Spike in rents causes local businesses to rethink, relocate, close down


The lack of retail space and rising costs of maintaining properties is causing owners to raise rents, leaving longtime mom-and-pop businesses, as well as bigger stores, to grapple with either relocating or closing.

By Max Taves / Special to the Times

The idea for Bob Walker’s store, Tops, located in the Malibu Country Mart, began on the beach in Malibu while day-dreaming 23 years ago, but now, he’s considering closing his business. He’s not the only one-other Malibu businesses are grappling over whether they can still make a go here.

The property boom that has inflated property values globally has not left Malibu unaffected. According to the Los Angeles County assessor, the value of Malibu’s property has increased significantly since 2001. The total value of the city’s property-that is, commercial and residential-rose 36 percent from 2001 to 2005, after adjusting for inflation. With rental prices traditionally lagging behind property prices, this boom might reshape the landscape of local retail businesses.

Commercial land property owners say that the low availability of commercial/retail space, coupled with the rising costs of maintaining and operating their properties, has caused the need to raise rents.

Steve Soboroff, owner of the Malibu Creek Plaza, sees the spike in rent as a function of the city’s low supply of retail space.

“In communities like Malibu there isn’t a lot of space, and there’s a lot of demand,” he said. “Whenever you have more demand than supply, you have a push-up on your rents. There are also few areas in Malibu that have adequate parking and adequate access that helps shops.”

The owner of Malibu Country Mart, Michael Koss, ascribes the increase in rent in part to the mounting costs of owning and maintaining property.

“I’ve had a big increase in my operating expenses over the last 21 years,” Koss said. “One of the causes is that there’s a substantial higher cost to operating a septic system. That’s a big one. Another is that we’ve added security. We have security patrol at night and a security company on the weekends in Malibu.”

It’s not just mom-and-pops that face pressure to leave Malibu; Blockbuster will close up shop this January and Subway’s owner fears the cost of renewing her next lease. Granita restaurant, owned by one of the most successful restaurateur’s in the world, Wolfgang Puck, closed earlier this year.

But it’s the mom-and-pop stores that have been in Malibu for decades that many would be sad to see go.

For the past two decades, Walker has worked with more than 300 artists from around the country, selling a mélange of paintings, sculptures and home furnishings at Tops. Walker was an actor in between roles when his previous wife mentioned the idea of opening a store. An open space in the Malibu Country Mart fueled their excitement and within one month they had opened up shop.

“We’re basically a mom-and-pop shop here and it’s been a labor of love,” Walker said. “We’ve got a great customer base that we’ve cultivated over the years. People really love us and will probably be really sad to see us go.”

Reluctant to close up shop, Walker said he is currently looking for a more affordable, smaller space in Malibu; however, he will close down his shop if he cannot find such a space in the city.

Shahnaz Fattahi and her husband own five Subways in the Westside of Los Angeles, including one in the Malibu Colony Plaza, but are most worried about renewing their lease in Malibu. Fattahi said she pays $4 per square foot in her Brentwood and Palisades stores, but already pays more than $6 per square foot in Malibu. She recently renewed her lease in the Palisades and will not pay any increased rate. With her Malibu lease expiring in less than two years and expecting an increase in rent to $8 or $9 per square foot, Fattahi said she is concerned. As a condition of being a franchisee, Fattahi cannot raise prices beyond a certain level to maintain her profit margin. Furthermore, Subway currently demands that all franchisees remodel their stores.

“We are really happy with the Malibu people and the location that we have, but we’re going to have to spend $100,000 to remodel this December,” Fattahi said. “I hope I can afford to stay.”

Tony Dorn, a commercial Realtor in Malibu for 15 years, said he believes the city’s unique geography makes relocation difficult.

“If you’re on Beverly Drive and your rents get doubled, I can take you over to Camden or Bedford or Wilshire or Santa Monica. I have options. I can even take you to the adjoining city,” Dorn said. “Malibu is 27 miles of coastline with very few options. What is happening is that a lot of the older businesses that are there [in Malibu] are going to get forced out.”

The trend toward escalating rents has increased expectations of a more exclusive and less distinct Malibu. One local shop owner who prefers to be unnamed has operated her store in Malibu for 30 years and plans on relocating and downsizing.

“I’m not devastated by the whole idea, but it’s kind of sad,” she said. “The Malibu that we know is going to be lost and the Malibu that’s coming looks to me like every other town in the world because it has all of the same businesses.”

Koss said the composition of the city’s stores is shoppers’ decisions, not his.

“I do not decide [what] stores are going to be out there,” he said. “The people who live in Malibu decide, and the way they decide is where they shop.”

Soboroff and Koss both said they subsidize the cost of some businesses they consider valuable to the community. “Where would Radio Shack, where would a shoe repair, where would a ballet studio afford to be in Malibu if it were not for our [Malibu Creek Plaza] property?” Soboroff asked. “We made a conscious decision.”

Neither Soboroff nor Koss said they would prioritize individually owned shops over chain stores.

However, Malibu’s demographics might decrease the likelihood of chain stores if not exclusive ones.

“No chain stores have come to Malibu in the past five years. The chain stores find our population too small and our rents too high,” Dorn said. “The Ron Hermans and the Jean Purses-you know, the $200 T-shirts-those boutiques are the ones coming to town.”