Retail space in part of L.A. commands prime rates: market lease rate comparisons show...

Profit-hungry retailers are paying up to twice as much to rent shop space in East and South Central Los Angeles as they do in the San Fernando Valley, according to brokers' figures. Unlike the San Fernando Valley and West Los Angeles where an average of 2.5 individuals live in each house, 4 to 4.5 individuals live in each house in East Los Angeles and South Central. East and South Central L.A. also have smaller homes and smaller lots, features that increase density, said retail brokers and demographers.

For example, in East Los Angeles, 63,000 residents live within a one-mile radius of the intersection of Atlantic and Gage avenues; 290,000 residents live within a three-mile radius of the same intersection and 793,000 live within a five-mile radius, said Richard Heller, a leasing agent with Watt Commercial Development Corp., a subsidiary of Santa Monica-based Watt Industries Inc.

South Central Los Angeles has 39,491 residents living within a one-mile radius of the interchange of the Harbor Freeway and Imperial Highway; 308,815 within a 3-mile radius and 948,891 within a 5-mile radius, according to data compiled by West Los Angeles-based Urban Decisions Systems Inc. Demographer Evan Cole said the figures are based on data compiled in the 1990 U.S. Census.

By contrast, within one mile of the intersection of Interstate 405 and Ventura Boulevard in the San Fernando Valley, there are just 20,797 residents, 139,852 within a 3-mile radius and 399,103 within a 5-mile radius, according to Urban Decisions.

Watt has two retail centers in East Los Angeles, and two in South Central Los Angeles. Heller reported all four are virtually full. Outside the neighborhoods, Heller said retail vacancy is higher because security is not as tight.

David Kato, a retail broker with Montebello-based Legaspi Cos. a real estate brokerage, said East Los Angeles' hottest retail pockets run along Whittier Boulevard from Soto Street West to Interstate 5, along Brooklyn Avenue and along the 1.5-mile stretch of Whittier Boulevard from the Long Beach Freeway to Gerhart Avenue. Retailers in the three neighborhoods typically pay $2.25 per square foot per month for their shop space, Kato said.

"The other types of retailers that are doing well are the mom-and-pop shops. Twenty years ago they were owned by Jewish and Hispanic families. Now they are dominated by Koreans, Middle Easterners and Hispanics," Kato said.

Retailers paying the high East Los Angeles rents have learned how to sell to the Hispanic market. "McDonald's and Jack-in-the-Box do well in the neighborhood. The mistake retailers make is in thinking that Hispanics don't have any money to spend," Kato said.

Hispanic neighborhoods support more bridal and Western ware stores than predominantly Anglo neighborhoods. They also spend less money advertising.

"Shop owners develop a clientele and since many Hispanics are Catholic, they spend a lot on clothing for weddings and other church-related events such as baptisms and the girls' 15th birthday parties," Kato said.

Comparing the lease rates between middle- to upper-middle-class San Fernando Valley and East Los Angeles, Zugsmith-Thind senior marketing consultant Liz Evans said retailers can lease space along San Fernando Valley's Ventura Boulevard for as little as $1 per square foot per month. On top of the low lease rate, Evans said the tenants can get up to two months free rent each year.

East and South Los Angeles landlords are cashing in on their base rents and on the percentages of their gross sales that retailers pay them as part of the lease agreement. Office, industrial and research space lease rates usually are quoted on a per-square-foot-per-month basis.

In the retail industry, lease rates also are quoted on a per-square-foot, triple net basis. This means the tenant pays the flat rent, plus a percentage of the upkeep for the common area, security, utilities and property taxes.

In addition, retail tenants pay landlords a percentage of their gross sales. If a shopkeeper pays $40,000 minimum per year to