What Befell Santa Monica? Why the City Struggles as Beverly Hills and Culver City Thrive

By the Editorial Team · Tuesday, October 6, 2026

A Rand Corporation study found that Santa Monica's economic decline began before the pandemic but worsened afterward, with retail vacancies exceeding 11% and sales revenues remaining well below pre-pandemic levels. In response, city officials have launched a $3 million revitalization plan focused on downtown improvements, increased events, and business support programs, aiming to attract visitors and encourage private investment despite ongoing fiscal and safety challenges.

Santa Monica, once one of California’s leading economic centers with thriving office parks, popular tourist attractions, and a bustling downtown shopping district, has faced significant economic and social challenges in recent years. A comprehensive study by the Rand Corporation reveals that the city’s decline began before the COVID-19 pandemic but was accelerated by it. Compared with nearby cities such as Beverly Hills, Culver City, and West Hollywood, Santa Monica has experienced a sharper and more prolonged downturn.

The study highlights that over 11% of Santa Monica’s retail space is vacant, with nearly half of those empty units located in major commercial hubs like Third Street Promenade and Santa Monica Place. This contrasts with retail vacancy rates of 9.2% in West Hollywood, 6% in Beverly Hills, and 5.2% in Culver City. Retail sales revenue in Santa Monica has failed to rebound to pre-pandemic levels, declining across nearly all business categories. For example, revenue from clothing and accessories dropped 75% between 2015 and 2025, while food service sales fell by 24% over the same period. Sales revenue in early 2026 remained around one-third below pre-pandemic figures.

City officials acknowledge these challenges and have launched efforts aimed at economic revitalization. Santa Monica City Manager Oliver Chi confirmed the Rand findings and articulated the city’s choice between managing decline or attempting a more proactive turnaround. The city plans a $3 million investment in the Third Street Promenade area, including the introduction of an entertainment zone that permits open alcoholic beverages to be consumed while walking downtown. Additional initiatives involve hosting large events—such as concerts and sports watch parties—to attract visitors and reinvigorate foot traffic. City officials have also implemented a business concierge program to streamline permitting and other services for local enterprises.

Concerns about escalated crime and homelessness have contributed to the city’s challenges, with some business owners, like Barney’s Beanery’s AJ Sacher, pointing to these issues as deterrents for customers. However, the Rand report indicates that homelessness slightly decreased in 2026, and although incidents of assault and robbery remain higher compared to the early 2010s, more than 70% of these events are concentrated in just 5% of the city’s geography, mainly downtown and beachfront areas. This visibility has amplified perceptions of insecurity, even as Santa Monica police have increased foot and bike patrols, made more than 100 arrests weekly in early 2026, and significantly expanded drug investigations. As a result, the city reported a 12% decline in violent and property crimes in 2025 and an additional 10% drop so far in 2026.

Economic difficulties in Santa Monica have been compounded by a $229 million settlement related to a former city employee accused of misconduct in predominantly Latino neighborhoods, which has further strained the city’s fiscal position. Officials have labeled the city as being in a state of fiscal distress since 2025 and highlight that much of the prior economic success was tied to international tourism. Shifts in consumer habits and the perception of safety concerns have hampered the city’s ability to draw both tourists and locals.

Compared to Santa Monica, nearby municipalities showed stronger recoveries; Beverly Hills, Culver City, and West Hollywood returned much of their sales tax revenue to pre-pandemic levels by 2021, although Culver City’s decline remains more significant. Experts like Ryan Hawley of JLL Los Angeles and Debbie Lee of Downtown Santa Monica Inc. recognize early signs of recovery, noting increased leasing activity and a 19% rise in average daily visitors downtown in 2026 compared to the previous year. Both emphasize the importance of welcoming local shoppers and fostering a supportive environment for new businesses.

Looking ahead, Santa Monica officials plan to continue focusing economic revitalization efforts on the downtown area while also considering dispersing homeless services across a broader area to reduce concentration downtown. Mayor Caroline Torosis emphasized the city’s commitment to the turnaround, stating that “Santa Monica is open for business, and our best days are ahead.” However, City Manager Chi cautioned that recovery will be gradual and dependent on renewed private sector investment to restore the city’s economic vibrancy.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.