing contractors operate in close proximity to wholesalers. However, they are not necessarily locating in the Fashion District. They have abandoned the upper stories of historic buildings in the Fashion District for low-density, single-story buildings, with amenities such as wide streets and large loading areas which are more accommodating to the frequent movement of goods. Smaller, related businesses, such as pattern makers and sample makers, continue to locate in the Fashion District. Wholesale Apparel wholesale is strong in the LA Fashion District with recent growth in inexpensive contemporary women’s fashion. The Fashion District is characterized by its high density of garment wholesalers. The types of garments sold by wholesalers in the area are diverse, ranging from high-end brands such as Trina Turk to unmarked garments going to small, local boutiques. The majority of wholesale showrooms for branded garments, either designed by well-known designers or marketed by well-known brands, are thlocated in major marts such as the California Market Center or the Cooper Building near 9 and Los Angeles Street. Showrooms for unmarked contemporary fashions, featuring popular designs mimicked from all the major runway shows and being sold in thousands of retail stores across the United States, are located along Wall Street, San Julian Street, and San Pedro Street. The concentration of these showrooms and storefronts has made the Fashion District a convenient stop for retail buyers. Retail buyers, including those for major department stores, as well as for “mom-and-pop” retail stores, find the variety of product options available to be attractive. Buyers can view the latest trends in the showrooms in the California Market Center; make large orders months in advance and then go to the other side of the district to San Pedro Street to purchase the latest contemporary women’s fashion from the wholesale storefronts for quick 1 week to 3 week delivery. The growing reputation in the fashion world of the Fashion District’s wholesale stores has contributed to the growth of area’s wholesale industry. While there have been contractions in other fashion industry sectors in the District, wholesale businesses continue to grow in number. Retail The discount retail storefronts have served as the “public face” of the Fashion District for many years. Saturdays bring thousands of visitors to Santee Alley who are looking for a unique shopping experience and discount goods. Because of the diversity of retail activities that occur in the Fashion District, the reputation of the District has been mixed. Many of the wholesale storefronts along San Julian Street and Wall Street will open themselves to public consumers for retail sales, offering wholesale-level discounts on garments. The concentration of retail stores in Santee Alley offer similar discounts, as well as “knock-off” goods (copies of popular designs and fashions). Illegal retail activities also occur in the District, with street vendors selling counterfeit merchandise. Additionally, due to the manufacturing businesses in the area, a large number of fabric/textile and other sewing goods retailers are located in the Fashion District, adjacent to the apparel retail stores. Fashion Support Services Fashion Support Services businesses, as the name states, provides support services to the other fashion-related businesses, including banking, legal and real estate services, as well as transportation and shipping services (to move manufactured goods in and out of the district). Fashion Support Services has remained a steady sector in the Fashion District. The growth of the apparel wholesale industry in the Fashion District has helped spur the growth of the banking sector in the area, with several bank branches opening in the District. Most significantly, several international banks have opened branches in the District, including Wilshire State Bank (South Korea), Mirae Bank (South Korea), Hanmi Bank (South Korea), and Habib American Bank (Pakistan).
LOS ANGELES FASHION DISTRICT OVERVIEW 35 Design Fashion designers can operate in a variety of business environments. The best-known designers own and run their own design studios, houses, or labels, with other designers creating on their behalf. Large garment manufacturers also utilize designers to either create original designs or to develop the designs necessary for patterns and samples based on popular fashion trends. However, it should be noted that designers (not working for larger firms) have a high rate of turnover, with even successful ventures only lasting five years and many having to close after only a few months. Designers in Los Angeles often choose to locate in the city because of the concentration of fashion-related supplies and services, such as textiles, pattern makers, sample makers, and manufacturers. The proximity to other creative industries, particularly the film and TV industries is also enticing. New designers, fresh out of design programs like FIDM and OTIS also may choose to stay in the LA region because of the availability of design manufacturing jobs located in the cities of Commerce and Vernon. Many new designers are encouraged to gain a year or two of work experience before starting their own design venture. Various buildings in the Fashion District, such as the Cooper Building and the 860 Building specifically market to young designers, emphasizing open floor plans ideal for creative design in beautifully-restored, historic buildings. Although Los Angeles County has about ten percent of the nation’s share of designers, the New York City area captures a far greater share (nearly 20 percent). New York, historically, has attracted and retained many of the industry’s premier designers, including Ralph Lauren, Vera Wang, Diane von Furstenberg, Calvin Klein, Michael Kors, Nanette Lepore, and others. Additionally, New York City has some of the top fashion schools in the nation, graduating over 1,000 students each year, many of whom choose to stay in the city after graduating. Like Los Angeles, New York City’s Garment District provides the necessary infrastructure for designers. With over 50 percent of the fashion jobs, the district is home to many of the critical support industries necessary to bring designers’ visions to reality. However, a key advantage New York has is its concentration of complementary industries, primarily marketing and publishing. Two of the three largest global marketing agencies as well as some of the biggest fashion publications, such as Vogue, GQ, and Women’s Wear Daily are headquartered locally. The proximity to these publishing houses provides opportunities for young/new designers to be “discovered.” For more information on the opportunities and challenges gathered from designer interviews, please see the Designer Profile in the appendix. Fresh Flower Industry The US fresh flower wholesale industry had sales of $ billion in 2007. Los Angeles County made up approximately $470 million of these sales, or 4 percent. In the US, employment in the florist industry has been gradually contracting across the last decade, but up until the recession, the flower wholesale industry had slight employment expansion of Figure 7: Flower WholesaleIndustry Sales approximately 6 basis points per year (%). % of the In Los Angeles County, the flower wholesale Sales ($1,000)FlowUSer Wholesale Salesindustry saw some growth in employment in 2001 Los Angeles County467,3064%and 2002, but employment has been decreasing Total United States11,578,970100%in the industry since 2003. Source: US Economic Census 2007Flowers and the Fashion District The two original flower markets, the Los Angeles Flower Market of the American Florists’ Exchange Ltd. and the Southern California Flower Market were opened in Downtown Los Angeles in the early 1900s. The markets were initially established to help provide a marketplace for local Southern California flower growers, but, with improvements in fresh flower distribution channels, Southern California’s increasing real estate prices, and the North American Free Trade Agreement, the fresh flower wholesale industry has been increasingly globalized. Currently, many of the US’ flowers come from South and Central America, as well as Europe.
36 LOS ANGELES FASHION DISTRICT OVERVIEW While the fresh cut flower industry is down across the county as a whole, the globalization of the flower industry has sparked expansion within the Fashion District. With its proximity to Los Angeles International Airport (LAX) and the Ports of Los Angeles, the Fashion District serves as a distribution hub for Southern California. Several flower marts have been founded since 2000, including the LA Flower Mall, the California Flower Mall, and the San Julian Flower Market. Growth has also occurred with domestically produced flowers. California’s orchid production has grown in recent years due to technological improvements and now there is also a budding “Orchid Row” at San Pedro. The two flower markets on Wall Street are the historic core of flower wholesale in the Fashion District, but, as described above, there are a growing number of flower malls along San Julian Street, as well as dozens of independently-owned wholesale and retail florists, floral supplies and floral-related storefront shops. These flower markets and malls supply fresh cut flowers and plants to retail florists, designers, and event planners throughout the Los Angeles area. Flower Industry Competition Figure 8Port of Entry for . Flower Imports (2010)Through logistics improvements, Miami has taken advantage of the trends in flower importing to capture a ATLgreater share of the US flower wholesale market and is a %major %etitor to Los Angeles flower industry. Miami %%ORDDFWmakes up approximately 14 percent of the US flower %%All Other wholesale industry. %Currently 87 percent of all flower imports come through %%the Miami International Airport. According to Miami Airport, this equates to 162,000 tons of flowers with a value of $702 million. A large number of the flowers sold in Los Angeles are being transported by refrigerated truck from Miami to MIACalifornia, a transportation period of approximately 54 %hours. The transport of the flower product from Miami to Los Angeles, adds to the product costs for LA’s flower industry in terms of both additional transportation costs as well as impacting the quality of the product. If flowers Source: Miami’s Disk of International Trade, 2010 were flown directly to Los Angeles, the flower industry would benefit from cheaper flower supply costs and would benefit from fresher flowers with a longer life span. LAX receives the second largest amount of flower imports, 6 percent of total US flower imports or 12,000 tons, but this figure is substantially lower than the amount imported to Miami. The Miami International Airport benefits from: 17 warehouses amounting to over million square feet of space, including refrigerated storage. Cargo aircraft parking of over million square feet (41 common-use cargo positions and 23 leased cargo positions). Centralized Cargo Clearance Center - Centralizes the functions of Customs and Border Protection (CBP), the Food and Drug Administration (FDA) and the Fish and Wildlife Service (FWS) under one roof, providing a one-stop center for documentation processing. Fumigation Facility - Permits efficient pest control for commodities needing immediate fumigation. MIA is the only US Airport with two on-site fumigation facilities. Development Programs – MIA has programs aimed at stimulating overall cargo traffic and enhancing trade connectivity between MIA and new global markets, as well as incentive programs offered to any carrier commencing scheduled, year-round cargo freighter service from routes not currently served by an all-cargo freighter to Miami. Figure 9 compares employment growth patterns between Los Angeles and Miami. Miami recently expanded their cargo facilities. While Los Angeles County and the US flower wholesale industry
LOS ANGELES FASHION DISTRICT OVERVIEW 37 contracted before the recession, Miami’s flower wholesale industry grew. In 2006 and 2007, nearing the completion of the new cargo facilities, Miami wholesaler employment expanded by 5 percent and 7 percent, respectively. Figure 9 Los Angeles County Flower Wholesale Industry Trends (2001 – 2009) LA CountyMiami-Dade County* Source: BLS QCEW Capturing Additional Market Share A new $1 million, 12,700-square foot refrigerated facility opened at Los Angeles International Airport in 2010. The airport has reportedly seen a 20 percent increase in direct imports from South America, as South American growers are trying to find faster and cheaper ways to get their goods to Asia. This is definitely a boon for the flower industry, but Los Angeles is still not at the capacity necessary to serve the industry. Simply building refrigerated storage facilities and expedited flower processing at LAX will not immediately help Los Angeles erode Miami’s market share of flower imports. As pointed out in an article by Genaro 20Pena about Houston’s attempts to capture a greater share of the global flower trade, Miami has been the traditional gateway for cargo from Latin America in part from the network of flower distributors, importers, and consolidators that have set up shop in Miami to be near the airport. New distribution facilities will help to capture greater share of flower air cargo to Los Angeles and, in result, will help to drive the growth of the flower wholesale industry in Los Angeles. It may take a number of years to build the overall network of distributors, importers, and cargo routes to capture a substantial share of the imports from Miami. 20 Marketing Director at Houston Airport EMPLOYMENT INDEX (2001 = )
38 LOS ANGELES FASHION DISTRICT OVERVIEW ADDITIONAL FASHION DISTRICT INDUSTRY FACTORS DECENTRALIZATION Garment manufacturing has not only globalized, it has decentralized as well. A map of manufacturers and designers is presented in Appendix Figure 3. Areas such as the City of Industry and the South Bay (Torrance, Gardena, and other neighboring cities) attract garment manufacturing and sewing contracting firms away from the Fashion District. The close proximity to downtown, as well as the connectivity provided by the freeways, allows businesses located in these areas to compete with the Fashion District. Industrial space is often times cheaper, as well as better suited for the needs of apparel manufacturers. Buildings are single-storied, located in industrial parks, with amenities such as wide streets and access ways, loading docks, etc. The residential neighborhoods near these areas tend to provide a lower cost of living as well, making it more convenient for employees. Unfortunately, Los Angeles still suffers from the past perception that the area is home to a number of sweatshops and cheap counterfeit goods (Santee Alley). This is partly an enforcement issue, as well as a marketing issue. Unlike New York, which had similar public perception issues, the City of Los Angeles has not supported the fashion industry through the creation of specific offices and the dedication of permanent staff and resources. New York City has been able to significantly improve its reputation, both within the industry and in the public, through active marketing of its more glamorous side. There are no basic marketing functions, such as quantifying the importance of the fashion industry, being done in Los Angeles on an ongoing basis. COMPETITIVE ADVANTAGES Despite some of these challenges, the Fashion District has been able to sustain itself through difficult economic periods due, in part, to several competitive advantages: Affordability: moderately-priced real estate throughout the district and Los Angeles County; Convenience: located near major transportation lines, including freeways, cargo rail lines, shipping ports, and air cargo ports; Availability of Labor: large base of skilled and unskilled labor for all aspects of the industry, including designers and managers (through schools like OTIS and FIDM), skilled technicians and machinists, and sewers and cutters; Clustering: easily identifiable clusters of fashion-related businesses. The LA Fashion District provides all of the services needed to run operations clustered in one centralized location (designing, cutting, sewing, sales, trade, etc.); Diversity: businesses range in terms of their role in the manufacture and retail process, as well as the type of fashion product produced and/or sold; and Market: Los Angeles is in of itself a large market. Additionally, there is a critical mass of talent coming from local fashion schools in the region, including FIDM and Otis within the Fashion District. Los Angeles is also a desirable location for many in the creative industries, due to its proximity to Hollywood.
LOS ANGELES FASHION DISTRICT OVERVIEW 39 FASHION DISTRICT EMPLOYMENT Based on analysis of the District and review of official records of employment, we estimate there are approximately 19,200 workers throughout the Los Angeles Fashion District. Using precise ES-202 data, we estimate that there are 14,600 official employees within the District. In addition, another 4,600 workers are projected to work in the District. These represent both sole proprietors and other undercounted workers. This section first describes the methodology for analyzing official employment records and additional employment estimates. Next, we review the data and trends for official employees, then estimate the share of sole proprietors and adjust our total figure by an estimate of undercounted workers. Methodology AECOM used several different sources to estimate total jobs in the district Official employment and business establishment estimates are based on confidential data provided by the California Employment Development Department (EDD). The employment and wage data, also referred to as ES-202 data, is derived from reports filed by all employers subject to unemployment compensation laws, both state and federal. Businesses that are owner-operated (sole proprietorships) are not included in ES-202 data, as they are not subject to unemployment compensation laws. Furthermore, as ES-202 data is self-reported by business owners, there may be some occurrence of “undercounting” workers. Typically, ES-202 data is provided for larger geographic areas, but AECOM was able to obtain confidential ES-202 data for the Downtown Los Angeles region. This allowed AECOM to estimate the employment within the specific study area boundaries. Based on data provided by the California EDD, AECOM estimates the study area has approximately 14,600 employees. As mentioned previously, this estimate does not include those who are self-employed or employees who are not officially reported by the employer. A previous 2006 report estimated that the Fashion District has 36,000 employees based on third-party survey data provided by Claritas. Zip codes are the smallest geographic area available through Claritas. The previous estimate is based on an area that extends far beyond the Fashion District boundaries. This was the best available data at the time, but for this study we were able to obtain access to the more precise, confidential ES-202 data. Figure 10 Comparison of Previous Study Area and Current Study Area Source: AECOM
40 LOS ANGELES FASHION DISTRICT OVERVIEW Additionally, since Claritas data is based on survey data collected by Claritas, businesses which are owner-operated are likely included in the estimates. Claritas does not limit its survey to business establishments which are subject to unemployment compensation laws. The major difference between the 2006 employment estimate and the current official estimate is primarily due to the more precise geographic area used, but the inclusion or exclusion of owner-operators and “unofficial” employees may also contribute to the variation. To account for sole proprietors, AECOM examined Non-Employer Statistics collected by the . Bureau of Labor Statistics from administrative records of the Internal Revenue Service. Non-Employer Statistics provides economic data by industry for businesses that have no paid employees, and are primarily comprised of sole proprietorship businesses. Non-Employer Statistics are only available on a county-level and are not available for every NAICS industry category. AECOM compared county-level Non-Employer Statistics against ES-202 employment data (for the county) by industry to estimate the number of sole-proprietorships operating in the Fashion District. AECOM estimates that approximately 10 percent of true employment may be comprised of sole proprietorships. AECOM also adjusted the total employment estimate for the Fashion District to account for other workers in the area not accounted for. This may include family members who often assist in the operation of sole proprietorships (but are not counted as official employees), those not counted in the official ES-202 survey, etc. AECOM believes that between 10 to 15 percent of true employment may be unreported and therefore not accounted in the figures reported to the California EDD. Throughout the report, AECOM will refer to these three types– official, sole proprietorships and unreported– to estimate the total number of jobs in the district. Firms are designated as either “employer firms” or “sole proprietorships” to distinguish between those officially reported to the CA EDD as employing non-owner individuals (the former) and those estimated based on Non-Employer Statistics (the latter). Fashion District Employment Trends Officially Reported Employment The area has declined in the number of officially reported employees by approximately 20 percent since 2005, but the number of employer firms in the area has increased slightly, to over 2,800 firms. Figure 11 Fashion District Officially Reported Employment by Category (2003 – 2009) DesignFashion Support ServicesRetailManufacturingSuppliersWholesaleFlowerOther (Non-Fashion or Flower)Unknown20,00018,000*TOTAL: 18,900*TOTAL: 18,25016,000Unknown 194 14,000TOTAL: 14,600*Other 3,79312,000Flower 32510,000Wholesale 3,8598,0006,000Suppliers 780Mfg 2,6424,000Retail 2,2312,000Services 6870Design 95200320052009YEAR Source: CA EDD EMPLOYEES
LOS ANGELES FASHION DISTRICT OVERVIEW 41 Figure 12 Fashion District Employer Firms by Category (2003 – 2009) DesignFashion Support ServicesRetailManufacturingSuppliersWholesaleFlowerOther (Non-Fashion or Flower)Unknown3,500*TOTAL: 3,2503,000Unknown 127TOTAL: 2,840*2,500*TOTAL: 2,670Other 7412,000Flower 451,500Wholesale 801Suppliers 1781,000Mfg 472500Retail 338Services 1120Design 27200320052009YEAR Source: CA EDD The officially reported employment in the Los Angeles Fashion District is primarily comprised of fashion-related jobs (70 percent). This includes fashion wholesalers, manufacturers, suppliers, designers, and fashion support services. About 26 percent are not directly related to fashion, such as restaurants and non-apparel-related manufacturing, wholesale and retail, while another 2 percent are related to the flower industry (wholesale flower sales, florist suppliers, etc.). The remaining 2 percent are unknown. It should be noted that although flower-related jobs make up only 2 percent of jobs in the study area, this employment comprises about percent of the flower-related jobs in the entire county of Los Angeles. As shown below, the Fashion District study area contains a significant density of employment in the county. Although the study area makes up less than percent of the physical area of Los Angeles County, it supports percent of the total officially reported employment in the county, making it a significant economic player in the county. Figure 13 . Fashion District Share of County Officially Reported Employment %%%%%%%%%%Total Employment %%Fashion-Related Fashion-Related Fashion-Related Fashion-Related Flower-RelatedDesignManufacturingSuppliersWholesaleEMPLOYMENT CATEGORY Source: BLS QCEW; CA EDD PERCENTESTABLISHMENTS
42 LOS ANGELES FASHION DISTRICT OVERVIEW The local industry in the Fashion District has been impacted by the global trends discussed earlier in this report. An analysis of the number of fashion-related businesses between 2003 and 2009 shows that: The number of retail firms has only slightly declined, due partly to the economic recession and drop in consumer spending; In light of increased overseas competition (due to the adoption of free trade agreements and the elimination of import quotas), Los Angeles-based manufacturing firms have steeply declined in number; Consequently, the number of supplier firms which provide materials and raw goods to the manufacturers has also been slowly declining; And, despite declines in other sectors of the fashion industry, the number of contemporary fashion wholesale retailers has risen to surpass 2003 levels, reflecting the rise in fast fashion sales. Figure 14 Fashion-Related Employer Firms by Type in . Fashion District 1,000MFG900800WHOLESALE700600500400RETAIL300SUPPLIERS200SUPPORT SRV100DESIGN0200320052009YEAR Source: CA EDD Sole Proprietorships As previously mentioned, AECOM examined Non-Employer Statistics collected by the . Bureau of Labor Statistics from administrative records of the Internal Revenue Service to estimate the number of sole proprietorships in the Fashion District. Non-Employer Statistics are only available on a county-level and are not available for every NAICS industry category. AECOM compared county-level Non-Employer Statistics against ES-202 employment data (for the county) by industry to estimate the number of sole-proprietorships operating in the Fashion District. AECOM believes approximately 10 to 15 percent of true employment may be comprised of sole proprietorships. Figure 15 below summarizes the distribution of sole proprietorships estimated to be in the Fashion District and by sector category. The non-employer to employee ratio factors used to determine the estimates are also shown below Figure 15. AECOM estimates that the Fashion District contains an additional 2,100 businesses operating as sole proprietorships. Minimally, these businesses account for an additional 2,100 jobs, assuming the owners do not employ other individuals. However, we have observed throughout the district that many “mom and pop” stores utilize family members and other individuals who are not officially reported to the state or IRS. An FIRMS
LOS ANGELES FASHION DISTRICT OVERVIEW 43 estimate of those individuals employed by sole proprietorships, as well as those not included in official employment records (ES-202) is provided in the next section. Figure 15 Summary of Estimates of Sole Proprietorships in Fashion District (2009) TOTAL Support (Non-Fashion or Flower) ,127 Source: CA EDD; US Census Non-Employer Statistics; AECOM Unreported Employment To account for overall underreporting of employment, AECOM applied an “Other Employment” factor to the previous estimate, comprised of officially reported employment from the California EDD (ES202 data) and sole proprietorships. This “Other Employment” category may include family members who often assist in the operation of sole proprietorships (but are not counted as official employees), those not counted in the official ES-202 survey, etc. AECOM believes that between 10 to 20 percent of true employment may be “Other Employees” not accounted for in the figures reported to the California EDD. AECOM assumed the factor varies between sub-districts, primarily due to the nature of the businesses in the area and strictness in compliance culture in the areas. Total Jobs in the Fashion District AECOM estimates the Fashion District contains approximately 3,800 firms (employer firms and sole proprietorships) and over 19,000 jobs, when accounting for sole proprietorships and the practice of undercounting of employees. Figure 16 Summary of Total Jobs in the Fashion District by Sub-District (2009) Officially Employment Firm Estimate Factor: Reported Estimate with Sole with Sole "Unreported" Estimate of 123 Employees Proprietorships Proprietorships Employment Total Jobs Sub-District #1 4,427 5,023 596 5% 5,274 Sub-District #2 1,293 1,507 214 10% 1,658 Sub-District #3 3,761 4,257 1,502 20% 5,109 Sub-District #4 3,152 3,763 1,011 20% 4,515 Sub-District #5 1,973 2,183 473 20% 2,620 TOTAL 14,606 16,733 3,796 13% 19,175 Notes: 1/ Estimate based on ES202 data provide by the California Employment Development Department 2/ Sole Proprietorship factors based on analysis of Nonemployer Statistics from the US Census Bureau for the County of Los Angeles, selected by NAICS categories 3/ “Unreported Employment” factors based on anecdotal evidence collected during study Source: CA EDD; US Census Non-Employer Statistics; AECOM
44 LOS ANGELES FASHION DISTRICT OVERVIEW SUB-DISTRICT ANALYSIS One of the advantages of the Los Angeles Fashion District is the clustering of fashion-related businesses within a small physical footprint. In order to better understand the strengths and opportunities of the Fashion District as a whole, AECOM segmented the district into sub-districts by examining the concentration of specific activities, as well as the different audiences the sub-districts serve. Three of the five sub-districts are fashion-oriented. A map of the area with the boundaries of the sub-districts is shown on the following page. For purposes of this study we have drawn certain boundaries, but it should be noted that in reality the boundaries are considered fluid. They are defined by the characteristics of the activities and users of the area and will change over time. The sub-districts were created for the purposes of this study only and have not been adopted by any official entity at the time of the writing of this report. SUB-DISTRICT #1 Figure 17Map Overview of Sub-District #1 Sub-District #1 is characterized by its concentration of high-end fashion showrooms and mixed-use infrastructure. Several high-rise buildings in the area, including the four buildings clustered at Los Angeles thStreet and 9 Street contain wholesale showrooms which house well-known, branded fashion labels. Major showroom buildings, otherwise known as marts, in the area include the California Market Center, Cooper Design Center, the Gerry Building, the New Mart, and the Liberty Building. The wholesale showrooms in this sub-district reflect the brands and labels most easily recognized by the public. Furthermore, the fashion lines, labels, and brands that are represented in this sub-district provide the basis for the styles that are emulated by the manufacturers in Sub-District The marts in the Fashion District are one of the city’s major #4. These labels typically operate on a competitive advantages as a fashion city. The showrooms serve as marketplaces for designers, manufacturers, wholesalers, and traditional fashion schedule, producing buyers (for retail stores) and are generally restricted to industry-collections on a seasonal basis. Many of the related parties only. Unlike other marts which tend to be garments sold through the showrooms are operationally limited and seasonal, those in the Fashion District produced overseas, as they operate on a are open year round. longer schedule than a fast fashion brand would. Since the garments are seasonal, thMarket weeks are held five times a year at the 9 and Los production timelines can be longer. Buyers Angeles Street marts. There designers are able to showcase and may be required to provide a line of credit to sell their latest designs to buyers. The market weeks held in Los purchase orders here, due to the higher risk Angeles typically attract retail buyers and other industry players; involved (overseas productions, size of the New York City’s Fashion Weeks, on the other hand, are well-order, higher quality goods, etc.). marketed to a non-industry audience and well-known by the general public. Despite the limited local and public media attention, the market weeks at the marts attract thousands of visitors and generate millions of dollars of revenue for local-area businesses. The Los Angeles Economic Development Corporation conservatively estimates that fashion-related runway shows and market weeks draw over 53,000 buyers and exhibitors to the Fashion District annually, resulting in over $103 million in annual revenues tied directly or indirectly to fashion market weeks held in the Fashion District.
LOS ANGELES FASHION DISTRICT OVERVIEW 45 Figure 18 Overview of Study Area Sub-Districts Source: AECOM
46 LOS ANGELES FASHION DISTRICT OVERVIEW SUB-DISTRICT #1 (CONTINUED) A variety of uses can be found in this sub-district. Ground floor has traditionally always been retail-oriented. In the past, storefronts along Los Angeles Street housed men’s wear retail shops, forming a strong cluster of businesses. While the type of retail shops has changed, the nature of the ground floor commercial space has been kept the same. Designer collection brands are slowly opening retail shops in this space, clustering mostly near the north end of the sub-district near the Historic Core of downtown Los Angeles. Use of the upper floors of many of the historic buildings, however, has changed over time. Today, these floors are used by small-shop designers, pattern makers, sample makers and other support sub-industries for the fashion industry. Previously, many of these upper floors were used for garment contracting. The number of manufacturing-related firms (as reported by the CA EDD) has declined by nearly 70 percent in the last six years. However, with the contraction of garment manufacturing in the United States, there are a greater number of vacancies in the upper floors of these buildings. Jobs AECOM estimates that there are approximately 5,300 total jobs in Sub-District #1. Approximately 4,400 persons are officially employed within this sub-district. In addition, we project that there are approximately another 850 persons working in the sub-district as sole proprietors or other workers. Officially Reported Employment Estimates Sub-District #1 has the greatest diversity of fashion-related, officially reported employment, as well as having the largest concentration of employees, approximately 4,400 employees dispersed amongst nearly 930 firms. Figure 19 Distribution of Officially Reported Employment in Figure 20 Distribution of Employer Firms in Sub-District #1 Sub-District #1 (2009) (2009) DesignDesignUnknownUnknown1%1%1%3%WholesaleWholesale15%14%Other (Non-Other Fashion (Non-or Flower)MfgFashion 31%Mfg19%or Flower)21%44%SuppliersSuppliersRetail2%3%25%RetailFashion Fashion Flower-Flower-8%Support Support RelatedRelatedServicesServices0%0%7%5% Source: CA EDD Source: CA EDD As shown in Figure 21, the sub-district has experienced a small nominal, but large percentage increase in the number of design-related jobs, as well as growth in fashion retail-related jobs. Manufacturing-related jobs, and consequently employment at supplier-related businesses, have both decreased dramatically since 2003. However, the number for firms that are not fashion or flower related (“Other”) has increased significantly, showing businesses in the area are becoming more diversified over time. A break out of the non-fashion or flower-related employment is shown in Figure 22. The sub-district contains many jewelry businesses (29 percent of the non-fashion uses), most likely due to its proximity to the Jewelry District in Downtown Los Angeles. Another 21 percent of “other” employment is related to non-fashion or flower retail. It should be noted that this sub-district has the highest number of “Creative
LOS ANGELES FASHION DISTRICT OVERVIEW 47 Industry”-related (such as film production, talent management and representation, printers and publishers, etc.) businesses and employment. Figure 21 Employment and Establishments in Sub-District #1 by Category (2003 – 2009) 2009 Change ('03 - '09) CAGR ('03 - '09) Overall Trend Emp Firms Emp Firms Emp Firms Emp Firms Fashion-Related Design 62 12 % % % % Wholesale 608 141 % % % % Manufacturing 845 194 % % % % Suppliers 94 29 % % % % Fashion Support Services 307 43 % % % % Retail 1,089 70 %* % % % Flower-Related 12 4 % % % % Other (Non-Fashion or Flower) 1,351 409 % % % % Unknown 59 25 Grand Total 4,427 927 % % % % *It should be noted that much of this increase is due to the inclusion of a large retail office. Without this anomaly the growth rate would have been in the range of 6 percent. Source: CA EDD Figure 22: Composition of “Other (Non-Fashion or Flower)” Employment Category UnknownOther 4%Wholesale4%Other (No Category)20%Creative Other RetailIndustry21%1%Home GoodsJewelryRestaurants, 4%29%%Private Households7% Source: CA EDD; AECOM Sole Proprietorships and Unreported Jobs AECOM estimates Sub-District #1 contains another 600 sole proprietorship firms and an additional 250 other jobs, not officially reported. This sub-district is expected to have a lower proportion of unreported jobs, as many of the businesses in the area are associated with more established corporations and are likely to achieve greater reporting compliancy.
48 LOS ANGELES FASHION DISTRICT OVERVIEW Summary of Sub-District #1 Strengths The sub-district is home to a diversity of fashion labels and brands in a geographic cluster, making it convenient for buyers. The wholesale showrooms are open year-round, a distinct competitive advantage against the other major wholesale market in the United States, New York City, which only opens its wholesale showrooms during specific times in the year. Wholesale showrooms are located in close proximity to contractors, other wholesalers and educational institutions, providing an energetic fashion-oriented environment for visitors. Challenges The area lacks amenities for buyers, such as convenient and appropriately-priced overnight accommodations, restaurants, etc. Although the area is known to seasoned buyers, it is not well-marketed to the public and the rest of the industry as being the home of showrooms for high fashion labels. Opportunities The sub-district is adjacent to other areas in Los Angeles that are undergoing a “renaissance,” including the Historic Core of downtown Los Angeles, an area that is experiencing greater pedestrian traffic to art galleries, restaurants, and retail stores, and growth in its resident base, as well as the South Park area which is comprised of . Live, the Staples Center, and several new luxury condominium and apartment buildings. The existing commercial space is mainly characterized by its open space floor plans which are attractive to designers and others in creative industries. The Fashion District, as a whole, has the potential to become more “glamorous.” Threats The businesses in this area are sensitive to changes in the economy, in particular consumer spending. The slumping economy and the decline in consumer spending have resulted in buyers visiting the marts less frequently and purchasing less. The wholesale marts in the sub-district are facing greater competition from emerging fashion cities throughout the United States, which are starting to host their own “Fashion Weeks” and showrooms. Retail buyers in the area are being attracted away from this sub-district to businesses located in Sub-District #4.
LOS ANGELES FASHION DISTRICT OVERVIEW 49 SUB-DISTRICT #2 Figure 23Map Overview of Sub-District #2 Sub-District #2 stands apart from the other sub-districts in that it is characterized by a major cluster of flower-related activities. The roughly 4- to 6-block area generally bounded by Maple Avenue and San Pedro ththStreet and 7 Street and 9 Street represents one of the largest concentrations of flower wholesalers in California and the nation. The majority of the flower-related business in the whole study area occurs in this sub-district. The sub-district contains five major flower markets, including: San Julian Flower Market, Los Angeles Flower Mall, California Flower Mall, Southern California Flower Market, and Los Angeles Flower Market. The five markets contain approximately 125 flower-related businesses. Another 60+ flower related businesses are th21located along San Pedro Street and 8 Street. Utilizing survey data, $760 million in sales is reported throughout the sub-district, with $260 million 22specifically in flower-related business. However, the flower wholesale industry is a cash business and some share of sales may be underreported, even in this private survey. Persons in the flower business estimate that upwards of $600 million is generated by the wholesale flower businesses within the area alone. The sub-district also serves as a junction between the fashion industry in Downtown Los Angeles and other related industries, such as arts and crafts. The area is home to many textile and other sewing goods retail stores. These stores sell to both the public and as wholesalers, serving as suppliers to some of the garment manufacturers and sewing contractors in the Fashion District. Most of the “retail” firms discussed below are textile businesses. Jobs AECOM estimates that there are approximately 1,700 total jobs in Sub-District #2. Approximately 1,300 persons are officially employed within this sub-district. In addition, we project that there are approximately another 370 persons working in the sub-district as sole proprietors or other workers. Officially Reported Employment Estimates Of the approximately 1,300 people employed in Sub-District #2, 24 percent are employed in flower-related jobs. The area has approximately 240 businesses, of which 17 percent are flower-related. With 2,600 persons employed within floral-related businesses throughout Los Angeles County, the sub-district makes up 10 percent of the flower market in Los Angeles County. 21 Some of these businesses may be located outside the boundaries of Sub‐District #2 22 Info USA data 2009.
50 LOS ANGELES FASHION DISTRICT OVERVIEW Figure 24 Distribution of Officially Reported Employment in Figure 25 Distribution of Employer Firms in Sub-District #2 Sub-District #2 (2009) (2009) DesignDesignUnknownWholesaleWholesale0%Unknown0%3%7%7%Mfg1%Mfg6%7%Other SuppliersOther (Non-(Non-11%SuppliersFashion Fashion or Fashion or 14%Flower)Support Flower)34%Services42%4%Fashion Support RetailServices5%RetailFlower5%13%Flower24%17% Source: CA EDD Source: CA EDD More than a third of employees and firms are categorized under “other,” and are not directly related to the fashion or flower industries. As shown below, about a third of these jobs are part of the produce industry, most likely due to the sub-district’s adjacency to the Produce District in Downtown Los Angeles. “Other (No Category)” represent businesses that were not easily aggregated into major categories. The share of Other (No Category)” reflects the diversity of businesses in the sub-district. Figure 26 Composition of “Other (Non-Fashion or Flower)” Employment Category Other UnknownWholesale2%3%Restaurant, Other %5%Other (No Category)45%Produce Industry30%Private Households4% Source: CA EDD; AECOM As shown below, the overall number of officially reported employment and business establishments in the sub-district has not changed significantly since 2003. The jobs lost in the design, manufacturing, suppliers and flower-related sectors were offset by the gains made in the wholesale, fashion support service and other sectors. The greatest increase in jobs and firms was seen by the “other” category of employment, increasing from 580 jobs in 2003 to approximately 710 jobs in 2009.
LOS ANGELES FASHION DISTRICT OVERVIEW 51 Overall, the Fashion District’s flower-related employment has declined at a slower pace than Los Angeles County’s, at an annual average rate of percent between 2003 and 2009, versus 5 percent for Los Angeles County in the same time period. It is also worth noting that the flower-related employment actually grew 3 percent annually between 2003 and 2005, but declined in the period between 2005 and 2009. Despite these metrics, the physical footprint of the flower markets and malls within the Fashion District has actually expanded in the last decade. Figure 27 Officially Reported Employment and Establishments in Sub-District #2 by Category (2003 – 2009) 2009 Change ('03 - '09) CAGR ('03 - '09) Overall Trend Emp Firms Emp Firms Emp Firms Emp Firms Fashion-Related Design 2 1 . . . . . . Wholesale 84 17 % % % % Manufacturing 70 17 % % % % Suppliers 147 34 % % % % Fashion Support Services 55 11 % % % % Retail 66 32 % % % % Flower-Related 313 41 % % % % Other (Non-Fashion or Flower) 547 84 % % % % Unknown 9 8 Grand Total 1,284 237 % % % % Source: CA EDD Sole Proprietorships and Unreported Jobs AECOM estimates the sub-district contains an additional 214 sole proprietorships, nearly half of which are related to the fresh flower industry. Through interviews, AECOM found that many flower-related businesses are small, owner-operated businesses involved in the coordination of floral and related shipments (serving as wholesale agents), rather than primarily doing face-to-face sales. This is supported by the number of flower businesses operating in the many “flower marts,” that were not reported by the CA EDD in the ES202 data. In addition to sole proprietors, AECOM estimates that another 150 people work in the area.
52 LOS ANGELES FASHION DISTRICT OVERVIEW Summary of Sub-District #2 Strengths The area is well-served by having a clustering of flower-related businesses, creating a distinct identity within the greater Fashion District. Flower-related businesses in the area are expanding. The clustering of flower-related businesses frees up the other parts of the sub-district for other uses, ensuring the wholesale floral trade is not disrupted by incompatible adjacent businesses. The area functions as hub between the flower-related businesses and the fashion-related businesses in the District, providing cohesiveness to many District-wide activities. There is high demand for space in the two historical flower markets. Challenges There is a dearth of flower import processing facilities at Los Angeles International Airport. Buildings are older and are not well configured with loading docks required for flower businesses. Traffic issues do not allow for easy traffic flow and pedestrian flow in the sub-district. Parking is difficult in the sub-district and can be expensive. The flower industry is very energy-intensive (flowers need to be kept refrigerated at all times). Developing permanent recycling program and facilities for the flower industry. The sub-district is adjacent to Skid Row and security is an ongoing issue for the area. Opportunities th Flower-related business continue to expand along San Julian and 8 Street. Flower-related businesses in Los Angeles can go “green” through energy consumption reduction and use of alternative energy. The flower-oriented area of the sub-district is amenable to casual visitors, partly because the goods themselves (flowers and other plants) are attractive and partly because the operations of the businesses allows for casual visitation in the afternoon. The area can market itself as a destination to visitors to the downtown area and as a public marketplace There are opportunities for place making through identity and infrastructure improvements. The cluster of flower businesses can be defined and promoted as a sub-district. Lighting and streetscape improvements can aid the definition of the sub-district. Opportunities may exist to create more density in the area. Property owners in the area have large parcel sizes and are amenable to redevelopment opportunities. The San Pedro area continues converting to fashion uses and may provide catalytic thredevelopment opportunities at the Product Market property at the southeast corner of 9 and San Julian. Threats Miami and other areas, such as Houston, Texas, continue to expand and capture additional imports away from Los Angeles. Areas closer to the main port of entry for flowers (Los Angeles International Airport), may choose to develop themselves as the wholesale flower marketplaces to further reduce travel time for the products. Other local flower districts, such as in North Hollywood, may expand fueled by the impression that Downtown is unsafe and by customers who do not want to drive as far. Development pressures in the area could force the dispersal of concentration of flower-related businesses.
LOS ANGELES FASHION DISTRICT OVERVIEW 53 SUB-DISTRICT #3 Sub-District #3, especially Santee Alley, serves as the public “face” of the Fashion District. The sub-district is known for its high concentration of independently-operated discount retail shops and wholesale storefronts. The retail shops along Santee Alley were initially opened so garment contractors and manufacturers in the area could sell excess Figure 28Map Overview of Sub-District #3 garments directly to the public. Over time, Santee Alley has become one of the most sought after areas of commercial real estate in Los Angeles, in some cases commanding higher rent per square foot than other high-profile shopping districts like Third Street Promenade in Santa Monica. Retail shops are still known for selling discounted garments, accessories, and other personal goods. Unfortunately, the area struggles against negative public misconceptions about the nature of the products that are sold, primarily that the goods are either counterfeit or sold at wholesale, rather than discounted, prices. Wholesale storefronts in this area sell a variety of goods and are not limited to finished apparel garments. Non-apparel wholesalers in this area sell textiles, fashion accessories, bridal goods, and accessories, among other goods. Jobs AECOM estimates that there are approximately 5,100 total jobs in Sub-District #3. Approximately 3,800 persons are officially employed within this sub-district. In addition, we project that there are approximately another 1,350 persons working in the sub-district as sole proprietors or other workers. Officially Reported Employment Estimates This sub-district has the greatest share of businesses in the study area, with over 1,000 employer firms in 2009, but has fewer employees than other sub-districts. The high concentration of firms is reflected in the small format storefronts in areas like Santee Alley. The retail stores, however, are small businesses employing fewer than four people, on average, and are likely to be operated by their owners. The number of firms and employees in the area has declined greatly since 2003, from approximately 5,400 employees in 2003 to about 3,800 employees in 2009. Adjacent to Sub-District #4, Sub-District #3 also contains a substantial share of the wholesale and manufacturing activity in the Fashion District. As Sub-District #4 grows in prominence amongst retail buyers, wholesalers from the Sub-District #3 appear to be moving out towards areas near the San Pedro Wholesale Mart.
54 LOS ANGELES FASHION DISTRICT OVERVIEW Figure 29 Officially Reported Employment and Establishments in Sub-District #3 by Category (2003 – 2009) 2009 Change ('03 - '09) CAGR ('03 - '09) Overall Trend Emp Firms Emp Firms Emp Firms Emp Firms Fashion-Related Design 23 13 % % % % Wholesale 1,372 408 % % % % Manufacturing 883 156 % % % % Suppliers 160 43 % % % % Fashion Support Services 179 34 % % % % Retail 527 166 % % % % . . Flower-Related . . . . . % Other (Non-Fashion or Flower) 560 133 % % % % Unknown 57 53 Grand Total 3,761 1,006 % % % % Source: CA EDD Figure 30 Distribution of Officially Reported Employment in Figure 31 Distribution of Employer Firms in Sub-District #3 Sub-District #3 (2009) (2009) Other UnknowDesignnUnknownDesign(Non-1%2%5%1%Fashion or Flower)13%Other Flower(Non-0%Fashion or FlowerFlower)0%15%WholesaleWholesaleRetail36%41%Retail14%17%Fashion Support ServicesFashion 5%MfgSupport Mfg23%SuppliersServices16%Suppliers4%3%4% Source: CA EDD Source: CA EDD Sole Proprietorships and Unreported Jobs AECOM estimates an additional 500 sole proprietorships are present in Sub-District #3. About a quarter of sole proprietorships are estimated to be retail stores, while another quarter of businesses are wholesale stores. This is estimate is supported by the large number of small, “mom and pop” storefronts which characterize Sub-District #3. AECOM estimates the Sub-District contains an additional 850 unreported jobs.
LOS ANGELES FASHION DISTRICT OVERVIEW 55 SUMMARY OF SUB-DISTRICT #3 Strengths Has a long-standing reputation of providing low-cost, quality garments and other personal goods to the public Has a high concentration of diverse retailers and wholesalers Highly desirable, ground floor retail space (experiences low vacancy rates for ground floor retail space) Pedestrian-oriented character Challenges Suffers from structural issues, such as overcrowded shops, poor signage, crowded/dirty streets, etc. Perceived as dangerous due to a limited security presence Limited and expensive parking options for shoppers Limited public transit access Occurrence of illegal retailers, primarily operating on sidewalks and/or with mobile setups that sell counterfeit goods or without proper licenses or storefronts Opportunities Better marketing to strengthen its reputation for bargain-hunting shopping, rather than for counterfeit goods Close proximity to growing resident base in Historic Core and South Park areas of downtown Los Angeles Create safe evening shopping areas, akin to the Art Walk in the Historic Core, to introduce the retail area to a new sub-market of consumers Threats Continual public misconception that the area primarily carries counterfeit products or items at/under wholesale prices Inconsistency in quality and type of merchandise being sold throughout the sub-district
56 LOS ANGELES FASHION DISTRICT OVERVIEW SUB-DISTRICT #4 Sub-District #4 is characterized by its clustering of wholesale Figure 32 Map Overview of Sub-District #4 retail shops which sell to a wide range of buyers for individual shops, smaller retail chain stores and, department stores, both domestic and international. In contrast to the wholesale showrooms in Sub-District #1, the businesses in the Sub-District #4 provide less expensive versions of popular, trendy, contemporary fashion items which can be purchased for more rapid delivery. The styles are typically derived from the major designer collections and are examples of today’s popular fast fashion products. Buyers have the option of purchasing goods which they can either walk out with or have delivered, depending on the quantity needed and the immediacy of the delivery date. Wholesalers in this sub-district have the advantage of being closely associated with sewing manufacturers and contractors in the Fashion District and in surrounding areas that can supply them with garments immediately. Often times, the wholesalers are also the manufacturers, who are responsible for the design, pattern and sample making, and distribution of sewing work, and have shops and warehouses in and around the Fashion District. Jobs AECOM estimates that there are approximately 4,500 total jobs in Sub-District #4. Approximately 3,200 persons are officially employed within this sub-district. In addition, we project that there are approximately another 1,350 persons working in the sub-district as sole proprietors or other workers. Officially Reported Employment Estimates This sub-district contained over 3,100 registered jobs and about 400 businesses in 2009. Wholesale-related jobs and firms in this sub-district experienced the greatest amount of change since 2003, growing from approximately 540 employees in 2003 to about 1,270 employees in 2009. Employment in other categories has remained stable. Figure 33 Officially Reported Employment and Establishments in Sub-District #4 by Category (2003 – 2009) 2009 Change ('03 - '09) CAGR ('03 - '09) Overall Trend Emp Firms Emp Firms Emp Firms Emp Firms Fashion-Related Design 8 1 % % % % Wholesale 1,428 168 % % % % Manufacturing 641 64 % % % % Suppliers 214 37 % % % % Fashion Support Services 92 14 % % % % Retail 437 48 % % % % Flower-Related . . . . . % . . Other (Non-Fashion or Flower) 290 43 % % % % Unknown 42 25 Grand Total 3,152 400 % % % % Source: CA EDD
LOS ANGELES FASHION DISTRICT OVERVIEW 57 Manufacturing is another major sector represented in this sub-district. It is estimated that between 40 to 50 percent of garments sold in the sub-district are produced in Los Angeles County, primarily in and around the Fashion District. Materials used for garment production, such as textiles and adornments (buttons, zippers, etc.), are also likely to be purchased from importers based in the Fashion District. Figure 34 Distribution of Officially Reported Employment in Figure 35 Distribution of Employer Firms in Sub-District #4 Sub-District #4 (2009) (2009) Other (Non-UnknownOther Fashion or Unknown1%DesignDesignFlower)(Non-6%0%9%0%Fashion or Flower)11%Flower-RelatedFlower-0%RelatedRetail0%14%WholesaleFashion RetailWholesale42%Support 12%45%Services3%Fashion SuppliersSupport 7%ServicesMfgMfg4%16%21%Suppliers9% Source: CA EDD Source: CA EDD Sole Proprietorships and Unreported Jobs Given that many of the businesses in this area are small businesses (“mom and pop” stores), we expect there may be a significant number of undercounted employees. AECOM estimates over 600 sole proprietorships exist in the Sub-District and estimate that nearly half are apparel wholesale businesses and another third are apparel retail businesses. An additional 750 jobs are estimated to be unreported.
58 LOS ANGELES FASHION DISTRICT OVERVIEW SUMMARY OF SUB-DISTRICT #4 Strengths The concentration of wholesalers is convenient for domestic and international buyers. The established relationships between the wholesalers and manufacturer/contractors in the area enables wholesalers to quickly turnaround garments to buyers, without limitations on the size of the order. Close proximity to the branded-fashion wholesale showrooms in Sub-District #1 ensures wholesalers are able to stay in touch with the latest consumer trends. Commercial real estate, particularly newer buildings, are able to command high rents per square foot, as high-traffic space is considered a premium. Vacancy in ground floor spaces close to the San Pedro Wholesale Mart remains low. Challenges Wholesale business transactions are not subject to sales tax. The area lacks amenities, such as eateries or overnight accommodations, for buyers. Upper floors of existing buildings tend to remain vacant (they are not attractive to wholesalers, who tend to prefer ground floor retail space). Vacancy in buildings located on the edges of the sub-district, not associated with one of the bigger wholesale marts, is continuing to increase. The type of fashion products profiled in the area (fast fashion) is characterized by low cost of production and does not always allow for “good” pay for contractors producing the goods. Opportunities Wholesalers in this sub-district are able to attract buyers who traditionally shop at the wholesale showrooms located in Sub-District #1, partly due to consumer demand and partly due to the economic recession; buyers are attracted to the opportunity to buy similar garments at lower prices. The San Pedro Wholesale Mart has high lease rates and low vacancy rates, illustrating that with the right combination of amenities, such as exclusive customer parking lots, even multi-storied retail buildings can be successful. Sewing contract work from wholesalers in this area can more easily be shifted back to Los Angeles, as a significant portion of production is still conducted in the County and the relationships and infrastructure are already in place. Threats Wholesale businesses, as well as sewing contractors, located in the sub-district experience a high rate of turnover. The passage of copyright infringement laws currently in discussion in Congress could negatively impact wholesalers, as their garments are reliant on the emulation of unique designs developed by larger, more well-known fashion houses; these wholesalers could risk being sued for the sale of these garments. Wholesale businesses in the area experience strong competition from other wholesalers, as the merchandise sold is not always unique or distinctive; competition may be based on the wholesaler’s ability to lower its price or its ability to provide other incentives to the buyer/customer. Wholesale businesses have been known to sell illegally to the public on weekends. These primarily cash-based sales are not recorded and sales tax is not collected.
LOS ANGELES FASHION DISTRICT OVERVIEW 59 SUB-DISTRICT #5 Figure 36Map Overview of Sub-District #5 Sub-District #5 is comprised of the area in the southern most edge of the study area, extending beyond the I-10 Freeway towards Washington BoulEvard. The area has the greatest variety of land uses and businesses. Unlike most, this sub-district is not characterized by a specific use or activity. There is also a diversity of building types in the sub-district. This sub-district contains a mix of single-story light industrial buildings, along with older, multi-story buildings with open floor space plans. Jobs AECOM estimates that there are approximately 2,600 total jobs in Sub-District #5. Approximately 1,900 persons are officially employed within this sub-district. In addition, we project that there are approximately another 650 persons working in the sub-district as sole proprietors or other workers. Officially Reported Employment Estimates The area contains about 2,000 officially reported employees, a little over half of whom are classified as “other” (non fashion or flower-related). Similarly, of the over 260 businesses in the area, about half are related to fashion or flower. Figure 37 Distribution of Officially Reported Employment in Figure 38 Distribution of Employer Firms in Sub-District #5 Sub-District #5 (2009) (2009) DesignDesignUnknownUnknown0%0%1%6%WholesaleOWholesalether 19%(Non-26%Fashion or Other Flower)Mfg(Non-27%10%Fashion or Flower)Mfg53%Suppliers16%8%FlowerRetail0%8%SuppliersFashion Fashion 13%Support Support ServicesRetailFlowerServices3%6%0%4% Source: CA EDD Source: CA EDD The majority of non-fashion or flower jobs could not be easily categorized into discrete groups, reflecting the diversity of businesses located in this sub-district. About 10 percent of the “other” category is comprised of restaurants and other food and beverage places. The sub-district has experienced loss of employment since 2003, primarily due to the loss of jobs in the “other” sector category, as well as in the manufacturing sector. Most of the fashion-related jobs in the area are manufacturing, wholesale or retail oriented. The sub-district includes a large “mart,” similar to the marts located in the Sub-District #1; however, this mart specializes in home goods and furnishings.
60 LOS ANGELES FASHION DISTRICT OVERVIEW The sub-district has benefited from the type of real estate available in the area. Most users are industrial users who are taking advantage of the affordable space and the adjacency to Downtown Los Angeles. In addition, buildings are well-suited for industrial users of all types, not just fashion-oriented users. Figure 39 Officially Reported Employment and Establishments in Sub-District #5 by Category (2003 – 2009) 2009 Change ('03 - '09) CAGR ('03 - '09) Overall Trend Emp Firms Emp Firms Emp Firms Emp Firms Fashion-Related Design . . . . . . . . Wholesale 367 67 % % % % Manufacturing 203 41 % % % % Suppliers 165 35 % % % % Fashion Support Services 54 10 % % % % Retail 112 22 % % % % Flower-Related . . . . . . . . Other (Non-Fashion or Flower) 1,045 72 % % % % Unknown 27 16 Grand Total 1,946 247 % % % % Source: CA EDD Sole Proprietorships and Unreported Jobs AECOM estimates that Sub-District #5 has an additional 210 sole proprietorships, the majority of which are classified as “other” businesses. Furthermore, the area is estimated to have another 440 unreported jobs.
LOS ANGELES FASHION DISTRICT OVERVIEW 61 SUMMARY OF SUB-DISTRICT #5 Strengths The building types in the area (single- or two-storied, light industrial buildings) are attractive to manufacturers and contractors due to their open floor plans, loading areas, etc. The area is convenient to freeway access, as well as public transit access, both of which are important considerations for manufacturers and contractors and their employees. The area is more affordable in comparison to the areas north of the I-10 Freeway. The area has a greater diversity of non-fashion related businesses, including other retail and eateries, which provide some amenities for existing businesses and residents. Most users are industrial users who are taking advantage of the zoning and building types. The area is well-served by Blue Line light rail transit stations. Challenges The area is separated from the area typically considered the Fashion District. The sub-district has a mix of older buildings (although, not necessarily historic) with limited amenities in the buildings themselves. Opportunities Allow mixed-use infill properties to attract other non-fashion uses TOD opportunities around Blue Line stations Threats Increase in lease rates
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FASHION DISTRICT REAL ESTATE ANALYSIS 63 FASHION DISTRICT REAL ESTATE ANALYSIS
64 FASHION DISTRICT REAL ESTATE ANALYSIS FASHION DISTRICT REAL ESTATE ANALYSIS The real estate analysis provides a comprehensive assessment of the existing real estate market within the Fashion District and considers potential demand for various land uses across a twenty to thirty year period. The analysis is broken into three major sections that review (1) commercial real estate, (2) hotel uses, and (3) residential uses within the Fashion District. First, we evaluate the characteristics and demand for commercial retail, office, and industrial real estate properties. This is reviewed on the Fashion District level, but for a better understanding of the real estate market and how it relates to business activities we also look at real estate characteristics by sub-district. We also pay close attention to interesting real estate forms and trends, such as the wholesale marts found throughout the District and creative office development throughout Downtown Los Angeles. The demand analysis looks at baseline demand estimates for commercial real estate. The hotel analysis looks at the existing hotel supply within all of Downtown Los Angeles, but focuses in on the demand generated by business activities within the Fashion District. Finally we evaluate the current downtown residential market and future residential demand based on a capture of the recent residential growth in Downtown Los Angeles, potential affordable unit development within the District and potential demand supported by students. COMMERCIAL REAL ESTATE CHARACTERISTICS The following section describes the real estate characteristics of commercial office, retail, and industrial markets in the Los Angeles Fashion District. First, we review the broad commercial real estate characteristics for the Fashion District as a whole, and in the following section we look more closely at the real estate trends and characteristics by sub-districts. AECOM has reviewed a variety of secondary sources of real estate data, but relies primarily on CoStar for secondary commercial real estate data and STR and PKF hotel data. CoStar data for the complete Downtown area is reasonable, but at smaller geographies, such as the Fashion District, the data is often less reliable. Thus AECOM has worked with a variety of real estate brokers and relied on additional information from a CRA/LA survey to draw a better picture of the Los Angeles Fashion District market. For analysis purposes, we provide the property information provided by CoStar, but, as noted, this information is presented with caveats based on a broader market understanding. OFFICE, INDUSTRIAL, AND RETAIL REAL ESTATE INVENTORY According to CoStar, there is almost 20 million square feet of Figure 40 Available Real Estate in Fashion District by Type (2010) retail, office, and industrial commercial space throughout the Fashion District. As shown in Figure 41, approximately 900,000 square feet has been added to the market between 2006 and the second quarter of 2010, primarily in retail 1%leasable space. The Los Angeles Fashion District is unique relative to many 32%Officetraditional commercial areas, in that there is a fluidity of the 39%use of these spaces within the District. The comprehensive RetailDistrict is almost evenly split between industrial (39%), office Industrial(32%), and retail space (28%), but these categorizations may Flexor may not well reflect the activities in the space. Buildings deemed as industrial space are being used to sew 28%garments, but also are being used for the retailing of flowers in the Flower Mart and are used for apparel showrooms. As described in the industry analysis, there are numerous wholesalers throughout the district and “manufacturers” Source: CoStar throughout the district, but wholesalers, selling garments and
FASHION DISTRICT REAL ESTATE ANALYSIS 65 accessories in bulk, often work out of showrooms that look more like a retail storefront and can be found in buildings categorized as retail, office, or industrial. This point is demonstrated more clearly as we profile the major mart properties later in this section. Figure 41 Fashion District Rentable Building Area (2006 – 2010 Q2) Total Fashion Period Office Retail Industrial Flex District 2006 6,252,247 4,745,080 7,614,227 284,169 18,895,723 2007 6,252,247 5,395,080 7,614,227 284,169 19,545,723 2008 6,252,247 5,483,904 7,715,182 284,169 19,735,502 2009 6,252,247 5,541,404 7,715,182 284,169 19,793,002 2010 Q2 6,252,247 5,541,404 7,715,182 284,169 19,793,002 Distribution 32% 28% 39% 1% 100% Source: CoStar; AECOM We briefly review the Fashion District real estate by the categories of office, retail, and industrial space to help refine some analysis about the buildings, but, overall, we believe that the space is fluid and can be used for a variety of activities and is better lumped as “commercial space.” Office Space Inventory There is million square feet of space categorized as office throughout the Fashion District. million square feet, or approximately 77 percent of the total Fashion District office space, is found in Sub-District #1. Another million square feet of space, 19 percent of the Fashion District space, is found in Sub-District #3. Figure 42 Total Available Office Rentable Building Area (2010) 6,000,0004,825,713 5,000,0004,000,0003,000,0002,000,0001,148,6961,000,000131,30970,57975,9500Sub-District 1Sub-District 2Sub-District 3Sub-District 4Sub-District 5SUB-DISTRICT Source: CoStar; AECOM SQUARE FEET
66 FASHION DISTRICT REAL ESTATE ANALYSIS Office Space Building Characteristics A majority of the buildings in the Fashion District are multi-story buildings from two to 14 stories. 38 of the approximately 60 buildings in the Fashion District are 4+ stories. These buildings house almost 90 percent of the office space within the District. As mentioned previously, real estate categories do not well describe the actual use of the space in the Fashion District. Most of these “office buildings” were constructed between 1920 and 1950 and were initially developed for the purpose of garment manufacturing. 26 of these multi-story office buildings are found in Sub-District # 1 and 12 are found in Sub-District #3. Currently, these buildings may be used for a variety of purposes such as showrooms, fashion supply wholesale, or standard office space. As described in the Industry Analysis and seen in lease rates and land sales transactions, ground-floor spaces have the highest demand and generate the most value. With the most visibility and access to both clientele and access for logistical purposes, ground floor uses generate the most value. The use of the upper floors of these multi-story buildings is a key question for the future of the Fashion District. Figure 43 Fashion District Office Buildings by Number of Stories (2010) Stories # of Bldgs Total RBA Avg. RBA 1 Story 5 102,815 20,563 2-3 Stories 16 404,007 25,250 4+ Stories 38 5,704,402 157,170 RBA = Rentable Building Area Note: One office building in Sub-District #2 did not have property information and was not included in this table. Source: CoStar; AECOM Retail Space Inventory There is approximately million square feet of space categorized by CoStar as retail in the Fashion District. Almost 40 percent of this retail space is found in Sub-District #3, followed by Sub-District #4 (24 percent) and Sub-District #1 (18 percent). Figure 44 Total Available Office Rentable Building Area (2010) 2,500,0002,144,7842,000,0001,500,0001,356,7561,010,2771,000,000529,041477,919500,0000Sub-District 1Sub-District 2Sub-District 3Sub-District 4Sub-District 5SUB-DISTRICT Source: CoStar; AECOM SQUARE FEET
FASHION DISTRICT REAL ESTATE ANALYSIS 67 Retail Space Building Characteristics Approximately 22 percent of the total retail space in the Fashion District is located in freestanding retail properties. The majority of spaces, 61 percent, are storefronts. Almost half include retail and office or residential (above) the storefront space. It should be noted that though this space is categorized as retail, properties are likely to include wholesale showrooms as well as traditional retail. Figure 45 Retail Properties by Type (2010) # of Retail Type Properties Avg. RBA Total RBA General Freestanding 30 41,252 1,237,565 Storefront 128 12,439 1,592,240 Storefront/Office or Residential 63 28,618 1,802,908 Other 44 21,108 928,755 RBA = Rentable Building Area Source: CoStar; AECOM Industrial and Flex Space Inventory There are approximately 8 million square feet of buildings categorized as industrial and flex located throughout the Fashion District. These properties are evenly distributed throughout the District. Sub-District #5 has the largest amount of industrial space at 24 percent, followed by Sub-District #3 at 21 percent. Sub-District #1 and Sub-District #4 both have approximately 19 percent of these properties. Figure 46 Total Available Industrial and Flex Rentable Building Area (2010) IndustrialFlex2,500,0002,000,0001,500,0001,000,000500,0000Sub-District 1Sub-District 2Sub-District 3Sub-District 4Sub-District 5SUB-DISTRICT Source: CoStar; AECOM This is interesting as more production of goods is likely happening in Sub-District #4 compared to the Sub-District #1, but the Sub-District #1 has multi-story buildings that historically were being used for manufacturing. SQUARE FEET
68 FASHION DISTRICT REAL ESTATE ANALYSIS Industrial and Flex Space Building Characteristics The figure below characterizes industrial space by size. More than 70 percent of the properties characterized as industrial have a rentable building area of less than 20,000 square feet and half of them are less than 10,000 square feet in size. Only 30 out of 368 industrial properties are larger than 50,000 square feet, but these 30 buildings contain almost 40 percent of the Districts industrial space. Figure 47 Industrial Properties by Type (2010) RBA Range # of Properties Avg. RBA Total RBA < 10,000 SF 165 5,653 932,720 10,000 - 20,000 SF 101 13,653 1,378,963 20,000 - 50,000 SF 72 31,927 2,298,772 50,000 to 100,000 SF 21 67,416 1,415,746 100,000 SF+ 9 190,162 1,711,457 Total 368 21,026 7,737,658 RBA = Rentable Building Area Source: AECOM REPORTED VACANCY According to CoStar, vacancy rates have ranged between 1 and 4 percent for commercial spaces 23between 2000 and 2006. However, there are numerous vacancies in many multi-story buildings that are not being appropriately recorded in CoStar. These CoStar rates significantly underestimate the true vacancy rates in the Fashion District. While the CoStar data cannot be used to estimate the specific vacancy rate, their surveys often reach out to the same properties, so the data can be used as benchmark for changes in vacancy rates in the area as presented in Figure 48. As shown in Figure 48, year-end vacancies were falling throughout the District between 2000 and 2004 and began to grow as the recession took hold. According to CoStar data, vacancy rates were highest between 2008 and 2010, rather than earlier in the recession. After reviewing the major marts, we make an estimate of the District-wide vacancy. 23 Retail information is not reported before 2006 in CoStar. Vacancy rates shown between 2000 and 2006 only include vacancies of office and industrial properties.
FASHION DISTRICT REAL ESTATE ANALYSIS 69 Figure 48 Vacancy Rate Index of Commercial Space in Fashion District (Indexed to 2005) Q2YEAR Source: CoStar; AECOM FASHION DISTRICT SALES TRANSACTIONS 24CoStar reports approximately 138 sales with prices within the Fashion District across the last five years. million square feet of commercial space has been sold within the District at an average price per square foot of $. While 2007 and 2009 show a small dip in overall price per square foot sales in the Fashion District, trends in price per square foot are obscured by the differences in the size and types of products sold. Smaller-sized wholesale condos were built throughout Sub-District #4 and ground floor acheived sales prices ranging from $600 to $1,800 per square foot at the height of the market. 2008 had an extremely high price per square foot because 80 percent of properties sold were small condos located in Sub-District #4. Figure 49 Fashion District Commercial Sales Transactions (2006 – 2010) Total Volume of Avg. Price per Avg. SF per Transactions Sales SF Transaction 200632$159,729,500$,067200730$68,183,000$,6452008 34 $83,467,584 $ 4,617 200930$46,669,000$,852201012$17,408,000$,686Total 138 $375,457,084 $ 12,118 Note: Includes only properties with a reported price. Source: CoStar; LoopNet; AECOM PROFILE OF MAJOR FASHION MARTS Year-round marts and market centers play a major role in the Los Angeles Fashion District. The marts and markets are buildings that house a number of showrooms. Buyers prefer to park once and to walk to the different stores, so there is often an advantage for showrooms, particularly showrooms offering a certain product type, to cluster together. 24 CoStar reports some additional sales, but they do not have associated price data so are not included herein. INDEX (2005 = )
70 FASHION DISTRICT REAL ESTATE ANALYSIS The following table displays information on select marts throughout the Fashion District. As shown, these major marts are estimated to make up almost million square feet of rentable building area, almost a quarter of the total commercial space throughout the district. It is also notable that the California Market Center (CMC) has approximately 2 million square feet of rentable building area and is almost a tenth of all the commercial space in the Fashion District. The major marts are often multi story buildings. More than half of these buildings are 4 stories are more. While almost all the space in these marts is being used for wholesale showrooms, three out of 16 are categorized as office; five out of 16 are categorized as industrial buildings; three out of 16 are categorized 25as retail. As mentioned previously, the reported CoStar vacancy rates do not reflect the true vacancies of properties throughout the District. This can be clearly seen as one surveys the major marts. Figure 50 presents property information available through CoStar, but also estimates more realistic vacancy rates in these marts based on counts of empty units and our knowledge of the Fashion District. Costar reported vacancies are percent of total space, but we estimate a vacancy rate of almost 30 percent throughout these major marts. The CMC, which makes up almost half of the rentable building area of the selected marts, is a major contributor to the vacant space, but otherwise, the higher vacancy rates are a result of vacancies in upper floors in major marts. AECOM estimates that the major marts have almost million square feet in vacant space. Most of these marts were close to fully occupied on the ground floor, but have high vacancies in their upper floors. Almost half of the vacancies are upper floor units in buildings built within the last five to ten years in Sub-District #4. While there is high demand for ground floor spaces, there is much available space in upper floors. ESTIMATED FASHION DISTRICT VACANCY According to our brief survey, there are almost million square feet of vacant space in major marts. If we estimate another 8 percent vacancy throughout the rest of the District, this equates to another million square feet of vacant space, as shown in Figure 50. In total, we estimate approximately million square feet of vacant space exists throughout the Fashion District. 25 Five buildings are not categorized.
FASHION DISTRICT REAL ESTATE ANALYSIS 71 Figure 50 Major Mart Property Characteristics Total Land AreaNo. of Building Reported Est. Vacancy Estimated Avg. Mo. (Acres)Building NameBuilding AddressRBAStoriesClassVacant ShareVacant SpaceRentDirect ServicesYear BuiltPrimary TypeZoningSub-districtCalifornia Market Center (CMC)110 E 9th St2,081,27513C025%520,319$ Service -District #1The New Mart127 E 9th St253,00012B20,0008%20,000$ -District #1The Cooper Building860 S Los Angeles St351,73611C015%52,760 -District #1Liberty Building843 S. Los Angeles St80,0005C015%12,000 M2Sub-District #1Gerry Building911 S. Los Angeles ,2209B63,57859%63,578$ M2Sub-District #3San Pedro Wholesale Mart1100 S. San Pedro ,%9,500 M2-4Sub-District #4Stanford Wholesale Mart807 E. 12th Street200,. . 30%60,000 -District #4Los Angeles Fashion Center1458 S San Pedro St650,,93140%260,000$ -District #4LA Fashion Mart1219 Stanford Ave100,9554B060%60,573 -District #4Crocker Fashion Plaza1030-1160 Crocker St45,5361C095%43,259 M2Sub-District #4Towne Center1025 Towne Ave48,%19,200 M2Sub-District #4Buyers Mart727-735 E 12th ,%8,625 - Triple -District #4Towne Plaza1001 S. Towne Ave43,7012B035%15,295 . -District #4New Mark Wholesale Mart 747 E 10th Street81,. %52,650 . . . -District #4(New Red and Gray Building)777 E. 10th Street90,. %58,500 . . . -District #4Towne Wholesale Mart1016 Towne Avenue45,. %18,000 . . . -District #4Total/Average4,425,9235139,50929%1,274,260$ . = data not available Note: Information highlighted in blue are AECOM estimates. Source: CoStar; AECOM
72 FASHION DISTRICT REAL ESTATE ANALYSIS Figure 51 Map Overview of Major Marts in Fashion District Source: CoStar; ESRI; AECOM
FASHION DISTRICT REAL ESTATE ANALYSIS 73 Figure 52: Fashion District-Wide Vacancy Estimate Fashion District Wide Vacancy Estimate Estimated Vacancy GLAVacancyRate Major Marts 4,425,9231,274,26029% Balance of Fashion District (w/ Est. Vacancy of 8%) 15,367,0791,229,3668% Total Estimated FD Vacancy 2,503,626 13% Source: AECOM
74 FASHION DISTRICT REAL ESTATE ANALYSIS COMMERCIAL REAL ESTATE OVERVIEW BY SUB-DISTRICT While there is not a clear distinction in building types between sub districts, it is helpful to evaluate the real estate market by sub district. Real estate trends such as lease rates, vacancies, new developments, and sales prices are dependent on the performance of the business operating in the space; whereas most businesses are fashion or flower-related, the focus of business activity and performance differs by sub district. SUB-DISTRICT #1 Sub-District #1 includes million square feet of commercial space. This sub-district includes the majority of the multi-story buildings in the Fashion District and, in all, includes 40 percent of all commercial space in the Fashion District. As described in the Industry Analysis, Sub-District #1 is characterized by branded showrooms. Many major branded marts thare located, at the intersection of 9 Street and Los Angeles Street, the California Market Center, the New Mart, the Cooper Design Space, and the Gerry Building, as well as the Liberty Mart. In addition to the wholesale showrooms, there is a substantial amount of retail in this sub district. Figure 53 Type of Real Estate in Sub-District #1 Figure 54 Characteristics of Real Estate in Sub-District #1 by Type FlexMonthly 0%# of Average Buildings Total RBA Rate/SF Retail 44 1,010,277 $ RetailIndustrial14%Office 30 4,825,713 $ 20%Industrial 21 1,502,526 $ Flex 1 20,000 , Source: CoStar; AECOM Office66% Source: CoStar; AECOM Key Characteristics Upper floors are generally underutilized in Sub-District #1, as well as throughout the Fashion District. o Upper floors were previously used as manufacturing space, but the layouts of these buildings create substantial time and material costs to businesses. For example, due to the layout of the buildings, businesses must move product by vans, rather than cargo trucks and require businesses to move merchandise through elevators which
FASHION DISTRICT REAL ESTATE ANALYSIS 75 necessitates having security to watch the van as product is being delivered and picked up. o The inconvenience of being located in a multi-story to businesses trying to move product is high. Thus, there are substantial vacancies on these upper floors. o One broker describes the lease rates for upper floors to be as low as 20 percent of the lease rates for bottom floors. Office buildings can achieve rents of $ to $ for ground floor space, but only $.40 on upper floors. This is reflected in the lease rates reported in Figure 54. 99 percent of the office space and a majority of the overall leasable space, in this sub district is in buildings with more than four stories. Given the number of multi-story buildings, there is a lot of upper floor space within this area and there are concerns that a substantial share of this space is underutilized. Upper floors are being fairly well utilized as showroom spaces by the major marts, but even the largest of the marts, California Market Center, has major portions of its building that are underutilized. As presented in Figure 50 above, we estimate that the four marts within the Sub-District #1 and the Gerry Building have almost 670,000 square feet of vacant space, which represents almost ten percent of the leasable space within the sub district in these five buildings alone. As described above, the costs of production in multi-story buildings are high. Even if the Los Angeles region is able to capture additional manufacturing activity, manufacturers are likely to locate in different types of buildings than currently available within the Fashion District. Many of these vacant spaces will have to be repositioned for other uses. o Property owners have already begun to reposition many of the buildings in the sub district as creative office uses and functional fashion showroom/office uses. The closer thto the branded fashion activity center, 9 Street and Los Angeles Street, the more successful the endeavor. Sub District #1 Sales Transactions Across the last five years, CoStar reports 19 property sales in Sub District #1 with an average price of $ per square foot. A few (smaller) office condo sales were sold for $ per square foot came in at much higher pricing, but otherwise storefront retail achieves the highest sales per square foot values in the sub-district. Figure 55 Recent Real Estate Transactions in Price/SF in Sub-District #1 $400 $350 $ $300 $250 $200 Average$150 $ $ $100 $ $ $ $50 $ $0 Office Storefront/Mixed UseManufacturingWarehouseGeneral CondosStorefront RetailOffice SpaceTYPE OF REAL ESTATE Source: CoStar; AECOM AVERAGE PRICE/SF
76 FASHION DISTRICT REAL ESTATE ANALYSIS Figure 56 Select of Real Estate Transactions in Sub-District #1 (2008 – 2010) Land Use TransactionsAvg. Price/SFGeneral Office Space 2$ Office Condos 5$ Storefront/Storefront Retail 4$ Warehouse3$$ Use 1$ Theater 2$ / Residential 1$1,: AECOM
FASHION DISTRICT REAL ESTATE ANALYSIS 77 SUB-DISTRICT #2 There is approximately 2 million square feet of commercial space in Sub-District #2, the majority of which is categorized as industrial. The sub-district is the center of the flower market industry in Los Angeles. The small four- to six- block area of flower businesses accounts for more than 10 percent of the flower industry employment in Los Angeles County. The major flower marts are located in one- to two-story industrial buildings along Wall Street ththand San Julian Street between 7 and 8. The flower markets and malls are configured as true markets where flower wholesalers lease stalls that can range in size, approximately 15’ by 30’, and include refrigerated areas. Buyers are able to walk amongst the stalls and choose their product. Product is sold to wholesaler buyers only before 10am and then shopping is opened to the public. Key Characteristics The district has a limited number of property owners. Two property owners, the Southern California Growers Inc. ( Ac) and the American Florist Exchange ( Ac) own the two major marts that dominate the flower industry. The historical core of the Flower Market, the two ththFigure 57 Type of Real Estate in Sub-District #2blocks along Wall Street between 7 and 8 Street, include approximately 460,000 square feet of Flex2%industrial space, almost a quarter of the total sub-district square feet. ththRetail While the area between 7 and 8 Street between 24%Maple and San Julian Street are the core of the flower industry businesses, flower-related businesses extend downward from the two major ththOfficemarts from 8 to almost 9 Street and have also 7%expanded eastward. Industrial Buildings in the area are older and do not have 67%modern configurations for moving product, such as appropriate loading docks. The majority of buildings in the area are industrial and are over 60 years old on average. Big rigs are not likely to be Source: CoStar; AECOM used in the sub-district due to the lack of loading and the size of the roads. Currently, 20-foot trucks are used to move flower product in and around the sub-district. Monthly retail lease rates are reported at approximately $ per square foot. Sub-district lease rates fall just under the average reported rates for Sub District #3. While flower mart spaces are small, 600 to 700 square feet, prime flower market locations, the major marts and mart entrance locations, can have lease rates of $ to $ per foot, while average flower mart prices are in the $ to $ range. Textile lease rates are lower $ to $ per square foot. This sub-district also includes the City Market property. The main market site is approximately 6 acres in area, but when combined with ancillary parcels there are approximately acres of land approximately bounded by San Pedro Street on the east, 12th Street on the south, San Julian Street on the west and 9th Street on the north. The City Market was closed in 2009, and the
78 FASHION DISTRICT REAL ESTATE ANALYSIS main market site is largely vacant. The ancillary parcels contain wholesale space, vacant space and surface parking. There are few produce tenants using the space, but it is primarily vacant. The property is located across from the very successful San Pedro Wholesale Mart on the east and connects to the cluster of textile businesses on the west. In the heart of the Fashion District, the City Market is a strong candidate for redevelopment. Figure 58 Characteristics of Real Estate in Sub-District #2 by Type # of Bldgs Total RBA Monthly Average Rate/SF Retail 34 477,919 $ Office 2 131,309 $ Industrial 53 1,328,471 . Flex 2 35,446 $ Source: CoStar; AECOM Real Estate Transactions Costar reports only seven sales within the sub-district area in the last five years, but sales rates were strong. Storefront Retail sold for an average of $300 per square foot which is a higher per square foot value than most land use types within the adjacent Sub-District #1. Sales prices for industrial are in line with industrial and warehousing space throughout the District. Figure 59 Summary of Recent Real Estate Transactions in Sub-District #2 (2008 – 2010) Avg. SF/ Transactions Avg. Price/SF Transaction Storefront/ Storefront Retail/ Office 2 $ 12,250 Warehouse2$,098Industrial / Manufacturing 3 $ 27,345 Source: CoStar; AECOM Figure 60 Recent Real Estate Transactions in Price/SF in Sub-District #2 $350$300$ $250$200$ Average$150$ $100$50$0Storefront/ WarehouseIndustrial / ManufacturingStorefront Retail/OfficeTYPE OF REAL ESTATE Source: CoStar; AECOM AVERAGE PRICE/SF
FASHION DISTRICT REAL ESTATE ANALYSIS 79 SUB-DISTRICT #3 Sub-District #3 has approximately 5 million square feet of commercial space and includes a mix of retailers and wholesalers and manufacturers. Santee Alley is located within the heart of this sub-district and is well known as a regional shopping destination for discount apparel. Despite the popularity of Santee Alley, retail only makes up 14 percent of the employment in this sub district according to the official employment data. 23 percent of the employment is manufacturers and another 30 percent or wholesalers. This sub district includes the greatest number of wholesalers, though not the most wholesale employment. This sub district has a larger number of small format storefronts at the ground level that accommodate a high concentration of wholesalers and retailers. Key Characteristics During the weekends there is heavy foot traffic within Santee Alley; retail storefronts within Santee Alley are in high demand. Lease rates for stores located in Santee Alley are as high as $ to $ per square foot for 1,500 square feet spaces. Santee Alley rents are as high as rents for retail space in Santa Monica. The recession has impacted all of the Fashion District, but the recession has not created many vacancies within the Alley. There has been some turn over in a few of the stores in the Alley, but these spaces have been filled immediately. The greatest impact on the Alley may be a slight decline in the overall lease rates. Los Angeles Street has struggled in recent years, as many of the wholesalers now located in the San Pedro area were drawn out of retail buildings along Los Angeles Street. Santee Alley has very little vacancies, but ground floor vacancies along Los Angeles and Wall Street are estimated to be between 10 to 15 percent. As shown in Figure 62, outside of Santee Alley prices average $ per square foot for ground floor retail. There is a mix of single and multi-story buildings in the district. The sub district has approximately 15 buildings with 4+stories over. Similar to Sub District #1 and the Sub District #4, these multi-story buildings may have a number of vacancies.
80 FASHION DISTRICT REAL ESTATE ANALYSIS Figure 61 Type of Real Estate in Sub-District #3 Figure 62 Characteristics of Real Estate in Sub-District #3 By Type Flex 4%Monthly # ofAverage BldgsTotal RBARate/SFRetail 1282,144,784 $ Office 191,148,696 $ Industrial 30%Industrial 631,490,874 43%Flex 5181,578 . Source CoStar; AECOM Office 23% Source: CoStar; AECOM Real Estate Transactions CoStar reports the sales price for only 11 sales transactions across the last five years within the sub-district. 9 out of the 11 sales transactions have been for storefront retail which achieve a fairly high price per square foot of approximately $. All buildings sold average over 20,000 square feet and have an average price per square foot of almost $300. The sub district’s sales price represents the second highest sales price per square foot average, after Sub-District #4, which achieves an average sales price per square foot of just over $500. Figure 63 Recent Real Estate Transactions in Price/SF in Sub-District #3 $450$400$ $350$300Average$250$ $200$150$100$ $50$0Storefront/Storefront Retail/OfficeIndustrialOffice Live/WorkTYPE OF REAL ESTATE Source: CoStar; AECOM AVERAGE PRICE/SF
FASHION DISTRICT REAL ESTATE ANALYSIS 81 SUB-DISTRICT #4 There is 3 million square feet of commercial space in Sub-District #4 and, while uses are fluid, it is split fairly evenly between buildings characterized as industrial and retail. In recent years, many of the unbranded wholesale showrooms have moved eastward from the Los Angeles Street area to the San Pedro area. Wholesale and wholesale/manufacturing have become the activity focus of the area. Key Characteristics Sub-District #4 is characterized by fairly dense two to three -story buildings. There are few buildings with more than four stories within the sub district. CoStar reports that retail spaces have an average lease rate of approximately $ per square foot. Besides Santee Alley, these are the highest lease rates within the District. These rates are likely due to the showroom uses in the area. The San Pedro Wholesale Mart opened in 1995 and was a “game changer”. This development was targeted to recent Korean immigrants who had an interest in ownership, but were not able to purchase the large buildings within Sub-District #1. The San Pedro Mart was sold as showroom condominiums and, across the last decade, has been a huge success. Sub-District #4, specifically the San Pedro Wholesale Mart, has become the destination for purchasing less expensive, unbranded fashion within Los Angeles. Buyers prefer to park once and to walk through the District to make their wholesale purchases. Thus, ground floor locations within walking distance (1/4 to ½ mile) from the major marts in this area are in high demand. However, the further away buildings are located from the San Pedro Wholesale Mart the less the ground floor space is in demand. Upper floor spaces are very difficult to rent throughout the area, as well as throughout the Fashion District. Figure 64 Type of Real Estate in Sub-District #4 Figure 65 Characteristics of Real Estate in Sub-District #4 by Type Flex2%Monthly # of Average Bldgs Total RBA Rate/SF Retail 33 1,356,756 $ Office 3 70,579 . Industrial 116 1,536,020 $ RetailFlex 3 46,349 . 45%IndustrialCoStar; AECOM 51% Office2% Source: CoStar; AECOM
82 FASHION DISTRICT REAL ESTATE ANALYSIS Brokers describe ground floor wholesale lease rates of $ to $ per square foot. Similar to Sub-District #1, there is less interest in upper floors. Lease rates for upper floors range from $ to $ per square foot. Ground floor vacancy rates in the area are much lower than other parts of the District. Brokers report estimated vacancies of less than 5 percent for ground floor uses. However, as presented in the profile of major marts there are still a number of vacancies in upper floors. Based on our estimates, the major marts make up more than a third of the leasable space in the sub district, million square feet, and upper floors contribute up to 600,000 square feet of vacant space. This makes up most of the vacant space within the district and is approximately 20 percent of total leasable area. Sub District #4 Sales Transactions The average sales price in Sub-District #4 was approximately $500 per square foot. Storefront Retail/ Retail Condos had the highest commercial per square foot values throughout the District. Condo units in the area are small, but, across the last five years, were being sold for an average of $1,100 per square foot. Figure 66 Summary of Recent Real Estate Transactions in Sub-District #4 (2006 – 2010) Land Use Transactions Price/ SF Avg. Size Storefront Retail/ Residential 9 $1,323 1,462 Storefront Retail/ Office/Retail Condos 39 $1,093 1,589 Showroom 2 $99 25,867 General Freestanding 16 $441 1,186 Industrial / Manufacturing 5 $265 15,911 Warehouse 6 $404 6,575 Other 4 $457 3,599 Source: CoStar; AECOM Figure 67 Recent Real Estate Transactions in Price/SF in Sub-District #4 $1,400$1, $1,200$1,000$1, $800$600Average$$400$ $ $ $200$ $ $0Storefront Retail/ Storefront Retail/ OtherGeneral WarehouseIndustrial / Traditional ResidentialOffice/Retail FreestandingManufacturingShowroomCondosTYPE OF REAL ESTATE Source: CoStar; AECOMAVERAGE PRICE/SF
FASHION DISTRICT REAL ESTATE ANALYSIS 83 SUB-DISTRICT #5 Sub-District #5 is characterized by a number of smaller free standing buildings. There are almost 150 buildings within the sub-district containing million square feet of commercial space. 75 percent of that space, or million, is in industrial buildings. Key Characteristics While almost half of employment in this sub-district is fashion- related, there is a greater diversity of users within this sub-district. Many of its industrial buildings are being used for typical industrial activities, such as production of goods, apparel and non-apparel, and warehousing of goods. With industrial lease rates as low as $.60 per square foot, this area currently offers fairly affordable commercial options. The freestanding buildings in this sub district have better loading areas and access roads than other parts of the Fashion District and are typically one to two stores. These buildings are more desirable to manufacturers and contractors. Figure 68 Type of Real Estate in Sub-District #5 Figure 69 Type of Real Estate in Sub-District #5 Flex 1% Monthly Retail Average 21% # of Bldgs Total RBA Rate/SF Retail 24 529,041 $ Office Office 6 75,950 $ 3%Industrial 115 1,879,767 $ Flex 3 32,796 . Industrial 75%Source: CoStar; AECOM Source: CoStar
84 FASHION DISTRICT REAL ESTATE ANALYSIS Real Estate Transactions CoStar reported 19 commercial transactions in Sub-District #5 across the last five years. Industrial space sold for approximately $90 per square foot, while warehouse/distribution space was sold for $150 per square foot. Retail had the greatest price per square foot at approximately $200 per square foot Figure 70 Summary of Recent Real Estate Transactions in Sub-District #5 (2008 – 2010) Transactions Avg. Price/SF Size / Transaction Industrial/Manufacturing5$,482Warehouse/Distribution7$,170General Freestanding 1 $ 3,886 Retail/Storefront/ Storefront Retail/ Office 2 $ 7,757 Other4$,746Source: CoStar; AECOM Figure 71 Recent Real Estate Transactions in Price/SF in Sub-District #5 $300$250$ $200Average$ $ $ $150$ $100$ $50$0General Retail/Storefront/ OtherWarehouse/Industrial/FreestandingStorefront Retail/ DistributionManufacturingOfficeTYPE OF REAL ESTATE Source: CoStar; AECOM AVERAGE PRICE/SF
FASHION DISTRICT REAL ESTATE ANALYSIS 85 CREATIVE OFFICE SPACE Given the historic building typologies found in the area, as well as the Fashion District’s proximity to the major downtown office center, “creative office” uses have been considered as a potential real estate use within the Fashion District. DEFINING CREATIVE OFFICE SPACE Creative office is a subset of general office space and is a burgeoning type of use that allows for a flexibility of interior spaces to encourage communication, play and collaboration. Creative office spaces typically are redevelopment projects that are located in the renovated interior spaces of older or historic buildings. Many creative office spaces are contemporary but also maintain certain design aspects of the building shell as well as the essence of the building’s historic past. They typically have an open, loft-like style which makes it flexible and easy to modify. A key element of creative office space is that it is designed to encourage and promote employee’s creativity, promote active communication, increase motivation, entertain and inspire clients while maintaining enough privacy for each employee. EXISTING SUPPLY OF CREATIVE OFFICE SPACE The following information is not comprehensive data of creative office space but gives an idea as to what is currently listed as creative office space within the Fashion District and in the Greater Downtown area by CoStar. As would be expected the greater Downtown Los Angeles market performs at a higher level relative to the Fashion District. As shown in Figure 72, there are currently 24 buildings characterized as creative office with nearly million square feet of space within the Greater Downtown area of Los Angeles. Reported vacancy rates increased substantially in 2006 but remain fairly low at approximately 5 percent. Current lease rates are high at $ per square foot which has increased significantly across the last five years. Approximately 46 percent (less than 1 million square feet) of the total creative office space within the greater downtown area is located within the Fashion District. Vacancy rates are fairly high at approximately 11 percent with an average monthly lease rate of $ per square foot. The Fashion District is not considered a central area for office uses within the Downtown and thus occupancies and lease rates for office uses are lower. Figure 72 Fashion District and Downtown Creative Office Space Trends (2005 – 2010) Total Vacant Total Total Net RBA Total Average Period # Bldgs Total RBA SF Vacant % Absorption Delivered Rate (fs) Fashion District 2010 QTD 10 995,670 106,016 % 4,000 0 $ 2009 10 995,670 110,016 % 3,100 0 $ 2008 10 995,670 113,116 % (33,251) 0 $ 2007 10 995,670 79,865 % 36,147 0 $ 2006 10 995,670 116,012 % (80,162) 0 . 2005 10 995,670 35,850 % (3,250) 0 . Greater Downtown Los Angeles 2010 QTD 24 2,166,386 116,404 % 3,011 0 $ 2009 24 2,166,386 119,415 % 52,855 0 $ 2008 24 2,166,386 172,270 % (59,405) 0 $ 2007 24 2,166,386 112,865 % 69,622 0 $ 2006 24 2,166,386 182,487 % (111,103) 0 $ 2005 24 2,166,386 71,384 % 33,820 0 $ Notes: RBA=Rentable Building Area FS=full service Source: CoStar; AECOM
86 FASHION DISTRICT REAL ESTATE ANALYSIS A Closer Look at Creative Office Properties The list below is an overview of specific properties listed as creative office within the Fashion District. The creative office space buildings within the Fashion District were built between 1917 and 1929. According to CoStar the largest building is approximately 178,000 square feet and the smallest is 24,000. Approximately 40 percent are class B space and the remainder is class C space. Most of the buildings are multi-story buildings repositioning their upper floors as creative office. Figure 73 Fashion District Creative Space Properties Rentable Total Vacant Average Weighted Building Number Of Building Address Building Area Available Rent Class Stories $ 122 E 7th St 126,000 14,000 C14 - 846 S Broadway 178,368 0 B 12 $ 656 S Los Angeles St 53,654 16,166 B13 $ 719 S Los Angeles St 169,161 5,250 C 12 $ 730-738 S Los Angeles St 72,712 34,860 C6 $ 1206 S Maple Ave 154,899 18,740 C 11 $ 819 Santee St 93,379 7,000 C13 $ 704 S Spring St 93,000 6,500 B 14 - 725 S Spring St 24,449 0 B3$ 833 S Spring St 30,048 3,500 C 5 Source: CoStar
FASHION DISTRICT REAL ESTATE ANALYSIS 87 Figure 74 Map of Fashion District Creative Office Buildings Source: AECOM
88 FASHION DISTRICT REAL ESTATE ANALYSIS Below are examples of creative office spaces that currently exist within the downtown Los Angeles area. Real estate characteristics of the properties are described in Figure 75 The Corporation Arts Building The Corporation Arts Building is a 14 story arts complex on Gallery Row in the heart of Downtown Los Angeles. The building was previously used as office space and a bank. It is configured to meet businesses’ needs for affordable creative spaces. Retail Office Space The following featured creative office space is a live/work retail office with private studio loft. It includes two store fronts. This retail showroom/office is located in Downtown Los Angeles between the Fashion District and Historic Downtown. The building is located near California Mart and The Intersection. There is lots of pedestrian and vehicular traffic and the building has good visibility on both sides. It is located within a historic building and has been renovated to include modern features. The storefronts are located on Spring and Main Streets. Additional information was not available on this property. Pershing Square Building The Pershing Square Building offers creative office space. It is described as having a “unique mix of historic charm and modernized, open spaces”. It is located between the Financial District and Gallery Row, on the corner of 5th and Hill Street, the Pershing Square Building. The building is located near Pershing Square Park, a red line metro station, bars and restaurants. The different spaces are flexible is size ranging from 950 to 11,000 square feet with exposed ceilings, concrete floors and views of the city and park. Primrose Design Center The Primrose Design Center is class C office loft/creative space building which was renovated in 1928. Originally built in 1924, the Primrose Design Center was one of the first entertainment buildings in downtown Los Angeles. The building is located within the Fashion District and situated within one block of the intersection of 9th Street & Los Angeles Street and close to the New Mart, California Mart, Gerry Building and Cooper Building.
FASHION DISTRICT REAL ESTATE ANALYSIS 89 Figure 75 Profile of Creative Office Properties in Greater Downtown Los Angeles Rentable Average Building Building Weighted Rent Number Year Building Name Address Area Space Range (SF/Month) Of Stories Built The Corporation Arts Building 724 S. Spring St N/A 400 - 4,000 SF $ 14 N/A Pershing Square Building 448 S Hill St 150,000 950 - 11,500 SF $ - $ 15 1924 Primrose Design Center 833 S Spring St 30,048 300 - $ 5 1924 Source: CoStar; Individual Properties; AECOM
90 FASHION DISTRICT REAL ESTATE ANALYSIS COMMERCIAL DEMAND ANALYSIS An understanding of possible future development trends is a key input for planners and designers in the process of producing the Fashion District Design for Development. In the commercial demand analysis, as in the hotel and residential analysis in following sections, we provide high-level projections of the demand and absorption of land uses in the Fashion District. The fashion industry, much like fashion, is a quick paced and ever evolving industry. It should be noted that the evolution of the Fashion District will change and evolve with changes in the fashion industry. The internal geographies of the District, the sub-districts described in the report above, may expand, contract, move, or disappear altogether with continuing trends of the fashion industry. Baseline projections of demand are developed based on knowledge of current long-term trends within the District, but they represent only the direction and overall likely magnitude of development within the District based on the District’s current trajectory. As part of the Design for Development we will later present certain economic opportunities that may help to catalyze significant jumps in growth beyond what is quantified in the baseline projections. As described in the previous real estate section, most of the spaces within the District are being used interchangeably by various businesses, with one of the main distinctions as ground floor storefront space and upper floor space. For this reason, retail, office, and industrial demand is aggregated into one comprehensive commercial demand analysis. METHODOLOGY Historic employment growth rates, adjusted to account for probable long-term trends in the District, are the basis for the commercial demand estimates. Officially reported employment data, ES202 data available for 2003, 2005 and 2009, plus the estimates of sole proprietor workers were analyzed to evaluate growth trends by sub-district. The historical growth trends were evaluated to estimate future growth patterns. In addition to reviewing growth rates between 2003 and 2009, the growth rates between 2003 and 2005 were also reviewed. This time period was before the recession, but also during a major run up in consumer spending. Historical growth rates are shown in Figure 76. Estimated future growth rates also account for expected growth and anticipated industry contractions as gathered from stakeholders and the industry analysis. These assumptions include: Expectation of continued strong wholesale growth, particularly in Sub-District #4 and Sub-District #1 Growth in design Continued manufacturing declines until 2020 for most of the district, but limited manufacturing growth supporting the growth in contemporary women’s fashion Using the 2009 officially reported employment and sole proprietor workers as a benchmark for 2010 employment, estimated annual growth rates are applied to the employment figures by sub-district to project growth in employment between 2010 and 2030. Employment density estimates are then applied to the growth in employment to calculate incremental square feet of commercial space. Employment density estimates are based on a 2001 employment 26density study prepared for Southern California Association of Governments. It should be noted that the report anticipates additional “under counted” workers in our total jobs figure. To account for space needed for these additional workers, an adjustment is made to the resultant anticipated square feet demand. 26 Employment Density Summary Report, October 31, 2001. Prepared for the Southern California Association of Governments (SCAG) by The Natelson Company, Inc. in association with Terry Hayes Associates.
FASHION DISTRICT REAL ESTATE ANALYSIS 91 Figure 76: Historical Annual Employment Compound Annual Growth Rate (2003 – 2009) Sub Districts Sub-District Sub-District Sub-District Sub-District Sub-District Total #1 #2 #3 #4 #5 District Fashion-Related Design 16% n/a -8% 18% -100% 6% Fashion Support Services 0% 5% 5% -4% 12% 1% Manufacturing -18% -8% -11% -2% -16% -13% 1 Retail 21% -1% -7% 0% -11% 3% Suppliers -10% -9% -10% -4% 0% -7% Wholesale -1% 5% -3% 15% 4% 3% Flower-Related 3% -2% 0% 0% 0% -2% Other -4% 4% -2% -16% -6% -5% 1 Sub-District #1 shows a 21 percent growth in retail, this is due to one outlier, the addition of a retail company's corporate headquarters. We lowered the expectation of growth in this sub-district, in the next table, to account for growth without the outlier. Source: California EDD Figure 77: Estimated Future Employment Compound Annual Growth Rate Sub Districts Sub-District Sub-District Sub-District Sub-District Sub-District Total #1 #2 #3 #4 #5 District Fashion-Related Design 10% -10% -6% 10% -20% 8% Fashion Support Services 0% 5% 8% 2% 8% 5% Manufacturing -10% -8% -8% 1% -8% -3% Retail 4% 1% -3% 2% -3% 2% Suppliers -5% -10% -5% -5% -5% -5% Wholesale 2% 5% -4% 7% 2% 4% Flower-Related 0% 1% 0% 0% 0% 1% Other 2% 3% 3% 0% 3% 2% Source: AECOM
92 FASHION DISTRICT REAL ESTATE ANALYSIS EMPLOYMENT PROJECTIONS Estimated annual growth rates, drawn from historical rates, are applied to current employment figures to estimate employment growth in Fashion District. The results are presented in Figure 78. Assuming that there is continued growth in the wholesale operations throughout the District and with that growth in fashion support services, as well as other uses and retail, we estimate that official employment and sole proprietor workers within the District will grow from approximately 16,700 to 25,400 across the next 20 years. Most of the growth is anticipated within Sub-District #4, followed by Sub-District #1. Without a major change, Sub-District #3 will experience a net decrease in employment across the next 20 years. The wholesale industry is projected to have the most growth during the next 20 years. It is projected to more than double in the Fashion District, growing from 4,300 to 8,700 employees. Other, non-fashion related industries will have the second highest growth during the period, increasing from 4,500 employees to 7,300. Figure 78: Employment Projections Total Fashion District Estimated Change CAGR 2010 2015 2020 2025 2030 2010-2030 Fashion-Related 190 262 389 604 956 766 Design % 841 1,010 1,252 1,597 2,093 1,252 Fashion Support Services % 3,050 2,308 1,863 1,730 1,535 -1,515 Manufacturing % 2,600 2,812 3,103 3,483 3,965 1,365 Retail % 816 604 451 353 280 -536 Suppliers % 4,288 4,784 5,607 6,856 8,671 4,383 Wholesale % Flower Market % 432 454 476 500 524 92 Other % 4,515 5,085 5,736 6,480 7,331 2,816 16,733 17,319 18,877 21,601 25,355 8,623 Total Employees Source: AECOM
FASHION DISTRICT REAL ESTATE ANALYSIS 93 BASELINE COMMERCIAL SPACE DEMAND PROJECTIONS Applying employment density benchmarks to the change in employment, we account for the general space requirements necessary for certain operations and estimate the incremental change in commercial space in the District. The results of this analysis are presented in Figure 79. The most growth in commercial space is generated as a result of the wholesale industry. Wholesale is estimated to support an additional million square feet of commercial space across the next twenty years. “Other”, non-fashion related industries, will support an additional million square feet throughout the District. Fashion Support Services will generate demand for almost 750,000 square feet of commercial space, while the fashion-related retail will generate 550,000 square feet of space. Based on the analysis of official employment and sole proprietor workers, commercial space demand is expected to grow by million square feet. Assuming that other workers make up approximately an additional 10 percent of jobs, this increases the demand for space to approximately million square feet across the next 20 years in the Fashion District. As to be expected much of the demand for commercial space will be generated in Sub-District #4. While demand is generated by employment growth “in this area” we expect that this growth can be expected as close to Sub-District #4 as possible, but will expand into other areas if space is not available within the sub-district. Sub-District #1 will capture much of the new retail growth. These estimates are the demand for space and do not account for current vacancies. As described in the Real Estate analysis, there is an estimated million square feet of space available within marts spread throughout the District and an estimated million square feet of space throughout the rest of the District. While there may be existing vacancies, the demand estimated in this analysis will not necessarily fill all vacant commercial spaces. As described previously, there is a significant premium for ground floor spaces for both retail as well as the unbranded wholesalers. Some of these wholesalers may be willing to locate in second or third story locations, but are likely to prefer newer two or three story locations to upper floors in multi-story buildings. If we assume that projected demand absorbs into 60 to 80 percent of the existing vacant space ( to 2 million square feet), then demand across the next 20 years will support to million square feet of new commercial space. CATALYTIC CHANGE The baseline projections estimate commercial space demand based on extension of existing growth patterns. In addition to this growth, we do believe it is possible that with the implementation of major projects and “game changing” elements such as the successful efforts to expand Santee Alley as a regional destination, or the successful creation of a buyer’s accommodation destination, or an explosion of designers and brands in the Fashion District as a result of raising Los Angeles’ fashion profile, that it may be possible to substantially increase the baseline commercial space demand projections. The demand estimates will evolve as we continue to refine the economic opportunities within the Fashion District.
94 FASHION DISTRICT REAL ESTATE ANALYSIS Figure 79 Total Fashion District Baseline Commercial Baseline Demand Projections Total 2010-2015 2015-2020 2020-2025 2025-2030 2010-2030 Fashion-Related 43,000 77,000 129,000 211,000 460,000 Design 102,000 145,000 207,000 298,000 752,000 Fashion Support Services (594,000) (357,000) (106,000) (155,000) (1,212,000) Manufacturing 85,000 116,000 152,000 193,000 546,000 Retail (318,000) (229,000) (148,000) (109,000) (804,000) Suppliers 248,000 412,000 624,000 908,000 2,192,000 Wholesale Flower-Related 9,000 9,000 9,000 10,000 37,000 Other 228,000 260,000 298,000 340,000 1,126,000 (197,000) 433,000 1,165,000 1,696,000 3,097,000 Total Square Feet (SF) Source: AECOM
FASHION DISTRICT REAL ESTATE ANALYSIS 95 HOTEL ANALYSIS Numerous stakeholders, business owners, and property owners have expressed the desire to see a hotel developed to serve industry within the Fashion District. There are a number of hotels within Downtown Los Angeles, but there are none located within the current Fashion District boundaries. In this section we briefly evaluate the current supply of hotels within the Downtown area and provide a high level estimate of hotel room demand for the Fashion District. The Central City Community Plan is being updated in tandem with the Fashion District study. Given that the Central City Community Plan team will be developing comprehensive estimates for Downtown hotel demand, our analysis focuses primarily on the hotel room demand generated within the Fashion District. DOWNTOWN HOTEL MARKET 27Downtown Los Angeles has approximately 21 hotels with 7,300 rooms. A list of hotels is presented in Figure 80 and the major hotels are mapped in Figure 81. As shown, there are no hotels in the Fashion District study boundary and most of the Downtown hotels are located on the west side of Downtown. Up until last year, there was a limited amount of upper level hotels in the Downtown. There were several hotels classified as stars, but only two hotels were considered in the 4-star class, the Omni and Hilton Checkers. In February of 2010 the JW Marriott, a new 4-star hotel at LA Live with almost 900 rooms, came online and in April the five-star 123-room Ritz-Carlton opened. These two hotels, housed in the same building, added 1,000 new rooms, or about 16 percent to the existing hotel room stock. With the opening of Nokia Theatre and LA Live and the overall renaissance of Downtown LA, hotel occupancies were inching upward in Downtown Los Angeles, despite the recession. The new hotel rooms delivered at LA Live have reduced the occupancies of other hotels throughout the district. Occupancies in the Downtown area are currently in the range of 60 percent, down from 70 percent last year (Figure 82). In addition to recent developments, a plan to redevelop the Wilshire Grand Hotel was revealed in March of 2010. The redevelopment project proposes raising the current 896-room hotel to develop both an office tower and a 560-room hotel. This would reduce Downtown’s hotel rooms by almost 300 rooms. In addition, the Grand Avenue project is planned to include a boutique hotel of up to 275 rooms. If both of these projects are eventually developed the number of hotel rooms in Downtown will remain balanced at approximately 7,300. The closest hotels to the Fashion District, the Cecil Hotel and Stay Hotel, are located just west of Sub-District #1, near the Pershing Square metro station. The Cecil Hotel is a 14-story hotel and the Stay Hotel offers hostel style guestrooms with shared bathrooms. Both hotels are located in the same building and are rated as two-star hotels. 27 Defined as the triangular area bounded by the 110 Freeway to the west, the Interstate 5 Freeway to east and the Interstate 10 Freeway to the south.
96 FASHION DISTRICT REAL ESTATE ANALYSIS Figure 80 List of Downtown Los Angeles Hotels Name of Establishment Address Open Date Rooms Classification Major Downtown Hotels Westin Bonaventure Hotel & Suites 404 S Figueroa St Jun 1977 1,354 Stars Wilshire Grand Htl Los Angeles 930 Wilshire Blvd Jun 1952 896 3 Stars Marriott JW Los Angeles @ LA Live 900 W Olympic Blvd Feb 2010 878 4 Stars Millennium Biltmore 506 S Grand Ave Jun 1923 683 Stars Sheraton Hotel Los Angeles Downtown 711 S Hope St Aug 1973 485 Stars Marriott Los Angeles Downtown 333 S Figueroa St Jun 1983 469 Stars Omni Los Angeles Hotel 251 S Olive St Dec 1992 453 4 Stars Kyoto Grand Hotel & Gardens 120 S Los Angeles St Jun 1977 434 Stars Stillwell Hotel 838 S Grand Ave 232 Stars Downtown LA Standard 550 S Flower St May 2002 207 Stars Luxe City Center Hotel 1020 S Figueroa St Jun 1965 195 3 Stars Hilton Checkers Los Angeles 535 S Grand Ave Feb 1989 188 4 Stars Miyako Hotel 328 E 1st St 174 3 Stars Ritz Milner 813 S Flower St 137 2 Stars Ritz-Carlton Los Angeles 900 W Olympic Blvd Apr 2010 123 5 Stars Los Angeles Athletic Club Htl 431 W Seventh St Jun 1912 72 . O Hotel 819 S Flower St 67 Stars Fashion District None Adjacent Boundaries Cecil Hotel 640 S Main St 100 2 Stars Stay Hotel 636 S Main St 138 2 Stars Source: Smith Travel Research; Bay Area Economics
FASHION DISTRICT REAL ESTATE ANALYSIS 97 Figure 81 Map Overview of Major Downtown Hotels Source: AECOM Figure 82 Downtown Los Angeles Hotel Occupancy Source: Smith Travel Research PERCENT
98 FASHION DISTRICT REAL ESTATE ANALYSIS HOTEL DEMAND ANALYSIS Buyers come from across the US and the globe to visit the wholesale showrooms throughout the Fashion District. Market weeks bring in tens of thousands of visitors to the major marts for a few weeks a year, but buyers also visit the Fashion District year round. It is helpful to note that there may be different target markets for a hotel in the Fashion District. Firstly, there are buyers who are shopping for branded and unbranded lines for larger boutique shops and department stores. Next, there are buyers for more “mom and pop” stores who are shopping for less expensive fashion goods. Buyers shopping for branded lines are likely to be able to afford $150 to $200+ for a hotel room and are looking for atmosphere as well as convenience. The buyers looking for less expensive goods may want more basic accommodations that are still convenient and safe for a multiple-day expedition to the Los Angeles Fashion District. By anecdote, we understand that a majority of the buyers visiting the branded showrooms in Sub-District #1 either stayed in the Standard (207 rooms) or stayed in hotels in Beverly Hills because other Downtown hotels did not offer the quality nor the ambiance that buyers seek. Many of these buyers may now also stay in the new hotels around Staples Center, the JW Marriott and the Ritz Carlton, but may still prefer a boutique hotel within walking distance of their Fashion District destinations. Methodology To evaluate the demand for the hotel, we consider two factors: (1) hotel demand generated from year-round commercial activities, and (2) hotel demand supported by the Fashion District’s Market Weeks. Commercial activities generate demand for hotel rooms. To estimate the demand for hotel rooms from general business activity we determined the average hotel room nights per employee for Los Angeles County using hotel and visitor information from the Los Angeles Convention and Visitors Bureau and 2010 State of California Employment Development Department Los Angeles County employment estimates and US Census Non Employer Statistics. This figure is then applied to the Fashion District current employee and sole proprietor estimates and the baseline Fashion District employment projections. Figure 83 Los Angeles County Overnight Visitor and Hotel Information Visitor Type % International 19% Domestic-Business 16% Domestic-Leisure 30% Domestic VFR 35% 1 Estimated Hotel Users57% Total Overnight Leisure 65% Total Overnight Business 35% LA County Hotel Market, 2009 Room Supply 96,682 Average Occupancy % ADR $ Notes: 1 Estimated Hotel Users excludes the share of domestic and international overnight visitors that are visiting with friends or relatives. International visitors are distributed by the same ratio as the Domestic Leisure, Business, and VFR Visitors. Source: Los Angeles Convention and Visitors Bureau; AECOM
FASHION DISTRICT REAL ESTATE ANALYSIS 99 Figure 84: Room Nights per Employee Calculation Room Nights Available Room Nights 35,288,930 Adjusted Average % Stable Economy Occupied Room Nights 24,702,251 Room Nights per Employee Occupied Room Nights – Business 8,592,087 LA County Employment 4,272,200 LA County Employment Adj. for Non Employment Firms 5,126,640 Occupied Room Nights/Employee Source: Los Angeles Convention and Visitors Bureau; AECOM Fashion District hotel demand also includes an evaluation of potential support from Market Weeks that happen in the Fashion District. In a previous study completed in 2006 by the LAEDC and ERA, LAEDC captured information directly from the major marts to estimate the economic impacts of market week. There are an estimated 53,000 buyers who attend these weeks a year. While the events support thousands of hotel room nights throughout the city of Los Angeles, proposed Fashion District hotels are only able to capture a small percentage of this support due to the short time period of these events. Hotel operators look to achieve an average occupancy in the range of 70 percent. The Market Weeks generate thousands of room nights, but only across a period of approximately eight weeks a year. A hotel that had sufficient rooms to service all the buyers during the market weeks would be left almost vacant the rest of the year. Thus, a single hotel with sufficient capacity would not get built and instead the support must be spread through a number of hotels. However, the Market Weeks could provide support to any proposed Fashion District hotels during their duration. Given the convenience of a hotel within the Fashion District, we estimate that during the market weeks, hotels in the Fashion District will be 100 percent occupied. Hotel operators are typically willing to develop enough hotel rooms to target a 70 percent occupancy, so the support from Market Week lowers the occupancy requirement for the rest of year to approximately 65 percent and supports an additional 8 percent of rooms. Figure 85 Adjusted Hotel Occupancy Target Estimated Occupancy Target Est. Duration Occupancy Market Weeks’ Occupancy 8 weeks 100% Target Annual Occupancy weeks 70% Required Occupancy Outside of Market Week weeks 66% Source: AECOM
100 FASHION DISTRICT REAL ESTATE ANALYSIS Results As presented in Figure 86, businesses within the Fashion District currently support approximately 120 rooms in the Los Angeles area. Based on our baseline estimate of projected employment growth, businesses will support another 60 hotel rooms across the next 20 years. Currently there are no hotels within the Fashion District and so all of the current demand is leaking out to other parts of Downtown and the city. Figure 86 Hotel Room Demand Analysis Rooms Demanded Los Angeles County Room Nights Demanded per Worker 2010 2015 2020 2025 2030 Fashion District Est. Employee and Sole Proprietor Workers 16,700 17,300 18,900 21,600 25,400 Base Employee Room Demand Employee Room Demand Room Nights /employee 27,989 28,994 31,676 36,201 42,570 Rooms, at Occupancy of: 65% 121 125 137 156 184 Source: AECOM If the Fashion District can capture approximately 60 percent of this existing demand, there is existing support for a small to mid-size hotel, up to 75 rooms. Across the next 20 years, with improvements in the physical environment and amenities in the area, we estimate a greater capture of the room night demand generated by the district, up to 85 percent and that there will be sufficient support for two small or mid-size hotels. Figure 87: Estimated Fashion District Room Absorption 2010 2015 2020 2025 2030 Fashion District Generated Room Demand 121 125 137 156 184 Capture at Project Site 60% 60% 75% 75% 85% Hotel Room Absorption 73 75 103 117 156 Source: AECOM Based on the two buyer markets described above, one of the possible hotels could be a mid-size, 3-star chain hotel, such as a Courtyard by Marriot, Homewood Suites, or Four Points Sheraton, offering affordable comfortable and convenient accommodations to buyers. These hotels typically range from 75 to 130 rooms. Rates typically range from $90 to $170 per night. This hotel would be best located within walking distance or offering convenient access to Sub-District #3 and Sub-District #4. A high-end boutique hotel may also be feasible within the Fashion District. High-end boutiques offer unique, creative environments to patrons with all of the latest amenities. Boutique hotels have higher room rates of approximately $200+ and can range in size from 30 rooms to 75 rooms. This hotel would thbe best located adjacent to the major marts at 9 Street and Los Angeles Street.
FASHION DISTRICT REAL ESTATE ANALYSIS 101 RESIDENTIAL DEMAND ANALYSIS GENERAL HOUSING TRENDS Residential development throughout the urbanized areas of Southern California has become increasingly constrained by the lack of available land, which, combined with historically strong regional economic and population growth (accompanied by historically low interest rates) helped create a run of uninterrupted strong appreciation in housing values in Los Angeles County. However, 2006 marked the end of the housing bubble in the County. Between 2000 and 2006, the median price of a home in Los Angeles County doubled while, at the same time, home ownership became less affordable with less than 10 percent of the population being able to afford to purchase a home based on the median sales price and traditional lending standards. Since the peak in 2006, housing prices have retreated approximately 30 percent in the County. Prices Downtown have experienced a similar trend, with slightly higher price depreciation driven by the delivery of a large number of units at the peak of the market. Near-term outlook for home ownership markets remains subdued with existing home sales continuing to slightly edge up and home prices rising marginally. Interest and inflation rates remain low, but job losses remain large as high unemployment levels further disrupt recovery. Strength in for-rent residential product has also weakened with recent vacancies increasing and prices falling in the Downtown and larger County areas. DOWNTOWN DEVELOPMENT 2829Since the passing of the Adaptive Reuse Ordinance (ARO) in 1999, Downtown has experienced tremendous residential housing growth. The Downtown area has increased its housing supply by over 17,000 units, which represents a total growth of approximately 150 percent. Approximately 85 percent of the units developed since 1999 were market rate, while 15 percent are classified as affordable. During the 11 year time-period, new units delivered Downtown represented approximately 10 percent of the new units in the countywide area. Between 2006 and 2008 alone, the total residential units increased by approximately 37 percent. Downtown condominium projects represent some of the highest density developments in the County. The average project size is approximately 150 units, with many developments offering 200 - 300 for sale units. Recently, due to a lack of demand for new for sale units, a number of projects have switched to rental properties. Historically, units were developed in Downtown’s Bunker Hill and City West districts with recent development occurring in the Historic and South Park areas. Future development will continue to focus on these areas with the majority of planned projects in South Park and to a lesser extent the Historic core. In total, there is an estimated 15,000 additional residential units either permitted, under plan check, or under consideration by the City of Los Angeles. Current estimates suggest that the Downtown housing units are 84 percent occupied. The median sales price for a 1-bedroom, 2-bedroom, and 3-bedroom unit is $268,000, $368,000, and $524,000, respectively. Current for-rent properties developed after 1999 are asking, on average, $2,200 per month. These units have vacancy rates of approximately 15 percent. FASHION DISTRICT DEVELOPMENT Currently the Fashion District has approximately 725 market rate residential units (for sale and for rent), which represents approximately 4 percent of the available market rate residential units in the Downtown 30area. Current vacancy for these units is approximately 64 percent, driven by unoccupied units in Santee Village. The project is comprised of three buildings located at the northern end of the Fashion District and the development went into foreclosure in 2008. Kennedy Wilson and RECP/Urban Partners completed a transaction in early November to purchase the remaining condominiums. The deal also 28 A public policy that allows for the conversion of certain commercially zoned property to residential in Downtown. 29 Bounded to the north by the 101 Freeway, to the south by the 10 Freeway, to the East by Los Angeles River and to the West by Lucas Street. 30 Does not include Broadway Plaza Lofts (no data available).
102 FASHION DISTRICT REAL ESTATE ANALYSIS includes 18,694 square feet of ground floor retail space. Close to 400 additional units are classified as Senior Housing/SRO and there is one development (9 units) in the pipeline. Figure 88 Summary of Residential Developments in Fashion District OccupancyUnitsSquare Feet (SF)PriceCompletionFor- SaleSantee Village (Cornell)2160%700 -2,200Unknown2007 Q1Santee Village (Textile)6481%650 - 1,575$350,000 - $1,000,0002006 Q1For-RentEmil Brown Lofts3997%700 - 1,700$1,285 - $3,3002010 Q1Orpheum Lofts37100%1,260 - 1,820$1,000 - $2,6502003 Q4Santee Court (Connell)16593%660 -1,219$1,375 - $2,7502004 Q2Tomahawk Building7100%1,820 -1,820$2,500 - $4,0002004 Q2Broadway Plaza Lofts82400-1,300$700-$2,3002010 Q2Great Republic Lofts72100%655-980Unknown2009 Q1National City Tower Lofts9394%650-1,884$1,395-$2,2952008 Q4Senior Housing/SROVan Nuys Building299UnknownUnknownUnknown1998Dewey Hotel72UnknownUnknownUnknown2000 2QYankee Hotel80UnknownUnknownUnknown2005 Q2Senator Hotel99UnknownUnknownUnknown1994Lyndon Hotel47Unknown300-300Unknown2006 Q1Huntington Hotel200UnknownUnknownUnknown1998PipelineGill Lofts9UnknownUnknownUnknown2010 Q1 rdSource: Downtown Los Angeles Housing Information (3 Quarter 2010)
FASHION DISTRICT REAL ESTATE ANALYSIS 103 RESIDENTIAL DEMAND Socioeconomic Analysis Since the passage of the ARO, it is estimated that the population in Downtown grew by 26,000 residents. In 2006 and 2008, the Downtown Center Business Improvement District (DCBID) conducted a demographic study to help profile the resident population in the area. Using secondary data sources, such as Claritas, the profile of Downtown residents are much different than those presented herein (. lower income, education levels, etc). The DCBID demographic study elicited responses from over 10,000 Downtown residents, workers and visitors and is not necessarily representative of all residents, as it captures primarily newer residents who have moved to the area in the last 10 years. AECOM anticipates that this data will likely capture a residential profile more appropriate for future residents in the Fashion District. According to the 2008 survey, the median income ($96,000) was almost twice as high as the city of Los Angeles. The Downtown area has attracted primarily professionals with a median age higher than the city. The employment profile shows a high concentration of employment in professional services, arts & entertainment, financial services, and real estate. There is also a high representation of residents between 30 and 54, most without children or recent empty nesters. Approximately two-thirds of those responding to the study live in for rent properties with the remaining third owner-occupied. In comparison to Census data prepared for the City of Los Angeles, the Downtown area has a significant number of residents using their home as a primary or secondary office. While the Census does not report on secondary office usage, the percent of primary office users in Downtown is over three times the City rate. Furthermore, it is estimated that percent of Downtown residents work in Downtown, up from 55 percent in 2006. Long-Term Housing Demand If there is a silver lining to the recent downturn in the housing market, it is that the overdue correction has brought the price of housing down, making owning a home more attainable for some people. Long-term, the effects of the weakened for-sale housing demand will likely prove only temporary due to the aforementioned combination of land scarcity, projected population growth, and regional economic fundamentals. The most recent forecasts regarding building permits, as reported by the Real Estate Research Council of Southern California, the Construction Industry Research Board, California Department of Finance, and UCLA Business Forecasting Project, all anticipate an increase in building permit activity beginning in mid-year 2011. To accommodate regional growth, Downtown will continue to be an attractive location for higher density development aligned to smart growth principals. This “smart growth” development strategy focuses future growth in high density mixed-use centers (housing, retail, transit, and jobs). Over $15 billion has been 31invested in Downtown Los Angeles in the past dozen years, and while the area has historically been an employment hub of the region, it has now become a tourist destination with approximately million 32visitors each year. New restaurant/bar offerings, as well as LA Live and other urban entertainment, has helped establish the Downtown as a vibrant 24/7 live, work, play environment. Similar to Downtown, during the past decade there has been a significant migration of affluent, childless professionals and empty nesters to urban cores throughout the nation. This growth has resulted in a remarkable shift in how we view our cities and a belief that the demand for compact, mixed-use design, smaller housing space, and transit-oriented development will continue to fuel downtown growth. Key demographic factors driving future demand may include, but are not limited to: The first wave of baby boomers is hitting 65. Many will shun or delay retirement and stay in the workforce; 31 70 percent of investment is in either residential or mixed‐use development per the Downtown Los Angeles Center BID. 32 LA, Inc.
104 FASHION DISTRICT REAL ESTATE ANALYSIS The children of baby boomers, Generation Y (the most technologically-connected and largest generation in US history) has started to enter the housing market and workforce; and Household size is shrinking, due to more people living alone, delaying marriage and childbirth, and having fewer children. Current estimates suggest that the Downtown residential population has grown to 42,000 and its daytime population is over 500,000 (employment and residential). The rise in population has attracted major retailers to the area including Ralphs, which opened in 2007, as well as the proposed Target (expected to open in 2012) at the 7+Fig shopping center. These, along with future retailers, will give Downtown residents the major retail offerings that many believed were missing from the area. A further emphasis on changing commuter habits as the expansion of the Metro Rail service will further enhance Downtown’s appeal to future residents. AECOM has estimated potential housing demand for the Fashion District and larger Downtown area. The illustrative analysis compares future population growth estimates with historic capture of housing in the Downtown using “fair share” estimates based on the last 10 years of development. Specific assumptions are outlined below, but assuming that the Fashion District does not become more aggressive in strategically pursuing future residential development, there is modest development demand in the 30 year horizon. It is also important to note that there are approximately 15,000 residential units either permitted, under plan check, or under consideration by the City in the larger Downtown area. These projects, further along in the development process, are better positioned to capture future demand in Downtown. Demand for market rate housing in the Fashion District may come from a number of market segments. AECOM anticipates that there will be demand from designers and other fashion-related industry employees who desire work/live space. This model has been successfully developed in the nearby Arts district, marketing the units for creative industry employees. Similar to the greater Downtown area, however, certain issues will challenge relocation to the Fashion District. These include the perception of personal safety, available open space, and issues surrounding homelessness. Furthermore, the current M-2 zoning that covers much of the district does not allow residential and there are inherent conflicts between the existing uses in the area (. flower district truck traffic) that may make it difficult to accommodate a large number of residential units. As such, available second story and above space previously housing fashion-related manufacturing may have limited potential for future residential conversion. Horizontal mixed use might be more appropriate in the near-term at targeted locations where residential is better suited in the Fashion District to avoid such conflicts in land use. OTHER RESIDENTIAL DEMAND DRIVERS Residential Demand from Students There are a number of other residential market segments that should be added to our traditional demand analysis. Other drivers of demand include student housing and other affordable housing options. FIDM currently estimates that 50 percent of their student body lives outside the city of Los Angeles. With a high percent of total students from out-of-state as well as a considerable international component of the student body, there appears to be a need for more housing options within walking proximity to the campus. The office of housing currently works with three rental properties to accommodate student housing needs. Conversations with FIDM have revealed that they would prefer to house their students in one location. While students generally prefer to be closer to campus, many of them are wary of the safety in Downtown. The current FIDM housing program includes two properties Downtown, The Metropolitan and The Medici, as well as Park La Brea, located in the mid-Wilshire district near Miracle Mile. The school has worked out placement within these properties, for short term leases, at discounted rates (paid on a quarterly basis) that includes furniture, utilities, cable, internet-access, and quarterly cleaning. They also report that a number of students live in Koreatown where rents are more affordable and they can commute to the campus via the Red Line. Currently, approximately 9 percent of FIDM students utilize student housing. Of which, they have placed approximately 350 students Downtown.
FASHION DISTRICT REAL ESTATE ANALYSIS 105 Affordable/Workforce Housing Demand The need for a more abundant supply of workforce housing is constantly a concern for the region. While housing prices have retreated, Los Angeles County has some of the most expensive housing-related costs in the nation. Traditional demand analysis for subsidized housing is not warranted because of the prevalent demand. The Housing Authority of the City of Los Angeles (HACLA) illuminated the issues surrounding demand for affordable housing in their most current annual report (2009). Key data points include: Under half of households in LA County live in units they own; Income over $144,000 is necessary to afford the median price home in LA County; Over half of households in LA County pay more than 30 percent of their income toward rent; As of April 2009, there are over 12,000 families on the housing waiting list in the City of Los Angeles; HACLA estimates that approximately 40 percent of households in the City of Los Angeles are classified as extremely low to low income (less than 50 percent the area median income (AMI); and The City of Los Angeles Planning Departments estimates that there will be a need to add approximately 113,000 affordable units between 2006 and 2014 to satisfy demand. Affordable housing may be a potential use for sites in the Fashion District, but the feasibility of these projects is largely determined by the availability of public dollars needed to make the projects pencil out. Residential Demand Projections Figure 89 and Figure 90 present our order of magnitude demand estimates for housing demand within the market rate (for rent and for sale) and student market segments. We estimate future demand for market rate residential of approximately 960 – 1,340 new units between 2020 and 2040 with an additional 33demand for 300 to 600 student housing units on an annual basis. As mentioned above there is additional demand for affordable housing units, but the number of these units that can be supported within the Fashion District is dependent on the public funds available to support these projects. Assuming that public funds are available, affordable housing units could represent between 10 to 25 percent of total housing, roughly 150 to 500 additional units. Additional Residential Capture Potential Despite the impression that the Fashion District has not kept pace with residential growth in the larger Downtown area, it has actually increased its residential housings supply by a slightly higher rate than downtown since 1998 (% vs. %). AECOM’s demand estimates are conservative based on the Fashion District’s historic capture of downtown growth. Improvements in economic drivers including, but not limited to, aggressive marketing, open space, improved perception of safety, and other residential amenities could help increase overall demand beyond what is projected herein. The Fashion District still has significant room to grow, especially in relation to market rate housing product. Since 1998, market rate housing deliveries in the greater downtown area have grown at a rate of 13 percent per year. Assuming this rate held constant over the next ten years, the Fashion District could add approximately 100 new units per year or 1,000 new units by 2020. While this estimate is approximately twice what is projected above in our mid scenario, it provides an order of magnitude estimate of the upward bound of market rate residential housing growth potential within the Fashion District based on the historic growth of market rate housing downtown. 33 Current low estimate of demand is being met by existing properties in the downtown.
106 FASHION DISTRICT REAL ESTATE ANALYSIS Figure 89 Residential Demand Analysis 2010 (Actual)202020302040 1Population Forecast10,441,10011,214,20011,920,30012,491,6002Household Population 10,261,20011,021,10011,714,90012,276,4003Occupied Housing Units 3,286,9003,399,5003,479,7003,511,4004Total Housing Units 3,431,6003,548,7003,632,4003,665,500New Housing Unit Demand117,10083,70033,100 5Existing Supply(8,900)108,20092,60033,1006Downtown Capture Low (10%)10,8009,3003,300 Mid (12%)13,00011,1004,000 High (14%)15,10013,0004,6007Fashion District Capture Low 440380140 Mid 530450160 High 620530190 Notes: 1 Per the California Department of Finance Population Projection for Los Angeles County (July 2007) 2 Assumes current ratio of household population to total population in the County 3 Person per occupied household assumption extrapolates 10 year trend to 2040 4 10 year average for occupied units in the County 5 There are 313 new unsold units on the market (since 2010 housing count) and 8,553 units in foreclosure in the County 6 Low = share of units delivered Downtown in relation to the County between 1998 and Q3 2010 7 Estimate based on existing share of total market rate residential units in Fashion District to Downtown Sources: Downtown Los Angeles Center BID; Real Estate Research Council of Southern California; MarketPointe California; Department of Finance; AECOM Figure 90 Downtown Student Housing Demand Analysis 2010Students1FIDM5,000OTIS250Total5,250Downtown Student CaptureLow10%Mid15%High20%Downtown StudentsLow525Mid788High1,0502Student Housing Demand Low300Mid450High600 Notes: 1 FIDM reports range of 5,000 - 6,000 students 2 Assumes students per unit Source: FIDM and AECOM
FASHION DISTRICT REAL ESTATE ANALYSIS 107 Figure 91 City of Los Angeles Regional Housing Needs Assessment Allocation (2006 – 2014) 60,00050,00040,00030,00020,00010,0000Extremely Low Very low Income (31-Lower Income (51-Moderate Income (81-Above Moderate Income (<30% of 50% AMI)80% AMI)120% AMI)Income (>120% AMI)AMI)INCOME CATEGORY Note: AMI = Area Median Income Source: Housing Element of the General Plan, Los Angeles, Department of City Planning, 2006 - 2014 HOUSING UNITS
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ECONOMIC OPPORTUNITIES 109 ECONOMIC OPPORTUNITIES
110 ECONOMIC OPPORTUNTIES ECONOMIC OPPORTUNITIES In this section, we identify some of the economic opportunities to grow and expand the economy and success of the Fashion District. It is important to note that the Fashion District is an area that has truly developed out of private initiative. For several reasons, the fashion industry in Los Angeles has been the “ugly stepsister” to other industries and sectors. However, as the industry continues to grow, it is a prime time to invest in the Fashion District. Many economic opportunities can be undertaken by private or non-governmental entities, but private investment may be advanced with focused public investment. There are some basic opportunities to improve the physical and economic infrastructure of the Fashion District that require investment, but are within the existing capacity of various public and private players. In addition there are other “game changing” economic opportunities that may be longer-term strategies and may require the Fashion District and industry to acquire or build additional capacities and skills. These types of improvements lay a foundation for continued economic growth and encourage additional private investment. AECOM has organized these opportunities into four categories: (1) Physical and Economic Infrastructure Improvements; (2) Industry Opportunities; (3) Promotion of the Los Angeles Fashion District; and (4) Real Estate Opportunities. PHYSICAL AND ECONOMIC INFRASTRUCTURE IMPROVEMENTS The comprehensive Design for Development is expected to address many of the required infrastructure improvements. AECOM lists physical and economic infrastructure improvements as an economic opportunity because it is very important to recognize that place and quality of place play a role in the vitality of an economy. While an attractive streetscape alone is not enough to build a strong economy, it can contribute to the success of a retail area. Buyers will still visit the Los Angeles Fashion District though there are few restaurants and it is a distance away from reasonable accommodations, but more buyers are likely to visit if the area is made more convenient for their purposes. Opportunities include: Improving the Physical Streetscape and Environment of the Fashion District Many of the streets and buildings in the Fashion District, particularly in Sub-District #1, Sub-District #2, and Sub-District #3 were initially developed in the early part of the Twentieth Century and, in the last twenty years, the Fashion District has not captured a substantial share of public investment to modernize all of the District’s infrastructure. Within Sub-District #1 many of the major marts are not well oriented to support and encourage pedestrian traffic. For example, the California Market Center acts as “fashion fortress.” While this can be a benefit to the market itself in trying to encourage buyers to stay within its folds, businesses located within the CMC may actually be losing out on synergies that could be created by building stronger pedestrian and business connections with other marts and the rest of the sub-district. While basic infrastructure improvements are needed within Sub-District #3, such as street paving and sewer improvements, overall streetscape and environment should also be considered for improvement. Discount shoppers and wholesalers are the target market for these areas. Although many customers coming to the area are likely to appreciate the “street market” character and the overall distinct shopping experience of Santee Alley, this Fashion District area could capture more market share by trying to make it more convenient and pleasant to shop in the area. The Fashion BID provides additional security patrols throughout the Fashion District, but many community stakeholders would like to see improved security in the area, particularly during the evenings and at the edges of the District. It should be noted that activation of the street and better lighting will help to improve Fashion District users’ perceptions of safety. Perception of safety is just as important as actual safety. Additional Amenities
ECONOMIC OPPORTUNITIES 111 Most Fashion District stakeholders agree that additional amenities, such as restaurants and hotels are much needed within the Fashion District. There is a substantial amount of employment and business activity within the Fashion District, yet it is missing the amenities that are seen throughout other business centers. The following amenities could be developed to enhance the built environment in the Fashion District: o Additional open space o Public space to accommodate large fashion functions o Brick and mortar restaurants for retail buyers and retail customers that do not interrupt the commercial activity of other businesses in the area o Convenient and affordable accommodations, as well as night-time activities, for retail buyers to stay overnight o Affordable and convenient parking for retail customers o Accessible and well-maintained restrooms for retail customers o Public transportation improvements to provide easier access and better connections to other parts of Downtown and the greater Los Angeles area Improvements in physical design and amenities can contribute to the concept of the Fashion District as an industry “fashion destination.” Green Assistance This is an opportune time for public investment in additional economic infrastructure to help support sustainable business solutions Offerings may include financing solutions for solar panel installation and assistance in the development of textile recycling programs. With the recent ARRA, federal grants were available to help businesses and institutions support environmentally-friendly, sustainable practices, and more funding is likely to materialize. The flower marts, which have to have refrigerated spaces to keep the flowers, would be a prime target for this assistance. Additionally, assistance may attract green apparel companies or allow existing apparel businesses to become greener.
112 ECONOMIC OPPORTUNTIES INDUSTRY OPPORTUNITIES The most significant trend in the fashion industry has been the globalization of apparel manufacturing across the last 30 years. Developing countries, such as China, Vietnam, and Cambodia, as well as South American countries, have low labor costs and are able to produce goods more cheaply than ever before. Technology and apparel skills overseas have improved to the point where goods can be produced more efficiently while maintaining quality. Whereas Los Angeles garment contractors previously were able to compete based on the quality and capacity to quickly turn around the goods, many have been squeezed out of business by the ever-improving overseas apparel manufacturing competition. One of Los Angeles’ strengths is the amount of manufacturing still available within the greater Los Angeles region. Local apparel production helps designers incubate and grow; it supports the fast fashion industry; and, as a whole, is necessary infrastructure for the fashion industry. On the other hand, Los Angeles apparel producers are not able to compete on price and, when they are able, it usually results in jobs that are not immediately desirable. Should the Fashion District be actively working towards rebuilding its garment manufacturing or given the renaissance of Downtown Los Angeles, should the District be looking to capture non-fashion or flower related growth? Relative to manufacturing and wholesale activities, fashion design is a small, but important piece of the Los Angeles fashion industry. How can Los Angeles further support the growth of design in Los Angeles? These are questions that should be discussed throughout the greater Fashion District area. Possibilities to consider include: Make efforts to maintain some level of apparel production in Los Angeles For the reasons mentioned above, it does make sense to attempt to maintain some level of apparel production in the Los Angeles region, however, it should be recognized that due to the existing building typologies within the Fashion District, not many garment contractors are likely to move back to the multi-story buildings in the Fashion District. There will be space available to be repositioned for different uses. Although it may be helpful to carve out some spaces within the Fashion District for manufacturing, it is very unlikely that the Fashion District will be able to recapture as many manufacturers in the future. Except for the implementation of more protectionist policies, manufacturers in the US are not likely to be able to compete on price. Manufacturing in Los Angeles is likely to be supported, instead, by smaller fashion lines and brands that desire local production. There are also many Americans who, for environmental and economic reasons, would be interested in purchasing apparel made in the United States. The public may also be educated to understand that it is worth a certain premium to purchase US-made goods. Furthermore, a move towards green industries may help to hold some manufacturing in the United States, and subsequently Los Angeles. As mentioned above, it will be helpful to the fashion industry to ensure that garment production space is maintained in the Fashion District. Garment production may not be able to afford to compete with other uses for space, and so carving out some space for this use in the District is important. Building the base of fashion designers within the Fashion District Los Angeles produces a lot of talented fashion designers, but many of our talented students and firms leave LA for New York as they expand because it is difficult to generate media and buyer attention in Los Angeles. Establishing a Los Angeles Fashion Week to the professional standards expected from the industry has been a challenge in recent years. (This is discussed in more detail in the profile of the design industry in Appendix 2). It is imperative that the Los Angeles fashion industry have a forum to collaborate and promote its assets, including fashion designers. Currently institutions and various players are working in their own silos, but by collaborating the whole Los Angeles Fashion industry will benefit. Institutions within the Fashion District are well suited to lead this collaboration.
ECONOMIC OPPORTUNITIES 113 Another idea to help build the talent in Los Angeles and keep graduating FIDM and OTIS students is to provide support to develop an intensive fashion design incubator program, similar to the Showroom NY program. An incubator can provide physical studio and showroom space and guidance to students through all steps of fashion apparel production. The Fashion Business Incorporated (FBI) provides some of this guidance, but does not have the funds to create an intensive program. Finally, to capture more designers specifically within the Fashion District, fashion designers would also require many of the physical and neighborhood improvements discussed previously. Improving the aesthetics of the district and encouraging more activity and energy on the street will help to attract more designers to the Fashion District. Encouraging the creative industries within the Fashion District As manufacturing remains stagnant, it is likely that there will be space available to be repositioned for different uses. The upper floors no longer occupied by manufacturing and sewing contractor firms, particularly in areas like Sub-District #1, can be repositioned as creative office spaces. The historic buildings and open floor plans are attractive to businesses in the creative industries. The Fashion District should aggressively pursue creative industries, such as publishing, media and advertising, photography, music and entertainment businesses. The close proximity to the historic core of Downtown Los Angeles with its burgeoning arts scene, as well as the Arts District, may be attractive to others in related creative industries. Immediate steps, such as extending the very popular Downtown Art Walk, into areas of the Fashion District that are adjacent to the historic core may encourage individuals to explore the District. Further, the induction of additional creative arts businesses will likely help to attract additional fashion designers as well.
114 ECONOMIC OPPORTUNTIES PROMOTION OF THE LOS ANGELES FASHION DISTRICT One of the main needs within the City is to have better recognition from both public and private industry of the activities that are taking place within the different centers of the District. The Los Angeles Fashion District is a major global center for fashion and currently manages a substantial volume of the fashion that everyday people wear around the globe. However, stakeholders within the Fashion District, let alone industry professionals outside of Los Angeles, do not understand the activities and volume of business in the Fashion District. As mentioned previously, New York City has been able to significantly raise its reputation, both within the industry and in the public, through active marketing of its more glamorous side. Active marketing and ongoing quantification of the volume and scale of business within the Fashion District can aid the District in capturing its fair share of private investment and buyer’s dollars. Segmentation and promotion of the different areas within the Fashion District Better segmentation and promotion of the different activity nodes within the Fashion District will help to better attract retail and wholesale customers and can also make the District more user-friendly. The Fashion District can still function as a complete physical district, yet the promotional activity, as well as the streetscape, can be segmented to provide customized information to potential customers. This will Not Mired in Sub Districts help customers to better understand and navigate the Fashion District, making the District more convenient and This report uses sub-districts to accessible. People looking for “high fashion” sample evaluate the Fashion District, but it is sales will not be disappointed if they find themselves in important to note that these Santee Alley, while buyers looking for inexpensive sub-districts are only representations product will not be disappointed in the New Mart building. of the activities within each of the Through segmentation it is possible to differentiate the sub-districts. more expensive fashion lines and designers in Sub-District #1 from the less expensive produce available in To effectively market, it is important to Sub-District #4 and to differentiate both these areas from continually identify the activity nodes the discount product being sold directly to the public in within the Fashion District and to the retail/wholesale area. determine the different audiences A better promotion of the various activities within the connected to each of these activity District will also facilitate the sharing of information and nodes. press for the Fashion District. Promoting destinations within the Fashion District Santee Alley is already a regional destination, but there are other areas within the Fashion District that should be identified and promoted as “destinations.” The Flower District is a Los Angeles gem, and with additional amenities, such as transit access, improved parking, and additional restaurants, has the potential to become a local public destination, similar to Olvera Street. th9 and Los Angeles Street is not necessarily meant to be a public destination, but it should be developed and promoted as a destination for fashion buyers. Physical improvements should focus on way-finding and place-making for the District, while promotions can include providing information about getting from LAX to the District, accommodations, and other “fashion tourists” needs. These areas are currently recognized for their business visitation, but it may be helpful to shift how people think about these areas to “destinations” because destinations are often marketed and promoted in a different manner than most business centers. Finally, the District may also consider shutting down some of the streets a few times year to produce street fairs within these areas.
ECONOMIC OPPORTUNITIES 115 Creating an entity whose prime purpose is to market and promote the total Fashion District It will be beneficial to many stakeholders—designers, retailers, and in turn, wholesalers and property owners—to raise the profile of the Fashion District on the global stage. The fashion industry is big business in Los Angeles and like any other regional industry it is helpful to promote its interests. This entity can also play an additional role of supporting the Fashion BID as a comprehensive information source for the Fashion District. The promotion and marketing necessary to raise the profile of Los Angeles are likely to require substantial resources and could require one or more full-time staff. Though there are various fashion activities centered throughout the Fashion District, it seems helpful to have one entity marketing the total Fashion District because they can tell the story of the various sub-district activities in a comprehensive manner. o Recommendations for an organizational structure of this entity will be refined throughout the Design for Development process, but initial thoughts include a quasi-public entity, so that the entity’s core interest is the promotion of the complete Fashion District as opposed to promoting one activity or area to the detriment of others. Promote a “Created in Los Angeles” Brand The new entity mentioned above could help to develop and promote a “Created in Los Angeles” brand. American Apparel is a major Los Angeles brand whose clothing labels specifically say “Made in Downtown LA.” While the company is currently facing a questionable future, the brand itself is a huge success. The Los Angeles lifestyle—typified as sunshine, beaches, celebrities, convertibles, and “beautiful girls”—is known the world over. Customers, as well as fashion industry professionals appreciate and aspire to capture the California lifestyle and image. The Los Angeles Fashion District can leverage this by connecting the lifestyle to clothes in a brand. By convincing a number of select fashion brands to include a “Created in Los Angeles” label or icon, they can raise the profile of 34high quality design and use the California lifestyle to help showcase Los Angeles brands. Creating better connections with Hollywood The Los Angeles Fashion District is less than 10 miles from Hollywood proper, and a number of television and movie studios. The television and movie industry and its stars and “red carpet” have tremendous influence on fashion trends. Building a stronger connection with the television and movie industry could provide intrinsic marketing and promotion opportunities. The Fashion District has not been able to leverage this forum to help promote businesses within the District and this is an arena that should be explored further. Raising the quality of Fashion Week in Los Angeles Much attention has been paid to the successes and challenges of fashion week in Los Angeles. We preface our discussion of fashion week with the understanding that while an improved fashion week in Los Angeles will aid the industry, it is one element among many potential opportunities for growth. Los Angeles is not New York, Milan, or Paris nor do we think it is necessary to strive to have fashion weeks of the scale and size of these cities. Los Angeles has a distinct role in the global fashion industry with huge success in the contemporary and fast fashion product. Our strength and focus has historically been on market weeks, which involve the actual sale of product, rather than fashion weeks, which are just the showing and presentation of the product that will be on sale during the market week. However, improved fashion weeks could, across the long-term, help to strengthen the fashion industry. 34 Another brand that did this well in the past was the shoe company, . Gear. They sold image and the California lifestyle to their primarily young female demographic with much success in the late 1980s. While the company did not maintain its preeminence far into the 1990s, the company moved from a small operation in 1985 to the third largest shoe company in the US behind Nike and Reebok.
116 ECONOMIC OPPORTUNTIES An improved Fashion Week may encourage more designers and brands to stay and locate within Los Angeles. Designers and brands seem to leave Los Angeles because they are better able to market their product and “become known” in New York. With improved opportunities to show their product in Los Angeles, the city may be able to capture more designers and brands. An improved fashion week may, in turn, also encourage more students graduating from FIDM and OTIS to stay in Los Angeles. More fashion houses and established designers in Los Angeles will also provide more apprentice opportunities for students. Fashion week in its essence is a publicity event, publicity within the fashion industry and to the general public, demonstrating the creativity and talent of the fashion brands and lines within Los Angeles. While fashion industry people may already know what is happening in the Los Angeles Fashion District, it is typically helpful to reinforce knowledge of all the quality brands and lines that are located throughout the Fashion District and Los Angeles area. Also up-and-coming brands and lines can get exposure if mixed with quality established brands. A more celebrated Fashion week, similar to Fashion Night out, serves to provide knowledge of the fashion industry to the greater Los Angeles public and knowledge is the first step in developing connections between other creative industries. Expanding role of Internet in the District With additional staff resources, the Fashion District may want to consider how it can better leverage the internet to help promote the Fashion District. Despite the economy, e-commerce 35grew by 11 percent in 2009 and is expected to grow at the same rate in 2010. While online sales are important, retailers are also focusing on how to use the Internet and mobile technology to influence in-store sales. Within the Fashion District, expanding the role of the Internet may include working with fashion design houses in the Fashion District to create online business or, if the fashion press and buyers still are not visiting Los Angeles, creating an innovative Internet platform to get Los Angeles designers the attention they need. 35 Fowler, Geoffrey, A. “E‐Commerce Growth Slows, but Still Out‐Paces Retail,” Wall Street Journal. March 8, 2010.
ECONOMIC OPPORTUNITIES 117 REAL ESTATE OPPORTUNITIES Reposition vacant spaces for office and residential uses in 4+ story buildings Many of the upper floor vacant spaces in the District were previously used for the manufacturing of apparel for garment contractors. As described previously, global trends have led to a decline in apparel production within the US and Los Angeles. While there are still opportunities in manufacturing for quick turn orders and fast fashion, new or expanding garment contractors are not likely to want to move back into the 4+ story buildings they occupied around the Fashion 36District. These spaces will need to be repositioned for fashion-related or other uses. Some of these upper floor spaces, particularly around the intersection of 9th Street and Los Angeles Street, may be repositioned for other fashion related uses, such as design, support services, and wholesale showrooms. Perhaps, CMC carves out a portion of its space for a boutique hotel or other nearby buildings become additional showroom marts. Upper floors within Sub-District #4, on the other hand, may slowly get occupied as showroom space across time. There is substantial vacant office space throughout Downtown, but given the historical nature of the buildings in the Fashion District, there may be opportunities to capture office tenants looking for interesting and unique spaces. thOther buildings that are further away from the 9 Street and Los Angeles intersection or the San Pedro Wholesale Mart, may be candidates for other non-fashion related uses; multi-story buildings located closer to Main Street and the South Park district or buildings closer to the Downtown Historic Core in Sub-District #1 may eventually evolve into residential uses. As described in the Residential Analysis section there are many units already permitted in other parts of Downtown but in seven to 20 years additional demand may exist for residential in Downtown. Better connecting the Fashion District to the growth in the South Park and Historical Downtown Core There has been huge growth in Downtown Los Angeles in the last five to 10 years. New condominiums, apartment buildings, art galleries, night life, and restaurants, grocery stores and most recently a Target have emerged. The Fashion District should position itself to be integrated into this growth, while maintaining its identity as a fashion and flower commercial area. As mentioned above, the Fashion District can start forging relationships with other creative industries. For example, there is burgeoning arts scene in the historic core, attracting visitors to the area. A relationship can help the fashion industry and, as the South Park and the Historic Core areas start to fill up, their growth can expand into the Fashion District. This can also take on a physical manifestation of orienting Sub-District #1 toward the South Park and Historical Downtown Core, so as to take advantage of the amenities that are currently available and will be available in the future. Catalytic development opportunities on large parcels, such as the LAUSD Site and the City Market Site The Fashion District is fairly dense and is almost fully developed. Many of the opportunities for revitalization of the area involve the renovation of existing buildings and a few infill spaces. There are only a few parcels large enough to accommodate substantial developments. However, the LAUSD site (approximately acres) is currently underutilized and provides an interesting opportunity for redevelopment with a large-scale, mixed-use project. The feasibility of residential 36 Real estate brokers and other stakeholders report that these multi‐story buildings are not convenient to apparel producers from the operations perspective or for regulatory purposes, as labor regulators specifically target multi‐story buildings with a number of garment contractor tenants.
118 ECONOMIC OPPORTUNTIES (not allowed under the current zoning) within the Fashion District has been a major question. We estimate that there is demand for approximately 700 to 1,000 units of residential. This site offers an opportunity to add a substantial amount of residential with associated public and private amenities to the Fashion District, in a location that is currently not in high demand by fashion industry uses. By adding a substantial amount of residential, it is possible to create the critical mass necessary to create a neighborhood and additional demand for residential, retail, and potentially even additional office, not just at the site, but throughout the Fashion District. The City Market Site, which totals acres, is located across from the San Pedro Wholesale Mart. This property is underutilized and has the potential to be redeveloped with a creative mix of uses that would add to the vitality of the District and bring meaningful amenities. There are other locations throughout the Fashion District where catalytic developments may occur. It is important to note that most projects may require additional zoning/code flexibility.
ECONOMIC OPPORTUNITIES 119 SPECIAL THANKS AECOM would like to extend special thanks to the Community Redevelopment Agency of the City of Los Angeles (CRA/LA), the Los Angeles City Planning Department, City Councilmember Jan Perry’s office (CD9), and City Councilmember José Huizar’s office (CD14) for their guidance and support on this project. We would like to thank the Los Angeles Fashion Business Improvement District (BID) staff, Kent Smith, Lynn Myers, and BID Board who were essential to the successful completion of this study. They initiated the overall study process, educated the consulting team on the Fashion District, and helped us to obtain access to key Fashion District stakeholders. The BID and BID members, such the California Market Center and Steve Hirsh, also graciously provided us space to host various meetings and interviews. We would like to thank Downtown Los Angeles real estate brokers Iqbal Hassan and David Zoraster, as well as special advisor, David Wilcox, for providing their insight on the real estate characteristics of the District. Finally, we would like to thank the many stakeholders who participated in various meetings and interviews for sharing their knowledge of the Los Angeles flower and fashion industry and sharing their experiences in the Los Angeles Fashion District.
120 ECONOMIC OPPORTUNTIES GENERAL LIMITING CONDITIONS Every reasonable effort has been made to ensure that the data contained in this report are accurate as of the date of this study; however, factors exist that are outside the control of AECOM and that may affect the estimates and/or projections noted herein. This study is based on estimates, assumptions and other information developed by AECOM from its independent research effort, general knowledge of the industry, and information provided by and consultations with the client and the client's representatives. No responsibility is assumed for inaccuracies in reporting by the client, the client's agent and representatives, or any other data source used in preparing or presenting this study. This report is based on information that was current as of February 2010 and AECOM has not undertaken any update of its research effort since such date. Because future events and circumstances, many of which are not known as of the date of this study, may affect the estimates contained therein, no warranty or representation is made by AECOM that any of the projected values or results contained in this study will actually be achieved. Possession of this study does not carry with it the right of publication thereof or to use the name of "AECOM" in any manner without first obtaining the prior written consent of AECOM. No abstracting, excerpting or summarization of this study may be made without first obtaining the prior written consent of AECOM. This report is not to be used in conjunction with any public or private offering of securities, debt, equity, or other similar purpose where it may be relied upon to any degree by any person other than the client, nor is any third party entitled to rely upon this report, without first obtaining the prior written consent of AECOM. This study may not be used for purposes other than that for which it is prepared or for which prior written consent has first been obtained from AECOM. This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations.
APPENDICES 121 APPENDICES
122 APPENDICES APPENDIX 1: FASHION INDUSTRY CASE STUDIES NEW YORK, NY New York and Los Angeles are considered to be the fashion capitals of the United States. However, their 37respective focus and strengths are different. As previously noted, New York is widely recognized as one of the premier global destinations for fashion. New York serves as a headquarters to over 800 38fashion companies, more than double that of Paris, its next closest competitor. Broadly speaking, the fashion industry employs 165,000 people, making it a larger employer than other New York-centric 39industries, such as publishing, advertising, and film. The New York City Economic Development Corporation (NYCEDC) estimates that the industry generates $9 billion in wages with tax revenues of $ billion on an annual basis. New York benefits from a long history of being the nation’s center of garment production. Geographically, the City is located at the nexus for much of the historic flow of fashion-related goods. In the past, the production of raw materials at the point-of-entry was critically important to distribution. However, advances in communication and transportation have taken away the inherent geographical advantage for manufacturing fashion-related merchandise. Despite changes in industry composition, New York remains one of the premier global fashion cities for a number of reasons. First, New York has attracted and retained many of the industry’s premier designers. Examples of designers located in New York include Ralph Lauren, Vera Wang, Diane von Furstenberg, Calvin Klein, Donna Karan, Michael Kors, Nanette Lepore, and others. Second, New York has some of the top fashion schools in the nation. These institutes, which include Parson, Fashion Institute of Technology, and Pratt 40Institute, graduate over 1,000 students each year, many of whom stay in New York. Third, New York is also home to many complementary fashion industries. Examples of such include marketing and publishing. Two of the three largest global marketing agencies as well as some of the biggest fashion publications, such as Vogue, GQ, and Women’s Wear Daily are headquartered locally. The purpose of this case study is to go beyond the differences in industry composition and to focus on two key issues that are important to consider when evaluating future potentials for the Fashion District: (1) The ongoing efforts to preserve the Garment District in New York as well as (2) the necessity of active marketing. KEY INSIGHT #1: PRESERVATION OF THE GARMENT DISTRICT Though fashion activity takes place all over New York’s five boroughs, the “heart” of the industry is the Garment District. The area, home to the majority of New York’s showrooms and to numerous major fashion labels, caters to all aspects of the fashion process, from design and production to wholesale selling. However, given the sweeping changes in production modes, fashion manufacturing has declined 41in New York by 58 percent in since 2000, reflecting the national trend of manufacturing migrating offshore. The loss of such industries has opened the area up to questions regarding the overall importance of preserving the Garment District and what its function in the future should be. Zoning mandates created in the late 1980s to stave off real estate pressures (specifically from office and residential uses) and to preserve manufacturing space are constantly being tested. Furthermore, recent proposals for rezoning and/or consolidating the district have been explored. Tom Vanderbilt, in his essay “Fashion Innovation: How New York’s Garment District Works” defends the district’s importance by suggesting that the larger fashion industry could not work effectively without it and that the area essentially serves as a business incubator. Mr. Vanderbilt suggests that the closer highly-skilled workers are together, the shorter the time in transit, the better a designer’s ability to control the outcome. Being able to produce quickly allows designers to 37 Please see “The Fashion Industry Today” Section 38 Hoover’s (2008) 39 New York State Department of Labor (2008) 40 According to the Fashion Institute of Technology over 90 percent of their graduates stay in New York. 41 New York State Department of Labor; US Bureau of Labor Statistics
APPENDICES 123 trim their inventories and respond to trends. As such, having key components of the production chain in one consolidated location is imperative. If the manufacturing component, for example, was removed, then everything on top of it would be jeopardized. While New York is not poised to again become an apparel manufacturing center, if the critical mass that remains is increasingly threatened by redevelopment and rising rents, it seems evident that the potential impact ranges beyond the loss of jobs and related skills. What is at stake is the countless number of skilled workers that create a critical infrastructure for designers that enabled New York to ascend to a global fashion capital. Mr. Vanderbilt also believes the garment district functions, in essence, as a business incubator. Providing ideas and infrastructure to start-ups, which help them learn and grow. In a panel discussion in June to discuss the “Made in Midtown” study, Simon Collins of Parsons, indicated that the Garment District is the “perfect” unofficial post-graduate environment for his students. Mr. Collins noted recent examples of students who have used the district as a venue to create lines and produce collections that have gone on to critical success. Such success helps support the notion that new talent needs a place where key resources are available. New York’s greatest asset is the continuous growth of such start-ups, which some believe would be difficult to develop outside of the confines of the Garment District. Some have argued that external market forces should not be deterred within the Garment District. In a 2003 report, titled “Remodeling the Fashion District,” the authors suggest that accommodating the ongoing demand for residential and office space could benefit the district. Without efforts to drive new investment in the Garment District and to attract the dynamic, growing segments of the New York’s economy, the economic expansion that is poised to occur in the surrounding area will simply bypass the district. These developments offer the possibility of spurring additional investment and economic activity in the areas that surround them. The demand for housing in the Garment District is anticipated to be strong after the residential market stabilizes. The report suggests that if the zoning were changed to permit the housing to intermingle with the commercial uses, it is possible that other complementary uses including restaurants and retail would be more viable. The addition of these uses and mix of activity in the area would help enliven the neighborhood. The long-term demand for additional office space is also anticipated to increase in the future. Similarly, adding to the daytime population base would provide additional demand for such complementary uses. Other potential options under consideration would be marketing the Garment District’s underutilized properties to “Creative Industries.” As Jane Jacobs’ noted in her famous quote from The Economies of Cities, “new ideas need old buildings.” Firms in these industries tend to be small and attract an employment base that looks for a more unusual physical or non-conforming office environment. Thus, with many underutilized leasable space in the Garment District, the area has a potential advantage in attracting these tenants as New York emerges from the current economic slump. A change to less restrictive land use regulations in the Garment District could attract such residential and office users, but the risk associated with the loss of fashion-related industry has to be carefully weighed. KEY INSIGHT #2: NECESSITY OF ACTIVE MARKETING Recognizing the importance of fashion and its place in New York there has been significant public and private investment in active marketing of the industry. Recent public involvement includes, but is not limited to, the following efforts: Establishing the Fashion/Retail Office, which is dedicated to supporting and growing the fashion industry; Creating the Office of Special Enforcement, which, along with its predecessor, has shut down 23 counterfeiting locations, seized $60 million in knock-off goods, and forced building owners and counterfeiters to pay $ million in fines; Renewing the lease for IMG Fashion Week at Bryant Park as well as announced agreement to move the Mercedes-Benz Fashion Week to Lincoln Center; and
124 APPENDICES The redevelopment and expansion of the trade show facility on Pier 94 to include Pier 92. This area will be transformed to a state-of-the-art facility with approximately 355,000 square feet of trade show and conference space. The most widely recognized private investment is New York’s semiannual Fashion Week. The event includes over 250 fashion shows and attracts over 230,000 attendees annually (distributed among each Fashion Week). A significant portion of the event attendees are writers, editors, and the like from over 30 countries. Beyond the international exposure given to the featured designers, the NYCEDC estimates that each Fashion Week results in over $230 million in direct spending on hotels, retail, transportation, etc. in New York.
APPENDICES 125 SÃO PAULO, BRAZIL According to the Global Language Monitor’s World Fashion Capital List, a list which ranks cities based on thmedia references regarding the fashion industry, São Paulo, Brazil was the 13 most frequently referenced fashion city in 2010. São Paulo has been the leading South American city on the Global Language Monitor’s list since 2007, outranking Buenos Aires, Rio de Janeiro, and Santiago. São Paulo has recently become the new frontier of the fashion world. Global fashion brands, such as Diane von Furstenburg, Missoni, Chanel, Gucci, Louis Vuitton, and Burberry, are just starting to make major investments in Brazil, primarily in São Paulo, to establish flag ship stores to cater to its growing base of consumers wanting luxury goods. The city is also hosting major fashion week events, not only for these global brands, but to showcase its own, domestically-developed fashion brands. According to the Instituto Brasileiro de Geografia e Estatística (IBGE), the official statistical agency of Brazil, there are approximately 25,500 commercial business enterprises involved in the wholesale of household and personal goods, of which 28 percent are related to the wholesale of textiles, fabric, and apparel. Additionally, there are over 250,000 commercial enterprises involved in the retail sale of textiles, fabrics, and apparel. These businesses generate over million jobs related to the wholesale or retail sale of textiles, fabrics, and apparel. Brazil exported approximately US$ billion in leather goods and apparel products in 2005, as well as an additional US$ billion in footwear and $ billion in textiles and fabrics. The City of São Paulo captures a significant share of this commercial activity. São Paulo has approximately percent of the wholesale business enterprises involved with the sale of household and 42personal goods, as well as 29 percent of the retail textile, fabric, and apparel businesses in the country. São Paulo benefits from its position as the country’s center of commercial activity, as well as its long history of being Brazil’s center of garment production. The neighborhood of Bom Retiro has been a major thgarment manufacturing center since the turn of the 20 century, as early Jewish settlers brought their skills and established garment businesses in the area. Bom Retiro has remained at the forefront of the garment manufacturing, wholesale, and retail trades, despite changes in the political and economic circumstances, as well as the demographic composition, of the city and country. The study of São Paulo, and in particular Bom Retiro, provides key insights into the importance of public policy, as well as the value of place-making, in supporting the local fashion industry. A CLOSER LOOK AT BOM RETIRO Bom Retiro is identified as one of two wholesale garment areas in São Paulo (the other being Brás). Bom Retiro is approximately square miles. There are about 2,000 businesses in the Bom Retiro neighborhood, with an estimated 1,200 concentrated along six blocks of Rua José Paulino, the main shopping street in Bom Retiro, similar to Los Angeles’ Santee Alley and the wholesale storefronts in the San Pedro Wholesale Sub-District. Bom Retiro has always been known as an immigrant neighborhood, with people arriving through the port of Santos via Luz station (train station). The 2-3 story properties were well-suited for garment manufacturing and retail sales by the early Jewish settlers. The ground floors would serve as retail space, while garment manufacturing of would be done in the upper floors by the same family/company. Starting in the 1960s, the majority of business owners in the area started to shift from the Jewish community to newer Korean immigrants. It is estimated that about 70 percent of the businesses in Bom Retiro are now owned by Koreans. Similarly, it is estimated that by 1989, about 90 percent of Korean immigrants in São Paulo were involved in, either indirectly or directly, in the garment industry. The majority of these Korean business owners, wholesalers, retailers, and garment manufacturers (those actually producing the garments) are located in Bom Retiro. 42 The IBGE does not provide regional data for specific sub‐categories within the “Household and Personal Goods” category. This category includes: Textiles, fabrics, clothing and footwear; medical, orthopedic, dental and veterinary products; office supplies and stationary, books, newspapers and other publications; and other personal and household products.
126 APPENDICES The type of garments sold are similar to those in the San Pedro Wholesale Sub-District in Los Angeles’ Fashion District – they are primarily ready-to-wear contemporary fashion, made and sold cheaply. They are derivative of popular designs produced by major fashion brands. Many of the storefronts in the district are wholesalers (typically selling 12+ pieces of any given design), selling to buyers from throughout South America. However, like in Los Angeles, wholesalers typically will also sell to the public. The area is well-known for bargain hunting shopping. Bom Retiro has been combating issues similar to those faced by the Los Angeles Fashion District. Manufacturers are accused of producing cheap garments in sweatshops, using undocumented immigrants (primarily from Bolivia or undocumented Korean immigrants), exploiting their lack of proper immigration papers to underpay them. The impact of garment manufacturing within Bom Retiro is difficult to estimate because of the practice of sub-contracting garment sewing to smaller shops or individual “homeworkers” (workers who independently produce garments at home). It was estimated that by 1998, Koreans were producing one in every three articles of clothing sold in Brazil. There has been an influx of immigration from Brazil to the United States, as Korean immigrants set up similar businesses in the Los Angeles Fashion District (as they exist in São Paulo). KEY INSIGHT #1: ROLE OF PLACE-MAKING As discussed above, São Paulo contains clearly identified fashion areas throughout the city. While the neighborhood of Jardins is known for experimental clothing boutiques and flagship luxury brand stores, Bom Retiro and Brás are reputed for their bargain shopping and wholesale apparel shops. While these fashion districts are geographically separated, they are also clearly delineated from one another by physical design. Bom Retiro and Brás are historically tied to the garment manufacturing industry and still retain their industrial feel. Bom Retiro continues to operate as the center of garment manufacturing for São Paulo and Brazil. As a result, the storefronts of Bom Retiro are compact and tightly situated. Shops along the main shopping street, Rua José Paulino are brightly colored, while buildings are generally between 2-3 stories. This is contrast to Rua Oscar Freire, the main shopping street in Jardins. Home to many of the city’s luxury and international brand shops, the area is mainly characterized by large storefronts, wide sidewalks, and well-landscaped streets. The street underwent a US$4 million “face lift” to remove overhead wires and widen sidewalks. Visitors to either of these areas are not likely to confuse one for the other.
APPENDICES 127 KEY INSIGHT #2: PROTECTION OF DOMESTIC GARMENT INDUSTRY Brazil has been able develop its own major fashion industry largely due to trade policies that support local fashion designers and brands. Brazil’s domestic industry is capable of producing textiles, designing garments, and manufacturing finished garments for sale to its own people. High import duties on foreign-made apparel has allowed for Brazilian garment makers to establish businesses and mature into major players in the fashion industry. Most apparel not made in Mercosul countries are subject to a 35 percent import duty, plus additional import taxes depending on the destination state in Brazil. Garments arriving for sale in São Paulo, for example, are subject to an additional 18 percent import tax, as well as other local taxes. The impact of the high import duty policy is evidenced in the country’s imports and exports activities. 43According to the International Trade Center, in 2005, Brazil exported nearly three times more than it 44imported in apparel products. In contrast, the United States imported nearly 15 times the value of exported apparel products the same year. As a result, domestic fashion brands have had the time to develop and mature, building an enthusiastic consumer base in Brazil and throughout South America. Consumers who can afford to buy from major European fashion houses will often seek out Brazilian designers. 43 The International Trade Center is a partnership of the World Trade Organization and the United Nations Conference on Trade and Development. 44 The term “apparel products” refers to finished leather goods and apparel (clothing and clothing accessories).
128 APPENDICES TOKYO, JAPAN thAccording to the Global Language Monitor’s World Fashion Capital List, Tokyo, Japan was the 14 most frequently referenced fashion city in 2010. Tokyo had been the capital of the Asian fashion industry as recently as 2007, but has recently declined on the Global Language Monitor’s list over the last few years. Since 2007, other competitive Asian fashion cities, Hong Kong (2) and Shanghai (12), have surpassed it. Despite Japan’s recent declines, it remains one of the key players in fashion worldwide. During much of the last decade, fashion trends that started in Japan have gone global. Countless Western designers closely monitor trendy districts in Japan where the fashion worn by the city’s youth are on display on the streets on a daily basis. Japan continues to be a leading country in terms of per-capita spending on fashion goods as well as sensitivity towards fashion trends. The following case study provides a brief summary regarding current fashion industry trends in Japan and examines the importance of fashion districts, retailers, and retail districts in Tokyo as they relate to anchoring entertainment districts in the city. FASHION INDUSTRY TRENDS According to the Census of Commerce, the official statistical agency of Japan, there are approximately 30,300 commercial business enterprises involved in the wholesale of textile and apparel goods, of which 19 percent are related to the wholesale of textiles and 81 percent are related to fabric and apparel wholesale. Additionally, there are over 177,000 commercial enterprises involved in the retail sale of apparel and accessories. These businesses support over million jobs throughout Japan. Since the early 1990s, wholesale trade of textiles and apparel has generally declined in Japan. The wholesale trade of textile and apparel goods has also decreased as a share of total wholesale trade from percent in 1991 to percent in 2004. Similarly, the retail trade of apparel and apparel accessories has declined over the same time period. Since 1991 retail sales in apparel and apparel accessories has decreased by 126 percent, resulting in the loss of approximately 100,000 jobs. Recent statistics expected more declines as recession-weary consumers and an aging population cut back sharply on fashion-related spending in the Country. In 2008, Japanese’s clothing and apparel-related exports accounted for $416 million. This compares to China which exported approximately $113 billion in clothing and apparel-related products.
APPENDICES 129 As noted above, wholesale of textiles and apparel goods has decreased over the last two decades. Textiles used for low-priced products have become increasingly less competitive as cheaper textile good imports from China saturated the market. However, backed by Japan’s technological and product development capabilities, the country’s textile industry has an advantage in the field of high-quality and high-functional textile products. Textile districts continue to invest in R&D efforts to increase Japan’s share and competitiveness in the high-end clothing market. Among the fabrics used by leading brands is a polyester cloth woven with treads finer than human hair. Another fabric widely used is a highly functional windproof polyester cloth that offers elasticity. Experts suggest that the textiles are valued overseas not only because they are technologically excellent, but also because they stimulate the imaginations of designers in Western countries. Luxury brands such as Louis Vuitton, Lanvin, and Jil Sander frequently use local Japanese fabrics for their clothing. THE HARAJUKU DISTRICT For several decades, the Harajuku district in central Tokyo has been a magnet for young people seeking the latest fashion trends. The district’s most important asset, however, is the people who walk the streets showcasing their individual fashion sensibility. In many instances, top-of-the-line designers look to the streets of Harajuku for inspiration for future collections and evolving trends. Harajuku, located in Shibuya Ward, has no definitive boundaries but is generally considered to be centered at the intersection of Meiji-dori and Omotesando Avenues. Harajuku has evolved from a unique mix of Japanese and American culture after World War II. In the 1960s and 1970s, the district was primarily home to many artists, who promoted their works in the area. The district changed dramatically in the 1980s when the district banned motorcycles and cars every Sunday on Omotesando Avenue. As a result, people went to the area to watch and take part in music, dancing, and other street performances, often wearing unique clothing inspired by the occasion that were produced by local designers. These people were often referred to as the Takenoko tribe because they purchased their clothes at the nearby boutique called Takenoko, which is still thriving on Takeshita-dori, one of the most popular shopping streets in the district. Another key development in the area’s evolution into a fashion mecca was the launch of Laforet Harajuku in 1978. The building was used by up-and-coming designers, allowing these designers a place to sell and market their products. Harajuku became recognized internationally in the early 1990s as foreign brands such as Benetton and Louis Vuitton entered the district. This, along with the evolution of media and the internet helped bolster its reputation throughout the fashion world. While the district continues to draw patrons from the fashion industry, it has also evolved into a major tourist destination in Tokyo based on its diverse retail and entertainment offerings. FAST FASHION Taking advantage of the luxury-goods appetite in Tokyo and the high incomes of Japanese consumers, foreign high-end retailers have been able to charge much more in Japan than in other markets for the same goods. The high prices are mostly a direct product of government policy (protectionist tariffs not only increase the costs of imports, but keep domestic producers insulated from having to compete on price). Tokyo’s retail landscape, however, has been undergoing a state of change. No longer are the streets the exclusive domain of European luxury mega-brands and high-end select boutiques. Japanese, European, and American chain stores (quickly dubbed “fast-fashion” by critics) have become ubiquitous throughout the City.
130 APPENDICES The market for luxury goods first thrived in the bubble decade of the 1980s, when owning a branded, European handbag or watch became a symbol of success. With Japan's vast middle class, these products were within reach for most people. When incomes peaked in the late 1990s and then started to steadily fall, the purchases became less justifiable, creating major opportunity for a new clothing brands to deliver high-quality goods at standard Western pricing levels seen overseas. The discounting may be a sign of a significant shift in Japan, long renowned for finicky and sophisticated consumers who accepted high prices as a mark of superior quality and craftsmanship. Over the years, luxury-goods retailers such as Louis Vuitton and Chanel have continued to invest millions of dollars in Tokyo, building striking, massive flagship stores. But with deflationary pressure, a weak economy, and an apparent shift in consumer tastes, sales of luxury goods in Japan have been in decline. One area where this dynamic is particularly apparent is in high-end shopping area of Ginza. The Ginza is Tokyo's most famous high-end shopping, dining, and entertainment district, featuring numerous department stores, boutiques, art galleries, restaurants, night clubs and cafes. Recently high-end retailers are downsizing or leaving the shopping district, with their former properties being occupied by fast fashion retailers. A similar phenomenon has also happened within the trendy Harajuku District. KEY INSIGHT #1: THE IMPORTANCE OF INNOVATION Similar to other locations throughout the world, Tokyo is in the midst of evolving fashion trends. External pressures from China, as well as internal changes based on evolving consumer preferences have begun to dramatically change the fashion industry from production to retail sales. However, throughout this change, Tokyo remains relevant based on their key asset: innovation. Whether examining the designs coming out of the Harajuku district or new technological processes developed for fabrics, the region continues to be a leader in fashion innovation throughout the world. It can be argued that Tokyo designers have not effectively leveraged their assets globally, as well as the country has not fully taken advantage of their innovative textile technologies, but it remains clear that their unique offerings help keep their fashions relative within the global fashion context. KEY INSIGHT #2: THE EMERGENCE OF FOREVER 21 Forever 21, often reputed for delivering runway looks at cheap prices, opened in the Matsuzakaya department store in Tokyo's upscale Ginza district. In a move symbolic of the shift to bargain hunting in Japan, Forever 21 replaced what was a Gucci boutique, occupying five floors with $4 tank tops and $17 skirts. The department store decided to replace Gucci with Forever 21 in the hope of drawing more foot traffic that may benefit sales of other higher-priced merchandise. The Forever 21 store is its second in Japan. The first, located in the Harajuku district, drew a line a half a mile long during its opening. The store has done well attracting shoppers, who are buying up Forever 21's wear along with local brands famous for "kawaii," or cuteness, in the district. Similarly, Ginza still attracts shoppers for its established European brands such as Chanel, Prada, and Hermes, carrying price tags of thousands of dollars. But, its landscape is changing with the arrival of other fast fashion retailers such as H&M, Zara, and Japan's Uniqlo. The emergence of Forever 21 and other fast fashion retailers in Tokyo helps support the notion that “high” and “low” fashions are not mutually exclusive. KEY INSIGHT #3: THE EVOLUTION OF PLACE The above analyzed shopping and fashion districts in Tokyo have evolved for different reasons. In the case of Harajuku, bringing vitality into the district through street closures allowed for a unique mix of entertainment and fashion to blossom, which helped transform the district into what it is today. In the case of the Ginza shopping district, the premier destination for high-end fashion in Tokyo (similar to Rodeo Drive in Los Angeles), government policy assisted retailers by making pricing less competitive with
APPENDICES 131 external global market. This, along with consumer preferences, attracted premier luxury fashion retailers to become tenants in the shopping district. In both cases, they are illustrative examples of existing areas within Tokyo that have thrived as destinations that are primarily based on diverse fashion retail offerings. Due to the importance of fashion within Tokyo, these areas have used fashion to successfully anchor their entertainment retail district.
132 APPENDICES APPENDIX 2: DESIGN PROFILE PROFILE: DESIGN IN THE LOS ANGELES FASHION DISTRICT 45Fashion is a $612 billion global business and Los Angeles is well-suited to play a leadership role in the industry, both as an American gateway to Asia and as a creator of many global fashion trends. Designers are the thought leadership and beacon of the fashion industry. As described in the report, Los Angeles County has approximately 10 percent of US fashion design jobs and design makes up less than 5 percent 46of total jobs within the Los Angeles Fashion District. While a relatively small portion of employment within the District, design is the foundation of the fashion industry and is a key element in maintaining a thriving fashion cluster in the Los Angeles Fashion District. A greater confluence of fashion designers in the Fashion District would add credibility to the district. The area can maintain its distinction purely as a manufacturing and supply hub (fabric, buttons, sample making, garment production, etc.) but, with the focus on finished goods at both the wholesale market level in the showrooms and the growing retail level with cheap goods, more recognizable brand names located in the district would help improve its reputation as a Fashion District with industry professionals. There are a number of designers and brands in Southern California, but they are dispersed throughout Los Angeles and Orange County and are often overlooked in the global fashion scene or are not credited with a California fashion heritage. This section looks closely at the fashion design sector and considers what is necessary to expand and promote the sector within Los Angeles and the Los Angeles Fashion District. The analysis was developed with support from Jennifer Uner and is based on interviews with a handful of Southern California-based designers as well as input from FIDM and OTIS representatives. DESIGNERS IN LOS ANGELES Location decision criteria are based on Designer Space/Environment where the designer is in their evolution Design studios are located throughout Los Angeles. Appendix and often include: Figure 1 presents a map of Southern California based designers and brands. An example of typical evolution, a designer will start 1. Affordability designing in a spare room at home, and then will move to a small 2. Convenience to industry space nearby when the home studio is outgrown. The company suppliers and contractors, and, will move to a larger space as distribution grows, perhaps in the 3. Reputation, visibility, and Fashion District to be near suppliers and the wholesale trade in convenience to key the showrooms, and then ultimately to the kind of larger space in which you find an established brand. Typically large, open, lofty buyers/clients. spaces provide the flexibility designers want to configure space to suit their needs. If focusing on wholesale, the final space is likely to be either in Vernon or Commerce, due to tax incentives and the availability of cheaper, larger spaces. The designer may or may not maintain showroom space in the Fashion District. If the focus is on retail, the final space may be on the Westside near wealthier clients. One designer we spoke to mentioned how she was located in West Hollywood because it allowed her to retail her line to celebrities. These designers can typically have their design studio connected to their storefront retail space. The young designers we spoke to mentioned the need to get showroom space in both the Fashion District and the East Coast. Successful Designers in Los Angeles Currently, we estimate that there are approximately 200 fashion designers and brands that are based in the Los Angeles Fashion District and another 700 designers and brands spread throughout Los Angeles and Orange County. Appendix Figure 2, at the end of this section, lists select high profile designers and brands based throughout Southern California. 45 Total exports of textiles and clothing, as reported by the World Trade Organization. 46 Office employment count for design (not connected to manufacturing)
APPENDICES 133 Appendix Figure 1: Map of Designer and Brand Locations Source: Le Book, Magic Directories, CDFA, Jen Uner
134 APPENDICES Advantages of Locating in Los Angeles Los Angeles may not be known for haute couture, but the city does have its fashion niche. Los Angeles is known for contemporary women’s fashion. Globally, Los Angeles is the city for denim and the “California casual” lifestyle inspires fashion trends world-wide. Many of the designers we spoke to describe Los Angeles as a great place to be a start up designer. Los Angeles designers have manufacturers and craftsmen at their fingertips, which is necessary for small runs, and it is much more affordable to lease space in the Los Angeles Fashion District relative to the New York Garment District. Another advantage of Los Angeles is that the market is open to fresh talent. Designers explain that it is difficult to get noticed in New York unless you already have a following. It is easier for new designers to find their voice in Los Angeles. A seemingly under-leveraged advantage of Los Angeles is the Southern California fashion market. There are over $33 billion in apparel and general merchandise sales in the greater Los Angele-Orange County market. If Southern California and West Coast retail buyers could be convinced to purchase a greater share of fashion products from Los Angeles firms, this alone could help to raise Los Angeles’ profile in the fashion industry. Currently, Los Angeles has a strong fashion niche and breeds good designers, but, since media and buyers are largely based in New York, designers often leave Los Angeles as the business grows. Challenges in Los Angeles and the Los Angeles Fashion District Several designers described New York as the ultimate place if you want to work in the fashion industry due to its concentration of fashion industry resources and media. Los Angeles was the second best place in the US due to the cluster of fashion suppliers, reps, and contractors. Los Angeles does have its advantages and these designers were in Southern California primarily as a lifestyle choice. Designers described a number of challenges designing in Los Angeles. Disadvantages include: Press and media attention is a key driver of the fashion designer sector. Los Angeles has not received its fair share of fashion media attention. Media attention in Los Angeles tends to focus 47first on entertainment, not fashion. Further, it is difficult for Los Angeles designers to get taken seriously by the global fashion media, especially the New York based media, who have a natural bias to the more competitive, organized and professional New York environment. Those within the fashion industry report that it has been years since there was a successful Fashion Week in Los Angeles and that there is a need for professionally produced fashion shows in Los Angeles that attract leaders in fashion design, merchandising, and media. Market weeks are Los Angeles’ current strength, but since the Los Angeles Market Week falls after the market weeks of New York, Paris, and the Magic Marketplace trade shows in Las Vegas, many of the buyers have spent their budget and are “burnt out” in purchasing product. The Fashion District is not an inspiring area. The City doesn’t take the The Los Angeles region does not respect the fashion industry Fashion District seriously, as a viable economic engine. how do you expect anyone Relative to New York, the City of Los Angeles has not provided else to? -Designer substantial support to the fashion industry. The most frequent challenge that has been heard about expanding the fashion industry in Los Angeles stems from the lack of fashion press and media attention by flagship media brands, . Vogue, Bazaar, Elle, W, Woman’s Wear Daily, for the Los Angeles fashion industry. Most of the major fashion press and 47 When these fashion publications commission stories in Los Angeles, it is often the entertainment industry (and which global designer they might be wearing) and not coverage specific to California fashion.
APPENDICES 135 editors are located in New York and, currently, the prime forum for designer promotion is through fashion shows that take place there. In most cities, fashion shows are organized under the umbrella of a Fashion Week. The largest and highest profile Fashion Week production is the Mercedes-Benz Fashion Week by IMG in New York City. It is worth noting that an alternative and rising star Fashion Week platform in New York is sponsored by Mac cosmetics and takes place at Milk Studios. Between 2003 and 2008, IMG and Smashbox Studios produced a reasonably organized Fashion Week in Culver City in the Los Angeles area. The LA Fashion Awards were also initiated in 2005, but ended in 2008 due to a lack of financial support. The last IMG/Smashbox Studios Fashion Week production was in 2008. Again a lack of financial support is cited as the reason for this discontinuation. Since their departure there has not been a comprehensive, successful, organized Fashion Week in Los Angeles. Industry press and media are now unwilling to visit fashion shows in Los Angeles due to the recent history 48of unprofessionally produced events and an uneven quality and mix of designers presented at these shows. Professional attention to the topic of industry promotion should solve key issues: assembly of partnerships, promotion of the platform, vetting of designer quality, and fine-tuning of both the live event experience and the related online and offline communications pre- and post-event. While Los Angeles’ fashion reputation is not as strong as New York’s, it is worth noting that New York has had many more decades to build their strength as a fashion city. Los Angeles has its competitive advantages and we need to explore these advantages and develop better industry collaboration to capture additional market share. STRATEGIES TO INCREASE THE PRESENCE OF DESIGNERS IN THE LOS ANGELES FASHION DISTRICT Designers and educational representative provide a number of strategies for expanding the fashion design industry in the District. Physically Improving the District. Many of the Los Angeles On the Fashion District: Fashion is fashion industry professionals we spoke to describe the supposed to be fun and inspiring; we existing atmosphere in the Fashion District as a major reason need a little more of that infused into it is difficult to grow fashion design in the area. They describe basic improvements such as adding trees, open space, feeling the community. - Designer safer, and improved cleanliness, as steps that will help to make the Fashion District more desirable, in addition to better amenities, such as well-curated restaurants and bars (not chains). They mentioned the need to connect existing “great places” so that there will be more interest in visiting and lingering in the area. One designer we spoke to purposely located in the Arts District because it was close to the suppliers and contractors she needed in the Fashion District, but that the Arts District has an energy, beautiful architecture, and sense of community that does not quite exist yet in the Fashion District. This designer chose a location with parking and lots of space so that it could become a retail space later. Improved retail was a suggestion for the area and the Meatpacking District in New York was used as a model for what Los Angeles can become. It was suggested that if the Fashion District had the basic physical environment improvements, discussed above, and one solid designer would put their faith into the Fashion District, then everything would follow. One local fashion house that designers mentioned could help to lead the District is Max Azria of the BCBGMAXAZRIAGROUP. Another designer suggested fostering pop up shops, or pop up shops inside of existing stores to create activity and energy within the Fashion District. The City of Los Angeles can help to make the basic improvements and provide staff/financial resources to help further promote the District. 48 Described as the level of the models, lighting, and the set up of the whole event. One designer estimates that it costs $50,000 to $60,000 to put on one professionally‐produced fashion show.
136 APPENDICES Media Attention / LA Fashion Week. Though many individual attempts at reviving LA’s Fashion Week have fallen short (primarily due to a lack of financial resources for professional industry participation), it is necessary to continue pursuing a successful fashion week in Los Angeles. It is very important for up-and-coming designers, as well as established brands to have their collections featured to a wide number of media and press. A successful Fashion Week production will likely require the collaboration of various industry groups. Designers believe that if you can get a few strong industry people from Los Angeles and New York to collaborate, in addition to a major publication (Elle, Lucky, Vogue, Bazaar) we can attract the leadership and talent to produce a professional level show. One show can initiate a successful Fashion Week though it will take time and a number of consistent productions to build strong media interest and participation. Additionally, one idea to help to control the amount of groups and quality of productions is to have a respected fashion organization, such as the Council of Fashion Designers of America, write fashion show standards and then have those producing fashion shows apply (and pay) to receive endorsement and promotion. Industry professionals will then know whether the show will meet the quality level they expect. (It is worth noting that the CFDA is not interested at this time in establishing a successful American fashion week platform outside of New York.) A key element to a successful Fashion Week is securing sufficient investment support. It can cost between $50,000 to $60,000 to put on a small professional level fashion show. An entire multi-day, multiple designers Fashion Week production with multi-media promotion can cost several million dollars. Los Angeles lacks the support typically provided by large fashion houses, such as Ralph Lauren and Donna Karen in New York. Can Los Angeles capture additional support from the entertainment community? Connections with Hollywood. Hollywood seems like it could offer a good forum for Los Angeles designers, but currently these connections are weak and limited to a personal level. Hollywood is so close, but there is limited participation in fashion shows. The entertainment industry suffers the bias of many others who don’t want an affiliation with anything they perceive to be “sub-standard.” Creating better professional linkages between Hollywood and the Los Angeles Fashion District could help to attract A-list celebrities and the media attention that follows. In addition, professional linkages could help to develop investment support for key fashion industry events. Manpower to promote the Fashion District. Designers also believe the Fashion District needs additional dedicated manpower to help promote the Fashion District and industry. It is also important that this manpower be educated and experienced in the fashion industry. Staff could be used to aggressively market and promote Los Angeles fashion designers and generate positive attention for Los Angeles designers. One designer suggested a team to promote the Los Angeles Fashion District similar to the Council of Fashion Designers of America (CFDA) in New York. In addition dedicated staff may be required to help support other strategies such as: ‐ Creating and updating web, print and signage resources to better navigate the Fashion District and developing a fashion industry directory. ‐ Creation of a design incubator. It is important that Los Angles be able to support and retain fashion designers as they grow. Designers suggested a fashion incubator similar to the program supported by Showroom NY. o Showroom NY is a non-profit funded by a grant through the New York State Economic Development Corporation through the Garment Industry Development Corporation (GIDC) to promote apparel manufacturing in New York. It offers a program called the Designer Development Program which provides local designers a platform from which to expand their business. The program teaches the financial part of building a business, links them to showroom representation, and provides guidance to new designers on obtaining high quality manufacturers.
APPENDICES 137 o Fashion Business Incorporated does similar work in the Los Angeles Fashion District, but with additional support they could take it a step further to connect young designers with mentors and provide showroom space and guidance for designers in a fashion more similar to an incubator. ‐ Better leverage the Internet o May want to consider creating an online platform to help promote Los Angeles designers. o If investment is made into supporting staff to help promote Los Angeles or an incubator is created for this purpose, the organization/staff may want to explore the capabilities of e-shopping and e-media as a platform for promotion and sales for new designers. There are many online resources for cost effective “shopping cart” and “commission junction” type functionality that could be leveraged to provide such services at reasonable cost. Attracting Additional Business for Designers through Alternative Avenues. Staff dedicated to the Fashion District could also evaluate opportunities to get positive attention for designers, such as focusing on capturing a greater share of our resident buyers and media. ‐ One designer mentioned that stores in Los Angeles have a better variety of lines and take bigger chances with the way they write their orders. Los Angeles is a large market. The Fashion District should look to ways to encourage buyers for stores in Los Angeles to purchase from Los Angeles. ‐ Also, people love the California lifestyle and editors do live in the area. How do we translate that their presence into positive press for Los Angeles designers?
138 APPENDICES Appendix Figure 2 Select Southern California Designers and Branded Goods 1Designer/BrandAddressCeityEmployee EstimatFashion DistrictGregory Parkinson117 W 9th StreetLos AngelesRozae Nichols834 S BroadwayLos Angeles20Anja Flint731 S Spring ST. Suite 500Los AngelesAlternative833 Spring StreetLos AngelesBabakul127 E 9th StreetLos AngelesBianca Nero935 S Wall StLos AngelesBishop of Seventh - Mens Sales127 E Ninth StreetLos AngelesCoco Kliks860 S. Los Angeles St. Suite 640Los AngelesCorey Lynn Calter719 S Los Angeles St #807Los AngelesCynthia Vincent860 S Los Angeles StLos AngelesDaftbird112 W 9th StreetLos Angeles2Deux Lux1031 S BraodwayLos Angeles7Dosa850 S BroadwayLos AngelesDream Culture110 E. 9TH StreetLos AngelesEdward An1031 S. Broadway, Suite 246Ellelauri860 S Los Angeles StLos AngelesFrankie South BroadwayLos Angeles30Genetic Denim1013 South Los Angeles StreetLos Angeles10Gr. Dano127 East 9th StreetLos AngelesGregory Parkinson117 W 9th Street #1005Los Angelesh. Starlet 860 S. Los Angeles AngelesJ'aime Productions1031 S BROADWAY STE 1228Los Angeles Jessica Louise1031 S BroadwayLos AngelesJenny Jen Atelier719 S LOS ANGELES ST #904Los AngelesJovovich-Hawk860 S Los Angeles St, Lobby FLos AngelesKova & T1013 S Los Angeles StLos Angeles4Kut127 E 9th StLos AngelesLnA127 East 9th StreetLos Angeles2MartinMartin713 South Los Angeles StreetLos AngelesMeghan Los Angeles1406 S. Main StLos Angeles8Mike & Chris834 S Broadway, 2nd FLLos AngelesMonrow1404 StLos AngelesNation LTD112 West 9th StreetLos AngelesOligo Tissew Jeans & Oliver Twist850 S Broadway, Ste. 1105Los AngelesQuail1220 Maple AveLos Angeles1-4Rachel Pally127 E 9th St. Ste 700Los AngelesRaven Kauffman833 South Spring StreetLos AngelesRobert Rodriguez860 S Los Angeles #512Los AngelesRozae Nichols834 S BroadwayLos AngelesRyan Roberts1031 S. Broadway, Suite 246Los AngelesSee Thru Soul127 E 9th StLos AngelesSerfontaine860 S Los Angeles St #322Los AngelesSheri Bodell860 S Los Angeles St. #542Los AngelesSunday Rocks110 E. 9th StLos Angeles9Susana Mercedes818 S Broadway #501Los AngelesSzulika719 S Los Angeles St #312Los AngelesTarina Tarantino908 S. BroadwayLos AngelesThrive860 S. Los Angeles StreetLos AngelesOther Los Angeles / Orange CountyRodarte409 W. Olympic BlvdLos Angeles5Monique Lhuillier1201 S. Grand AveLos Angeles100Jasmin Shokrian980 N. La Cienega BlvdLos AngelesMax Azria2761 Fruitland AveVernon525Trina Turk3025 West Mission RoadAlhambra83Jenni Kayne1944 Cotner AvenueLos Angeles5-9BCBG Max Azria2761 Fruitland AvenueVernon525Juicy Couture12723 Wentworth StArleta1-4Guess1444 S Alameda StreetLos Angeles700Lucky Brand5233 Alcoa AveVernon477William Rast2346 E. Pacifica PlaceRancho Dominguez1 As publicly available. Sources include InfoUsa and Source: Le Book, Magic Directories, Jen Uner, InfoUsa,
APPENDICES 139 Appendix Figure 2 Select Southern California Designers and Brand (Cont.) 1DEmployee Estimateesigner/BrandAddressCityMax Studio3100 New York DrPasadena 199Sue Wong3030 W. 6th Street Los Angeles100Karen Kane2275 E 37th StreetLos Angeles150Forever 212001 South Alameda StreetLos Angeles347 For All Mankind4440 East 26th StreetLos Angeles1-4Anoname19715 E. Harrison AveCity of . by Allen Schwartz1231 Long Beach AvenueLos Angeles85ALCAdriana Caras451 N. FairfaxLos AngelesAether Apparel6100 Melrose AvenueLos AngelesAffliction1720 Apollo CourtSeal Beach30Alan Del Rosario414 Boyd AngelesAlina Jeans8721 Santa Monica BlvdWest HollywoodAmerican Apparel747 Warehouse Angeles3000American Rag150 S LaBrea AveLos Angeles20And Cake1532 N. Columbus Gonzalo1129 W Capitol Dr #58San PedroAnthony Franco912 Hyperion AveLos AngelesAntik/ Yanuk /Blue Concept5804 E. Slauson & Florence5527 Hollywood BlvdHollywoodBand of Outsiders1109 N El Centro AveLos AngelesBao Tranchi177144 Willard Van NuysThe Battalion2404 Wilshire BoulevardLos AngelesBB Dakota1638 Pomona AvenueCosta Mesa+Beryll908 Colorado AveSanta Monica4Blessed & Cursed111 W 7th StreetLos AngelesBody Glove201 Herondo StreetRedondo Beach20-49Bordeaux2425 E. 12th StreetLos Angeles20Bradley Bayou127 N Robertson BlvdBeverly HillsBrian Lichtenberg8251/2 Silverlake BoulevardLos AngelesC&C California5835 S. EasternLos AngelesCalleen Cordero Design7331 Hinds HollywoodCapital Tailors5233 Alcoa AveVernonCasadei2641 S. Hill St. Los AngelesCharlie Lapson Collection5670 Wilshire Blvd #1410Los AngelesCharlotte Tarantola127 E. 9TH STLOS ANGELESChip & Pepper3737 Santa Fe AngelesChristian Audigier & Ed Hardy1135 North Mansfield AveLos AngelesCitizens of Humanity5715 Bickett StreetHuntington ParkCocchia11784 Miro CircleSan DiegoCommune666 N RobertsonLos AngelesCornell Collins1616 Cahuenga BoulevardLos AngelesCorpus Denim2121 E 7th Place #216Los AngelesCurrent Elliott4599 District BlvdVernonDavid Meister13071 Temple AvenueCity Of Industry1David Park673 Mateo St. 7th AngelesDC Shoes15202 Graham StHuntington Beach2Deborah Lindquist5657 Lankershim BlvdNorth HollywoodDisney Couture2010 E 15th StreetLos Angeles120Devine Rights of Denim14600 South BroadwayGardenaDuncan Quinn8380 Melrose AvenueLos Angeles1-4Dylan George335 N Maple DriveBeverly Hills1-4Eduardo Lucero7378 Beverly BlvdLos AngelesEisbar9877 CarmelitaBeverly HillsElla Moss335 W. 31st AngelesEndovanera1154 Glendale BlvdLos Angeles3Enza Costa Rogue2635 Nevin AveLos AngelesEnze3701 Highland AveManhattan Beach2Erge Designs4770 E 48th StLos Angeles10Erica Courtney7465 BEVERLY BOULEVARDLos Angeles11Esquivel Shoes8309 W 3rd StreetLos AngelesEstevan Ramos4150 Santa Monica Angeles1 As publicly available. Sources include InfoUsa and Source: Le Book, Magic Directories, Jen Uner, InfoUsa,
140 APPENDICES Appendix Figure 2 Select Southern California Designers and Brand (Cont.) 1Designer/BrandAddEmployee EressCstimateityFarmer USA1614 S. Central E Jefferson BoulevardLos AngelesFound Denim2123 Bay StreetLos Angeles5Gara Danielle8205 Santa Monica BlvdLos Angeles1-4Gentle Fawn Clothing8721 Santa Monica Blvd #322Los AngelesGeren Ford453 South Spring Street #820Los AngelesThe Generic Man4459 Avocado StreetLos Angeles8Gold Hawk3864 Santa Fe AveVernonGoldsign5715 Bickett StreetHuntington ParkGordon Rush5290 Eastgate Mall RdSan DiegoGoretti4430 Gainsborough AveLos AngelesGrey Ant1444 Edgecliffe DrLos AngelesGuy and Eva9320 Santa Anita AveRancho CucamongaHabitual Denim13344 Main StreetLos AngelesHale Bob2140 East 25th StreetVernon1-4Harverys Handbags1918 E. Glenwood PlaceSanta AnaHause of Howe18505 S Broadway Trading W Adams BlvdLos Angeles10Honeydew Intimates20830 Dearborn StreetChatsworthHot Kiss 1475 Long Beach AngelesHouse of PlumredOrange CountyHurley1945-G Placentia AvenueCosta Mesa201Imaginary People2010 E 15th StreetLos Angeles120Jainesse3344 Ridge Pointe HillsJames Galanos1316 Sunset Plaza DriveLos AngelesJames Perse3311 E. Slauson Ave. VernonJasmin Shokrian980 N. La Cienega BlvdLos AngelesJbrand Jeans1201 East Washington BlvdLos Angeles7Jee Vice1031 Calle RecodoSan Clemente3Jenni Kayne1944 S Cotner AveLos AngelesJennifer Nicholson147 Georgina AveSanta MonicaJoe's Jeans2340 south eastern avCommerce30Joie4599 District BlvdVernonJonesy2250 Maple AveLos AngelesJuan Carlos Obando2049 Century Park East #3600Los AngelesK-Swiss31248 Oak Crest DriveWestlake Village130Kaiser Marketing Inc1631 Pontius AveLos AngelesKara Saun5042 Wilshire Blvd #478Los AngelesKaranina5383 Hollister Ave. Suite 100Santa BarbaraKarolyn Kiisel Couture2459 Mission MarinoKeep Company1626 3/8 Serrano AveLos AngelesKelly Nishimoto2160 Century Park East #1905Los AngelesKevan Hall8255 Beverly Blvd Suite 217Los AngelesKirsten Ehrig1433 Roscomare RdLos AngelesKOI Design Studio1060 E. Cesar Chavez AveLos Angeles3La Chica Chic2535 Kettner BlvdSan Diego1-4LAmade1213 StreetLos AngelesOakley1 IconFoothill Ranch1-4Odd Molly122 S. Robertson BLVDLos AngelesQuicksilver15202 Graham StreetHuntington BeachRock & Republic3523 Eastham DriveCulver City170L'une / Anh VolchekLa JollaLibertine3390 San Marino St.#FLos AngelesLinda Loudermilk1511 N Ogden DriveLos Angeles1-4Live Life & Love Denim / Karl Kani1555 N. Vine St. Los AngelesLost Enterprises1030 Calle SombraSan ClementeLouis Verdad2828 London AngelesLunalba177 Riverside AveNewport Beach1 As publicly available. Sources include InfoUsa and Source: Le Book, Magic Directories, Jen Uner, InfoUsa,
APPENDICES 141 Appendix Figure 2 Select Southern California Designers and Branded Goods (Cont.) 1Designer/BrandAddressCEmployee EstimateityMaggie Barry1734 Silver Lake BlvdLos AngelesMaj Collection13344 S. Main StLos AngelesMark Nason 225 South Sepulveda BlvdLos AngelesMATTEO912 E 3rd St. Loft 105LAMeghan1240 S Corning St. #208Los AngelesMetal Mulisha41083 Sandalwood CircleMurrieta Michelle Mason2444 E 8th AngelesMichelle Roy201 North Robertson BlvdBeverly Hills10Mighty Fine2010 E 15th StreetLos Angeles120Mink ShoesPO Box 17691Beverly HillsMK2K3809 S. Hill StreetLos Angeles6Modern Amusement2032-A BroadwaySanta MonicaMon Atelier119 N La Brea AveLos AngelesMon Petite Oiseau6670 Flotilla StreetLos AngelesMona & Co630 washington monicaMonah Li3894 Filion AngelesMorphine Generation1555 Cahuenga BlvdLos AngelesMother Denim127 East Ninth Street, No. 705Los AngelesMustache Brigade2010 E 15th StreetLos Angeles120Neil Lane708 N. La Cienega BlvdLos Angeles3Nikolaki530 Molino St #108Los AngelesNoah Tyler Inc837 Traction Ave Loft 305Los AngelesOliver Rayn2735 E 11th StreetLos Angeles6Onna Ehrlich10865 Washington BlvdCulver City3OP3 StudebakerIrvineOrtega Design Group761 Terminal Street, 2nd Fl Los AngelesOrthodox2203 W. 20th StreetLos AngelesPaige Premium Denim10119 Jefferson BlvdCulver CityPalladium31248 Oak Crest DriveWestlake VillagePanacea673 Mateo St. 3rd AngelesPaul Frank Industries960 W 16th MesaPavina3020 Old Ranch ParkwaySeal BeachPetro Zillia8218 W. Third StLos Angeles12Poleci2221 E Washington BlvdLos Angeles55Popits6905 Oslo CircleBuena Park1-4Puella875 N. Virgil AveLos Angeles8Rails155 W Washington BoulevardLos Angeles2Rami Kashou4208 Santa Monica BlvdLos AngelesRandolph Duke6671 Sunset BoulevardLos AngelesRaymundo Baltazar4000 woking wayLos AngelesRedsand15255 Alton ParkwayIrvineReiss145 N RobertsonLos AngelesRenee Bardot9411 Brighton WayBeverly HillsRich & Skinny Jeans2021 E. 49th StVernon33Riser Goodwyn2463 Solar DriveLos AngelesRock & Republic3523 Eastham DriveCulver CityRojas7350 Melrose # CLos AngelesRosasen7771 Melrose AngelesRoyal Elastics31248 Oak Crest VillageRVCA 960 W. 16th StCosta Mesa20Saja5478 Wilshire Blvd. Suite 205Los AngelesSamora8282 Sunset BlvdWest HollywoodSanctuary Clothing5721 Cahuenga BoulevardNorth Hollywood40Serfontaine860 S Los Angeles St #322Los AngelesShawn1521 N Commonwealth AveLos AngelesSiera Jewelry650 South Hill StreetLos Angeles3Single2324 Hunter AngelesSketchers USA228 Manhattan Beach BlvdManhattan Beach1 As publicly available. Sources include InfoUsa and Source: Le Book, Magic Directories, Jen Uner, InfoUsa,
142 APPENDICES Appendix Figure 2 Select Southern California Designers and Branded Goods (Cont.) 1Dmployee Estimateesigner/BrandAddressCEitySkingraft4th & Main areaLos Angeles Sledge USA940 w. Washington BlvdLos Angeles30Society for Rationale Dress255 South Sante Fe AveLos Angeles1-4Soffer Ari850 S Robertson BlvdLos AngelesSolitude1280 Coast Village Circle, First FloSanta BarbaraSplendid3751 S. Hill Street Los AngelesSt. John Knits17622 Armstrong AveIrvine150Sterling Capricio1174 S La Brea AvenueLos AngelesStewart + Brown955 E. Front StVenturaStitch's Jeans8360 Melrose AngelesStussy/Stussy Deluxe17426 Daimler StIrvine65STOP STARING! DESIGNS14023 PARAMOUNT BLVDPARAMOUNTStud Monkey7969 Norton Ave #4West HollywoodStussy Dailmler -Bags Los Angeles1745 N Spring StreetLos Angeles10Tacori300 West Colorado StreetGlendale48Tadashi Shoji3016 E 44th StreetLos Angeles100Taverniti5804 SlausonCity of CommerceThomas Wylde255 South Santa Fe Ave #103Los AngelesThe Proportion of Blu1305 Main St. #BVeniceThe Row c/o Dualstar Ent. Group1801 Century Park East, 12th FlLos AngelesThe Stronghold1625 Abbot KinneyVeniceThree Dots7340 lampson avenueGarden Grove250Tobi Tobin8601 Sunset BoulevardLos AngelesToes on the Nose1537 Monrovia AvenueNewport Beach15Tom Binns1406 Pacific AvenueVeniceTree1777 Vine St. #509Los AngelesTreesje8515 Washington BoulevardCulver City4Trovata505 31st StreetNewport Beach1True Religion2263 East Vernon AvenueVernon7Trunk Ltd420 1/2 N FairfaxLos AngelesUriel Saenz6321 Marbrisa AveLos AngelesVans6550 Katella AveCypress290Velvet3961 Landmark AngelesVoom7450 Melrose AveLos AngelesWhitley Kros2221 N Catalina StLos AngelesYa Ya140 N La Brea 2nd AveLos AngelesYana K7655 Melrose AveLos AngelesCharles David5731 Buckingham PkwyCulver City48Chrome Hearts915 N Mansfield AveLos Angeles1-4Citizens of Humanity5715 Bickett StreetHuntington Park1 As publicly available. Sources include InfoUsa and Source: Le Book, Magic Directories, Jen Uner, InfoUsa,
APPENDICES 143 Appendix Figure 3: Southern California Designers and Manufacturers Source: InfoUSA, Le Book, Magic Directories, Jen Uner
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