REVIVAL ON RODEO

It may have been their 20th anniversary, but the merchants belonging to the Rodeo Drive Committee had precious little to celebrate in 1992. Sales were declining, Rodeo was losing its luster, and vacant storefronts were proliferating along “The Drive.”

“Clearance sale signs suddenly began to show up in store windows,” recalls Rodeo pioneer Fred Hayman. “Business was tough.”

The shuttered storefront has once again become a common sight on Rodeo--but for different reasons. Rather than closing up for good, the glittering shops of Rodeo are in an unprecedented wave of remodelings, expansions and grand openings.

For example, Gucci, which downsized in 1992 by subleasing 25% of its space to other merchandisers, is spending $10 million to remodel and expand its Rodeo store. Hermes recently opened shop at a long-vacant building with 17,000 square feet--a huge move up from its previous 1,300-square-foot site.

The street is showing itself off as it hasn’t in years, with verandas and terraces as well as atriums aplenty--some of them resembling giant tiaras--amid the half-dozen new stores making their debut along this tony avenue of top-shelf merchandising.

Hayman himself--a founding member of the Rodeo Drive Committee--is today selling $5,000 gowns at a pace not matched since the heady days of the late 1980s.

The merchants association is now 25 years old and is celebrating a renaissance on Rodeo as well as its anniversary. It’s a revival driven by the kinds of companies the Rodeo Drive Committee coveted when it formed with hopes of creating an avenue of fashion comparable to Bond Street, the Champs Elysees and Fifth Avenue.

“We wanted to create international interest by attracting the world’s best merchants,” said Hayman, owner of the boutique known as Fred Hayman Beverly Hills. “Retail-wise, Rodeo may be the hottest street in the world right now.”

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Rodeo also reflects--if with a particularly high sheen--the retail recovery experienced by Southern California as a whole. Just as the street hit its nadir in the early 1990s, when empty storefronts appeared on Rodeo as such grand old Southern California retailers as the Broadway and Bullock’s were suffering, the street has remained at the leading edge of the region’s resurgence.

That’s not to say that Rodeo is just another shopping area. Its grandeur and glitz keep it at a certain remove even from such upscale malls as South Coast Plaza. But few turnabouts have the pure marquee value of recovery on Rodeo.

Indeed, the resurgence is a rousing reversal from the years when it almost seemed that Rodeo had lost its luster for good. Yves St. Laurent, MCM, Etro Milano and Elizabeth Arden were among those who closed their Rodeo shops during the first half of the decade (and have not returned).

But today the street is attracting waves of new high profile merchants--and plenty of them. As recently as 1993, the vacancy rate on Rodeo was 15%. Today, it’s close to zero as international fashion players snap up locations.

Hugo Boss, the German house of apparel design, and Spanish porcelain maker Lladro have opened expansive Rodeo stores in recent months.

Scheduled today is the opening of a Tommy Hilfiger flagship store on Rodeo at Santa Monica Boulevard. Architect Allan Greenberg--best known for designing the facade of the Bergdorf Goodman store on New York’s Fifth Avenue as well as the homes of actor Harrison Ford and the Trellis Room at the White House--has designed the new store.

Holland & Holland, the British seller of upscale apparel and accessories, opened recently, and opening soon are a Prada store for men and a LaCoste store featuring Izod apparel. LaCoste is the Paris-based clothier whose apparel sports the alligator logo.

“This is the start of a new era on Rodeo,” said Linda LoRe, who relinquished the top job at Giorgio Beverly Hills this month to become a merchandising consultant to Procter & Gamble Co., which owns the fragrance business and the well-known boutique. “The theater is back in Rodeo retailing.”

Merchants are more interested in the strip partly because tourism, which accounts for about 40% of Rodeo’s sales, has been rising, said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County.

“Rodeo is one of the top tourism draws in Southern California, and the tourists that visit Beverly Hills are heavy spenders,” Kyser said.

Indeed, the street is abuzz with accounts of big spenders, such as the Hong Kong businessman who recently plunked down $91,000 in cash for his purchases at Giorgio Armani.

The retail rush to Rodeo is also a reflection of the growing ambitions of top designers such as Tommy Hilfiger, Ralph Lauren and Calvin Klein, said Ira Kalish, senior retail economist at the Los Angeles office of Management Horizons, a consulting arm of Price Waterhouse.

“These design houses create a wide array of products--from clothing to fragrances--and they can offer more products in their own store than they can in a boutique section of a department store,” Kalish said. “Apparel prices had been falling for years. Now, those prices have stabilized, and apparel makers are more adventurous.”

Still, said Kalish, there is some risk in the Rodeo buildup. A substantial percentage of Rodeo’s shoppers are investors who have profited from the long-running bull market, he said. As the recent sudden correction shows, their wealth is still vulnerable to shocks.

“Retailers tend to overbuild during the good times--and that could be the case on Rodeo Drive,” Kalish said. “If the economy slows down in the next year or two, there will be a shakeout on Rodeo.”

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However, Beverly Hills real estate executives are optimistic about the future of Rodeo. Commercial rent prices--currently as high as $192 per square foot annually--are short of the 1989 peak of $230 per square foot. But after rising about 7% this year, those rents are now 25% higher than the levels of 1994.

“This is now a landlord’s market,” said Chuck Dembo, a partner at Dembo & Associates, a Beverly Hills-based real estate firm. “Rents are not at the level of the late 1980s, but it could reach that level in two to three years.”

Meanwhile, commercial property values are up 20% over 1994 levels, Dembo said. The site of the Lladro store and the neighboring Hugo Boss shop--15,000 square feet in all--was purchased by Lladro for $15 million two years ago, Dembo said. Today, that land is worth about $20 million, he said.

Not only the land, but also the decor is rising in value.

“Some of these merchants are building retail palaces,” said Michael Fisher, editor and publisher of Beverly Hills Business Fax, a weekly newsletter

Hermes, the upscale French retailer known for its silk scarves and leather handbags, has one of the more lavish renovated stores. The company remodeled the store extensively, adding a retractable atrium, a garden terrace and a new limestone facade.

Hermes would not disclose the cost of the renovation. However, a permit application filed with the city of Beverly Hills indicates that Hermes spent at least $700,000 on interior work alone.

That tab does not include the cost of a portrait of Louis XV by 18th century painters Charles Parrocel and Jean-Baptiste van Loo. The rendering of Louis on horseback was purchased for the store and hung on a first-floor wall.

Artisans are also on hand in the store. Jocelyne Zerbib, a leather specialist on the first floor, can produce a small custom-made purse for $4,200 or a much larger bag for as much as $20,000.

Leather products abound at Hermes, which began in 1837 producing saddles. Hermes has not abandoned its original business. A shopper can pay $6,000 to $7,000 for a custom-made saddle. A ready-to-wear saddle is available in the store for a mere $3,350.

Shoppers browsing with a flute of complimentary champagne can also find suede coats with mink trim; one sold for $11,500 a week ago. At the lower end is a $20 face towel that fits over the hand like a thumbless mitten. In between are gift items such as a crystal chess set for $2,600 and a crystal paperweight for $1,680.

“A larger store allows us to show people what we are about,” said Jean-Louis Dumas-Hermes, chairman of the Paris-based company.

“We want to be contemporary, and a presence on Rodeo keeps us on the cutting edge,” said Laurent Mommeja-Hermes, chairman of Hermes USA. “We’re proud to be part of Rodeo’s revival.”

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The store opened last month with great fanfare. Hundreds were feted with champagne, salmon and hors d’oeuvres at the grand opening. The street was barricaded to accommodate the crowd and makeshift bar. No one was allowed into the store, however, until a stallion--a symbol on the Hermes logo--was led in and out the shop.

The Rodeo Drive Committee had its own gala street party recently to celebrate its 25th anniversary. The event, an arts and education fund-raiser called “A Tribute to Style,” included a fashion show and dinner along a barricaded Rodeo. Actor Sylvester Stallone handled some of the announcement chores for the celebrity-studded event.

Merchants along Rodeo are finding different ways to make a splash. A giant rendering of a man in a suit by Ermenegildo Zegna looks down from a construction barricade. The words “Expanding Spring 1998” appear next to the rendering.

The Zegna store will absorb a neighboring Rodeo site early next year, doubling the retail space. But it’s not only presence that the company is seeking.

“We’re making money, and we wouldn’t consider an expansion if we didn’t anticipate making money,” said Richard Cohen, president of the company.

Store make-overs are now widespread on Rodeo as merchants look for ways to take advantage of the increased foot traffic on a street long known for its lavish window displays.

For example, Frances Klein Estate Jewels is closed for renovation. Gucci closed its store for the renovation and is operating temporarily at the nearby Rodeo Collection shopping complex. And, Guess recently remodeled one of its Rodeo stores.

The one sore spot on the street is the Rodeo Collection shopping complex, located between Santa Monica Boulevard and Brighton Way. The center’s owner--a partnership called Rodeo Collection Ltd.--has been reorganizing under Chapter 11 of federal bankruptcy law.

Executives at the partnership said they could not comment on the status of the operation because they have been developing a reorganization plan for Bankruptcy Court. Except for the presence of Gucci, there has been little change at the complex, which includes offices and three levels of retailing--two of them below ground.

The street and bottom levels of the complex are fully occupied, but there is only one tenant on the middle level.

Many observers of the Beverly Hills retail scene say Rodeo Collection’s difficulties arise from the same element that distinguishes it: its unique architectural design. Some of the merchants at the complex have windows facing Rodeo. Others don’t--and that’s a problem on a street that tends to attract window-shopping impulse buyers, observers say.

While the Rodeo Collection seeks tenants, many other retailers are unable to find a suitable space on Rodeo. For example, Faconable, a French retailer, explored the possibility of a Rodeo site but could not find a venue large enough.

The company, which is opening U.S. stores in partnership with Nordstrom, last month opened a Faconable shop of nearly 17,000 square feet at 9680 Wilshire Blvd., just around the corner from Rodeo.

With so many global retail giants jockeying for space, it’s now difficult for smaller firms to acquire or maintain a site on Rodeo. For example, Anna-Bella, a Northridge-based maker of women’s apparel, accepted a month-to-month lease for part of a store site on Rodeo at the corner of Santa Monica Boulevard.

The company already has stores in Del Mar and Newport Beach and some celebrities are among its clientele. The company, which opened on Rodeo earlier this month, had hoped for a long-term presence. However, real estate sources say a major retailer is already negotiating to acquire the location, which is located across the street from the site of the new Tommy Hilfiger store.

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Tommy Hilfiger has been planning to open its first flagship store at that location for two years. The designer, known best for his colorful casual lines, plans to offer more upscale merchandise at the Rodeo store.

“If certain exclusive items sell well, we’ll roll that merchandise out to our other [nine] stores,” Hilfiger said in an interview. “It’s important for us to have a flagship store.

“Rodeo has been one of the premier retail streets in the world,” said George Santacroce, president of Hilfiger’s specialty stores. “It’s back again, and this [move] wasn’t a difficult choice.”