How Santa Monica Is Reinventing Itself. Again.

The Best Deals Rarely Exist Once Recovery Feels Obvious

In 1965, the city closed Third Street to cars entirely and converted it into one of the first pedestrian malls in the country. Most people thought it was a mistake. The mall struggled for two decades, and by the late 1980s it had become one of Santa Monica’s most visible failures. Storefronts emptied out, foot traffic dropped, and by the end of the decade most people who knew the area had written it off.

The city spent $10 million to redesign and reopen it as the Third Street Promenade in 1989. What followed was one of the most successful urban turnarounds in Southern California history. The Promenade drew visitors from across LA and around the world for the next three decades.

That history matters right now, because Santa Monica is at a similar inflection point.

What Happened:

The pandemic hit Santa Monica harder than most Westside markets. Remote work gutted office demand. Rising crime pushed out residents and retailers. The Eaton and Palisades fires last January added another blow just as recovery was gaining traction. Walk the Promenade today and the vacancies are hard to miss. Office vacancy across the city sits near 35%, among the highest in LA County. Retail vacancy tells a similar story.

For a long time the city had been a magnet for creative firms, tech companies, tourism, and luxury retail, all compressed into a walkable coastal market that felt distinct from the rest of Los Angeles. For a stretch, Santa Monica's edge had slipped away.

What the City Is Doing About It:

In March 2026, the city approved a major update to what it calls the Realignment Plan, its most comprehensive economic recovery effort in years. The measures are specific and funded.

The city created a $3 million economic development fund for restaurant incentives, tenant improvement assistance, and business recruitment. It eliminated the per-seat wastewater fee that was costing new restaurants $50,000 or more before they served their first table. It repealed the chain restaurant ban that had been in place since 2018. The city also streamlined permitting, cutting turnaround time significantly. Downtown parking now offers 90 minutes at $1. Sidewalk dining fees for basic setups were eliminated entirely.

The centerpiece is the Entertainment Zone.

What the Entertainment Zone Actually Is:

In June 2025, Santa Monica became the first city in Southern California to establish an open-container district, made possible by California Senate Bill 969. The zone covers Third Street between Wilshire and Broadway, where adults 21 and older can buy a drink from any participating business and carry it outside along the Promenade on weekends. Wristbands, non-glass containers, designated boundaries. Six months in, the Santa Monica Police Department reported no meaningful increase in crime.

But the bigger story is what the zone represents. The city is explicitly shifting the Promenade's identity away from retail as the primary draw and toward dining, music, and experiential programming as the reason people show up. Oktoberfest events doubled foot traffic compared to prior years. Dodgers World Series watch parties tripled attendance on event nights.

The concept is already being considered for a much larger footprint, potentially including the Santa Monica Pier, Main Street, and Montana Avenue.

The question of whether people will come to the Promenade primarily to shop is probably settled. The question now is whether they will come to experience it. The city is betting they will, and it is spending real money on that bet.

The Timing:

Santa Monica is positioning itself around two major events. The FIFA World Cup runs through mid-July 2026 in the LA area, and the city has already secured a five-week activation in the downtown core running through that window. The 2028 Olympics will bring another wave. Neither event takes place in Santa Monica itself, but both bring millions of visitors to LA, and Santa Monica remains one of the region’s most natural destinations.

This is the backdrop against which the current market sits.

Why This Matters for Tenants and Investors:

Santa Monica is likely at or near the bottom of its market cycle right now. For the right tenant or investor, that is an extraordinary opportunity.

This is how it always works. Nobody rings a bell at the bottom. The market feels uncertain, the vacancies are visible, and most tenants either stay put or look elsewhere. Then the recovery arrives, leverage disappears, and the window closes.

Near 35% office vacancy means landlords are competing for tenants in ways they haven't in years. Free rent, meaningful tenant improvement allowances, flexibility on term length. That is the current reality, and it will not last indefinitely. The Realignment Plan is funded and moving, the Entertainment Zone is pulling people back downtown, and global events are on the horizon.

The best deals are rarely available once the recovery feels obvious.