New York jeweler Fred Leighton is planning its first Los Angeles store for Rodeo Drive. In September, MaxMara will expand its one-story boutique to a two-story space down the block. That's all surprising given the city's current refrain: complaints about a sagging box office, soaring gas prices, staggering soy latte costs. But it's nothing compared with the changes taking place across town.

At a time when it's rumored that the Los Angeles locations of big retailers like Barneys, Neiman Marcus, and Saks Fifth Avenue cut their fall orders in half, one neighborhood is seeing a luxury-boutique boom.

On Robertson Boulevard, a little east of Rodeo, a Chanel accessories store opened in June, selling silver-chain-strap handbags, nail polishes named for L.A. locations, and exclusive ballet flats. An outpost of New York's trend-aware Intermix boutique opened last fall. Large Dolce & Gabbana and Ralph Lauren signs announce stores in progress. Designer Phillip Lim just opened a freestanding shop—his third in the world—near Santa Monica Boulevard. Around the corner, bag maker Balenciaga's space-age emporium, which opened in March, has been bustling.

Down the road on Melrose Place, new boutiques from Ports 1961, Monique Lhullier, and Sergio Rossi attract a celebrity clientele. Catherine Malandrino's Maison Malandrino is prepping an August arrival. Whispers abound that brands such as Lanvin and Chloé want to neighbor up with Marc Jacobs, Marni, and the new Alexander McQueen boutique, which sells $4,000 dresses and $700 gladiator sandals.

But driving the growth is not simply selling clothing and accessories to Los Angeles women, say local real estate and retail insiders.

"The new L.A. luxury retail boom isn't just for locals," says Jay Luchs, a senior vice president specializing in fashion retailers in Los Angeles for CB Richard Ellis. "It's about having a retail fixture in Hollywood—it's about show, and like Hollywood, it's about image."  

Los Angeles—and particularly this neighborhood—offers designers increased exposure to celebrities (and the celebrity media), which can mean improved sales of lower-priced products to the masses, sometimes over the internet rather than in the shops.

"My L.A. shop is a way of infiltrating Middle America," Alexander McQueen admitted at the May opening of his Melrose boutique. "My friend Sarah Jessica Parker told me New York has nothing to do with America—and L.A. effects it quite a lot. So this store is here to help us launch e-commerce in America."

For the last few years, Paris Hilton has been frequently photographed shopping on Robertson—particularly in the Kitson boutique, Luchs points out. Kitson has become a nationally—even globally—known name because of its savvy use of celebrity cachet. Though it has been open since 2000, sales have been so strong in the past few years that the single, small boutique has spun off three additional locations, for men, women, and children, and additional women's locations. "When other brands saw how much product could be moved…they realized the power of built-in paparazzi pull," Luchs says. "Teen shoppers always look at celebrity-fashion sites before they shop online. And everyone sees those pictures eventually."

Most teen shoppers aren't dropping four grand on dresses, but they might spring for sunglasses or sneakers. And in some cases, they're giving clothing cues to their mothers.

A Ferretti spokeswoman confirmed that the label's new 4,500-square-foot superstore will open on Melrose in September or October, and was somewhat precipitated by the appeal of paparazzi photos, which traverse the world via blogs; photo sites like Getty, WireImage, and People.com; and magazines such as Us Weekly. "We've attempted celebrity dressing in New York," she says. "But you're much more likely to get [celebrities] in L.A. If they wear Ferretti more on the red carpet, that will literally translate into sales—and branding."

Bluprint's Jill Chayet notes that "L.A. boutiques serve a multitude of purposes," she explains. Designers use them to show collections to stylists and celebrities, and to do product placements for television and film. "And they can still sell handbags. It's a total win-win."

The new shops also draw tourists from overseas, who find the city even more of a bargain than New York. "Foreign tourists come to L.A. as much as they do New York," says the Ferretti spokeswoman. "But they will probably spend more in L.A. because the hotels and restaurants are less pricey than Manhattan."

The new retail axis is appealing because of its younger, hipper feel and clientele—and the real estate. "They are getting rent breaks—Melrose Place rents are still half of Rodeo, and the street is more architecturally desirable," says Chuck Dembo, owner of Dembo & Associates Real Estate in Los Angeles.

That means brands can afford to be more experimental. Phillip Lim, a Los Angeles native, lined the walls of his 5,000-square-foot space with dagger-edge Styrofoam. "This is the new frontier here," Lim says. "It's the Wild, Wild West. It's not as rigid as New York—it's the new gold rush."