An apparel retailer's woes are contributing to the struggles of downtown Los Angeles as the city seeks to fully recover from the pandemic.
After years of declining sales and store closings, Forever 21 told California officials it plans to close its headquarters at Brookfield Properties' 1.8 million-square-foot California Market Center in Los Angeles by May, contributing to rising vacancy in one of the country's biggest office markets.
Forever 21 is the largest office tenant at the complex, leasing roughly 164,000 square feet. The center at 110 E. Ninth St., about 52% vacant ahead of the retailer's departure, counts other fashion firms on its tenant roster, including Adidas and Ross, alongside smaller clothing wholesalers.
Toronto-based Brookfield acquired the 1960s-era building in 2017 and later invested roughly $250 million in renovations to the property. The massive complex is located in the downtown fashion district that's home to thousands of small garment-related businesses, like button makers and sequin dealers. The area is a popular destination for Angelenos shopping for bargain apparel.
When Forever 21 signed its lease in 2022, it was the biggest new office deal in downtown Los Angeles since the onset of the pandemic that effectively shuttered the region's downtown due to an exodus of tenants and residents, sending office vacancy rates to historic highs.
The lease was hailed by local stakeholders as a possible reversal of fortune for a district damaged by post-pandemic remote work trends and perceptions of crime and homelessness.
More than two years later, office vacancy is still climbing in downtown Los Angeles with the current rate sitting at nearly 21% — up from 19.6% a year ago, according to CoStar data. Tenants have given back 840,000 more square feet of office space downtown than they have leased in the past year, and the outlook for tenant expansion is relatively bleak, according to Ryan Patap, CoStar senior director of market analytics for Los Angeles.
"The real question is whether [the California Market Center] will be able to get higher profile tenants moving forward," Patap said.
Out of fashion
The retailers that are making office deals in Los Angeles are prioritizing hubs outside of the central business district.
In November, New York-based fashion label L’Agence relocated from downtown to the Harbor Building in Central Los Angeles' Mid-Wilshire neighborhood. Fashion Nova is relocating its headquarters from Vernon to a property it acquired in Beverly Hills, where fast-growing Alo Yoga is also headquartered.
Other retailers based in the Los Angeles area include Buck Mason in Hollywood; Hot Topic in City of Industry; Reformation in Culver City; Tom's Shoes in Playa Vista; and Nasty Gal in Central LA.
Forever 21 reportedly employs more than 300 at its Los Angeles headquarters.
The company opened its first store on Figueroa Street in Los Angeles in 1984. It is now preparing to file for Chapter 11 bankruptcy protection for a second time after increased competition from online rivals cut into profits in recent years, according to Bloomberg.
Part of the planned restructuring includes the closure of at least 200 of the retailer's 500 stores, 58 of which are in California. At its largest, Forever 21 operated 800 stores across the United States.
Brookfield is familiar with Forever 21. The landlord, along with Simon Property Group and Authentic Brands Group, bought a stake in the fast-fashion company in 2020 after the retailer filed for Chapter 11 bankruptcy protection. Brookfield sold its stake about a year later.
The apparel chain is currently owned by Catalyst Brands, a holding company that also owns the department store chain JCPenney.