West Hollywood recently released the first draft of its Economic Study, a detailed examination of the city’s economic status and opportunities for growth. The study, to be presented to City Council next month, was designed to assess the city’s economic health, identify strengths and weaknesses and formulate strategies to support all sectors of the local economy. The report was created with significant input from community stakeholders, including businesses, labor unions, advocates, residents and city staff and drew upon extensive data in areas such as real estate, employment and demographics.
Tourism is a central economic driver for West Hollywood, contributing significant tax revenues, generating jobs and attracting millions of visitors annually who patronize local businesses. The city’s hotel market includes 19 properties with 2,585 rooms citywide, 80% of which are categorized as luxury.
This heavy focus on high-end accommodations has driven the average daily rate (ADR) for hotels in the city to $381 in 2024, surpassing pre-pandemic levels and ranking just below Beverly Hills in the region. However, occupancy rates, currently at 71%, have not fully rebounded to pre-pandemic levels.
In 2023, visitation to West Hollywood increased 4% compared to 2019, with 4.9 million unique visitors making an average of 5.3 trips to the city annually. Despite these positive trends, overreliance on tourism has left the city vulnerable to economic shocks, such as the COVID-19 pandemic, which caused steep declines in sales activity, particularly on the west side. This resulted in significant job losses and a decline in tax revenues.
Visitation to West Hollywood is concentrated on the west side, which boasts a robust portfolio of hotels, nightlife and retail destinations. Sunset Plaza, West Hollywood Park and high-profile dining establishments like Catch LA and Craig’s are among the city’s top attractions.
In 2023, Sunset Plaza alone saw 325,000 visitors, while West Hollywood Park hosted 250,000. High-end restaurants such as Catch LA and SUR Restaurant & Lounge drew 204,946 and 159,721 visitors, respectively. However, the benefits of tourism are not evenly distributed across the city.
The east side, with fewer hotels and attractions, relies more heavily on spending by residents and employees. Businesses on the east side face competition from nearby areas with more robust retail offerings, contributing to economic leakage.
West Hollywood’s retail market spans 3.4 million square feet, with the Design District alone accounting for roughly one-third of this total.
The city’s retail vacancy rate stands at 9.2% in 2024, higher than nearby competitors like Beverly Hills and Culver City. Retail rents, averaging $64 per square foot annually, have decreased since 2018 but remain higher than most surrounding markets.
The Design District and Sunset Strip command the highest retail rents, at $114 and $92 per square foot per year, respectively.
Meanwhile, the Rainbow District and Mid-City areas face elevated vacancy rates of 10.0% and 10.3%. Leasing activity has been concentrated in the Design District and Sunset Strip, which together account for nearly two-thirds of leasing activity since 2018. By contrast, the east side, despite comprising 19% of the city’s retail inventory, has accounted for just 7% of leasing activity.
West Hollywood captured $9.5 million in sales tax revenue in FY 2023-24 from consumers living outside the city, while only $317,000 in sales tax revenue was lost to retail categories like department and building supply stores.
The city’s retail per capita space is 95 square feet, higher than Santa Monica and Los Angeles but lower than Beverly Hills and Culver City. Despite strong consumer spending, neighborhood-serving retail has struggled to capture resident and worker spending, which often leaks to nearby areas.
The city’s office market comprises 554 office-using businesses and 42 million square feet of office space. West Hollywood’s average office rent is $69 per square foot annually, with a vacancy rate of 15.3%. While the office market has been more resilient than those in neighboring areas, it faces challenges, including aging building stock and competitive pressures.
The Eastside has been a bright spot, with significant development at The Lot at Formosa driving a 99% increase in office space since 2013. However, recent volatility in the media industry has led to rising vacancy rates. Paramount’s exit from The Lot and CIM Group’s decision to sell holdings at 1041 North Formosa Avenue have left significant office space vacant.
Hotels, retail and office space are concentrated on the west side, which accounts for the majority of jobs in West Hollywood.
The Design District and Sunset Strip host 75% of the city’s office space and 58% of taxable sales. Retail and hospitality activity on the west side has outperformed other areas, but high costs pose barriers to new businesses. The east side and Rainbow District, by contrast, struggle with a lack of amenities and lower visitation.
The east side is home to West Hollywood’s Russian-speaking community, which has declined by 50% between 2010 and 2021. Despite demographic shifts, the east side has benefited from multifamily development, with 2,200 units built in the area since 2010, creating a retail audience. However, the area lacks a distinctive retail environment and remains less competitive than the west side.
West Hollywood’s economy is heavily reliant on visitor-driven revenue sources. Hotel and sales taxes accounted for 58% of city revenues in FY 2022.
Despite this reliance, the city does not levy certain resident-driven taxes, such as a utility users tax. Parking revenues, a proxy for city visitation, remain below FY 2019 levels but have recovered faster than in neighboring cities.
The city’s unemployment rate is 6.4%, slightly higher than neighboring areas. About 95% of West Hollywood’s workforce commutes into the city, while 93% of residents commute to jobs outside the city.
High-growth sectors such as entertainment, motion pictures and professional services have driven job growth over the past decade. These high-wage industries have offset declines in low-wage sectors like accommodation and food services. However, West Hollywood has the lowest share of high-wage jobs among its neighbors and the second-highest share of low-wage jobs.
The city’s luxury-focused economy has created disparities, with small businesses facing barriers to entry due to high costs. In 2024, 7% of businesses self-reported as BIPOC-owned, highlighting the need for greater inclusivity in economic opportunities.
Special events such as Halloween, Pride and the Super Bowl play a critical role in attracting visitors. In 2023, these events contributed to 26 million total visits to West Hollywood, with 20% of visitors coming from more than 100 miles away. Despite robust visitation, economic challenges persist, including high retail vacancy rates, limited office inventory and overreliance on tourism.
The West Hollywood Economic Study emphasizes the need for strategic investments, policy adjustments and community collaboration to ensure long-term economic resilience and equity across the city.
[…] Story continues […]