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If we were to make a list of streets in Madrid to avoid, that street would be on top of the list. Every month it appears on TV in the continuing fight of merchants and people who live on it to clean their street of these unsavory characters.
We found ourselves in calle Montera one summer evening about 9 when we were walking from the Puerta del Sol to the FresCo restaurant on calle de Caballero de Gracia. I was a little surprised to see Latin American women in short skirts standing in some doorways as I know this isn't "normal" for Spain , but our 16 and 17 year old girls didn't seem to notice anything out of the ordinary. Maybe because we're from LA where Latin American women in short skirts are not usually prostitutes, and are common sights.
There were plenty of other people in the street, and there were some police strolling too, so I didn't feel threatened. I don't think anyone needs to make a special effort to avoid this street or any other in this shopping district in central Madrid. Then the girls can get pretty aggressive. Most of these women are from eastern european countries.
It's seedy but it has character. It depends on your style of tourism. I like to see the good and the bad. I stayed on this street during a University trip back in I was 21 at the time, sharing a room at The Metropole with three fellow students. To be completely honest, this street appeared more or less the same as any other street in Madrid. Only slight difference was a couple of sex shops and subversive music stores located there The prostitutes only made an appearence during the evening.
They hung out across the road opposite the Metropole. My group and I walked passed them every night as we made our way into the city to get drunk. One night, returning to the hotel drunk and tired, we saw a prostitute using body language to get our attention. She was basically saying, "Do you fancy a good time? We signalled back "No thank you". Situations like that never have never bothered me because at the end of the day, prostitutes are human beings and if you reject their communication in a polite way they are usually polite in return.