DOWNTOWN LOS ANGELES - In early 2011, a Financial District property owner gave tours and had extended conversations with officials from upscale supermarket chain Whole Foods about opening a grocery store in one of its buildings. The site, a commercial mid-rise two blocks from L.A. Live, was slated to get a $20 million renovation.

On the surface, the grocer’s interest made sense. Downtown is the densest employment hub in the region, with some 500,000 workers nearby, according to the Downtown Center Business Improvement District. The area’s 45,518-person strong and growing residential population is highly educated and affluent, with a median household income of $86,300.

Soon after Whole Foods executives visited the site, however, their interest fizzled, said Gilad Lumer, a partner at property owner L&R Group. It is unclear why the Austin, Texas-based grocer did not move forward. Whole Foods does not discuss lease negotiations and no stores are currently in development in the Los Angeles area, said company spokeswoman Kate Lowery.

Lumer doesn’t know why interest cooled, only that it did.

“From what I recall, basically the CEO of Whole Foods came out to look at the location — apparently he doesn’t usually come out for that type of situation — and something about the space or Downtown made him decide he didn’t want to be there,” Lumer said.

Fourteen months later, the building at 845 S. Figueroa St. is slated to get a Smart & Final Extra supermarket. This month, the budget-oriented retailer signed a 20-year lease for the space previously eyed by Whole Foods. It will open in the first quarter of 2013.

The planned 25,000-square-foot Smart & Final Extra will expand local grocery options, as the store will have more perishables, fresh food and deli items than the Commerce-based chain’s traditional bulk goods outlets. Still, it does little to sate what some Downtown stakeholders say is a strong hunger for more specialty and upscale markets.

In particular, many area inhabitants have long pined for a Whole Foods or Trader Joe’s to bolster the options offered by the Ralphs Fresh Fare at Ninth and Flower streets. Yet just as Whole Foods has refused to bite, Trader Joe’s has no imminent intent to come to the Central City, said company spokeswoman Alison Mochizuki.

“Downtown is not in our two-year plan,” Mochizuki said.

To the dismay of Downtown boosters and retail recruiters, that’s a phrase Mochizuki has uttered to Los Angeles Downtown News since 2007.

“The question is, why not?” said Hal Bastian, senior vice president and director of economic development at the Downtown Center Business Improvement District, who considers Monrovia-based Trader Joe’s to be Downtown’s “Holy Grail.”

The DCBID’s 2011 demographics survey found that, among the 4,347 Downtown residents polled, 73.8% already shop at Trader Joe’s. Nearly 45% patronize Whole Foods. Seventy-six percent shop at Ralphs. In 2008, the group’s survey asked participants to name the grocery store they most desired for the area. Eighty-nine percent picked Trader Joe’s. Sixty-nine-percent voted for Whole Foods (participants were allowed to choose more than one, which is why the percentages total more than 100%).

Residents like Veronica Perez, a lobbyist who has lived Downtown for three years, currently get their groceries at a mix of locations, but many still drive outside the area to stock the shelves.

“Two to three times a month I drive to Pasadena just to go to Whole Foods or Trader Joe’s,” Perez said. “I think Ralphs is great, but as a foodie who likes organic and healthy options, there are many products I use that I can only get at Whole Foods.”

Barriers to Entry

If it’s conventional wisdom among Downtown boosters that a specialty grocer would be successful in the area, others say the fact that they haven’t flocked here after Ralphs is evidence to the contrary.

“[The specialty markets] have obviously done their core research and they know the answer,” said David Livingston, a Milwaukee, Wis.-based supermarket consultant who specializes in site analysis and planning. “If they say they don’t want to go, they have good reason.”

As Trader Joe’s and Whole Foods remain on the sidelines of Downtown, budget-oriented stores are diving in. Wal-Mart plans to open a grocery-focused store at Grand and Cesar Chavez avenues in 2013. The Target slated to debut at Figat7th this fall will include a large fresh foods component.

Those stores join several existing establishments that feature affordable edibles. Grand Central Market, where the lone butcher is named Economy Meats, is renowned for its droves of inexpensive produce, spices and meat. At Third and Alameda streets in Little Tokyo there is Woori Market, a full-sized Asian-focused supermarket. Also in Little Tokyo is Marukai, a smaller market with a range of produce, packaged foods and specialty Japanese items.

Fresh & Easy, which opened a store at Adams Boulevard and Central Avenue in 2010, has been “actively looking” for a central Downtown location for several years, said broker Derrick Moore, first vice president at CB Richard Ellis, who is working on behalf of the company.

Ralphs has also considered opening a second Downtown store, said company real estate manager Yoshko Prebanda. Earlier this year, market officials were eyeing the ground-floor retail space in the Spring Arcade Building in the Historic Core for a smaller format store.

“We told them, tell us what you want us to do and we’ll give it to you,” said Greg Martin, vice president of property owner Downtown Management. “They walked away.”

Ralphs’ expansion plan is currently on hold, but Prebanda said the change is “mainly internal.” He said a second Downtown store remains a possibility, but it would have to have a smaller footprint than the supermarket at Ninth and Flower streets.

“I don’t think that another 55,000-square-foot store would work, but I think there are some opportunities for one or even possibly two smaller concept stores of about 20,000 square feet,” Prebanda said. “We’re trying to wrap our arms around what a new smaller concept would be.”

A rule of thumb in the grocery industry is that a supermarket is needed for every 10,000 residents nearby, said Livingston, the site-analysis consultant. Downtown’s approximately 45,000 residents, who based on Livingston’s metric could support at least four supermarkets, have a wide range of incomes. According to the DCBID, the area has 28,861 housing units. Thirty-eight-percent of those are for people on low or fixed incomes.

Opening supermarkets in urban areas also poses unique challenges, from getting inventory into buildings that often lack loading docks or even rear access, to configuring floor plans in spaces with more support columns than are needed in low-rise shopping centers.

The primary challenge to urban grocers, however, is usually parking, Livingston said. That could be crucial in Downtown, where parking comes at a premium, and is often not present in century-old buildings.

Population density is another key consideration and, according to Martin, whose company has three Trader Joe’s stores in other commercial properties in the San Fernando Valley, the specialty grocer still considers Downtown’s residential sector to be too low. Martin said he has long tried to woo the chain to the Spring Arcade Building, the same space recently eyed by Ralphs.

“The response is, ‘We’re just not ready, it doesn’t fit our requirements,’” Martin said. “The residential component is well below what they would require. But I think they’re missing the huge daytime population that would flock to them.”

Whole Foods’ Lowery said the company takes daytime population into consideration among many other factors when mulling new store locations. She also said that Whole Foods is expanding, and will likely add new stores in the Los Angeles area in coming years — she wouldn’t say if Downtown is among the possibilities.

Contact Ryan Vaillancourt at ryan@downtownnews.com.

©Los Angeles Downtown News.