Developers Wanted on Sunset Strip : Economy: Fearful of losing the entertainment industry, planners consider easing restrictions for some builders at selected locations.

WEST HOLLYWOOD — What a difference a recession makes.

Just three years ago, Sunset Strip faced a stampede of new building, with several large office and retail projects approved or on the table. Fearing an all-out run on West Hollywood’s most famous 10 blocks, city planners sat down to sketch a more measured path to long-term development.

Now opposite worries are altering that sketch. Some of the proposed projects were abandoned. Others await financing or met legal challenges. And a shortage of fancy office space has fed a recent exodus of some of the strip’s biggest tenants, including Playboy Enterprises Inc. and Petersen Publishing Co., prompting fears that the city also may lose coveted show-business companies to aggressive neighbors such as Beverly Hills.

“It think it has reached panic levels,” said developer Charlie Mercer, who heads the Sunset Strip Assn. and served on the advisory committee working on the development plan for the strip. He said brokers trying to fill shiny luxury buildings in places like Santa Monica, Burbank and the Miracle Mile “are on this street every single day--pirating.”

City officials are less apocalyptic, but they too are calling for stepped-up efforts to encourage big corporate-office development at certain sites on the 1.7-mile strip--a telling shift away from the strict regulation that some say chased away needed building following cityhood in 1984.

“The issues are very different up there,” said Debbie Potter, the city’s housing and economic development manager. “Over the next few years, while the economy is rebounding, the city will have a window of opportunity. It’s important to get that flagship building.”

City officials are taking a long-range view, aware that banks are reluctant to finance new commercial space because of a glut of inexpensive cheap new offices that resulted from the ‘80s building boom and recent foreclosures.

The attempt to lure new corporate headquarters tops the development plan--still being drafted by city planners--that will be a lot-by-lot blueprint for everything from landmark billboards to parking on the crazy-quilt commercial strip. The City Council added its endorsement recently by directing authors of the so-called Sunset Specific Plan to designate 12 sites where developers would be allowed to escape normal building size restrictions in exchange for a fee or some other public benefit.

The 20-year plan, which should be finished late this year, already envisions dramatic new gateway buildings (the six-story Marlboro Man billboard on the strip’s east end is the closest thing to an entrance marker now) and imagines wider sidewalks and shade trees to encourage more foot traffic in the central shopping district. It suggests the possibility of a convention center handy to the strip’s seven hotels.

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The plan will reflect the strip’s three distinct faces: the high-rise offices and world-famous rock clubs near Beverly Hills, stores and restaurants in the central section around the swank Sunset Plaza shopping area, and hotels and entertainment companies closest to Hollywood. In order to encourage pedestrian-friendly office construction on both ends of the strip, it will ease regulations that require new developments to have first-floor stores. It offers no new restrictions on future nightclubs.

To streamline its approval process further, the city is preparing an environmental-impact report covering the entire strip, relieving developers of the long and costly job of writing one for each individual proposal.

The plan is not meant to cure short-term ailments. But it reflects concern the strip might lose its 70-year link to show business that goes back to the days of the Garden of Allah Hotel, home to Greta Garbo, John Barrymore, Humphrey Bogart and Marlene Dietrich.

Over the years, the strip was also the home address for John Wayne, Marilyn Monroe and Clark Gable. It was where F. Scott Fitzgerald dropped dead after eating a candy bar and John Belushi died from a drug overdose. Nightclubs such as The Whisky A Go Go, Gazzarri’s and The Galaxy launched a generation of rock bands, including the Doors.

Since then, dozens of film and music production companies and talent agencies have settled there, sending a daily corps of power-lunchers down the street to Spago and Le Dome.

The stretch is still a prime site for new clubs and restaurants. A 28,000-square-foot blues club won city approval this spring. A new restaurant is planned nearby and a Kenneth Cole shoe boutique will open in June, Potter said.

The strip is also an economic power plant. Sunset Strip businesses generate nearly a fifth of the city’s sales taxes and two-thirds of its hotel tax income. Businesses there employ more than 7,000 workers, about a quarter of the city’s work force.

But there was little major building on the strip after a burst of high rises sprouted in the 1960s, leaving today’s moguls with dated and cramped office spaces. A major 125,000-square-foot store and office complex proposed by Raleigh Enterprises sits stalled after neighbors successfully challenged its approval in court. Two other mixed-use projects totaling more than 60,000 square feet were approved but await financing.

A marketing study commissioned by the city last year showed that nine of the strip’s 12 anchor tenants had left or plan to do so. The exodus is sweeping up some of the street’s most treasured tenants, including Playboy and Warner Chappell Music Inc. Earlier this year, worried city officials chased rumors that David Geffen Co. was leaving. Geffen assured them he wasn’t.

“The problem is very simple--not enough space,” said Ronald S. Kates, president of a company that leases and manages retail property on the strip. Kates said three major entertainment companies have looked for space on the strip but have been unable to find anything suitable for corporate headquarters.

The marketing study estimates a demand for up to 680,000 square feet of new office space over 20 years, nearly 50% more than current stock but far less than could fit.

There are strong hindrances to development on Sunset, including high land costs, lots that are hemmed in by steep hillsides to the north, and residents’ resistance to projects that will worsen traffic and block a stunning view over the Los Angeles basin.

When it could not find room to expand, Playboy moved most of its cramped operations out of the 10-story landmark bearing the firm’s bunny-eared logo to fancy new quarters in Beverly Hills.

“Beverly Hills is where it’s happening. This is where entertainment is going,” said Richard Rosenzweig, Playboy’s executive vice president. Rosenzweig, who once helped form the group that sells West Hollywood’s image as the “creative city,” is now chairman of the Beverly Hills Visitors and Convention Bureau.

Rosenzweig said West Hollywood was too tough on development after incorporation. He said its recent efforts to accommodate business by creating a special entertainment zone on Sunset Boulevard was “five or six years late in coming.”

Officials acknowledge that the year-old entertainment zone, offering builders loosened rules on size, parking and certain fees, has failed to attract developer interest because the concessions are not guaranteed.

The concessions are to be included in the Sunset plan, though details still have to be worked out. Chief among them will be how to choose fairly which sites will be picked for the building-size and height bonuses and how big the bonuses will be. Mercer, head of the Sunset Strip group, said the fairness issue cropped up when three large sites on the street were designated eligible for such bonuses in the city’s General Plan.

“I didn’t like it because it’s just the rich getting richer,” he said. “That dragon might rear its ugly head again.”

Planners are also mulling ways to ease the city’s historic-preservation rules for strip developers without jeopardizing the street’s historic appeal. One idea is simply to encourage builders to preserve facades voluntarily, but the City Council put off a decision. Council members also sought more study before tackling the parking problem.

The concept already has won broad support among the more than 80 residents and business people who attended advisory meetings, participants said.

“Anything is better than what we’ve got now,” Mercer said, referring to the strip’s current slowdown. “It’s just not happening.”