Golden Opportunity In The Golden State
Retailers and developers are continuing to expand in California's growing markets.
Randall Shearin and Jennifer Orr

With California at the top of most retailers' must be lists, retail developers are scrambling to create centers in many areas of the state. Two types of projects stand out: infill projects in established, underserved areas, and new centers for growing areas serving young families. In the Inland Empire and Central Valley, new grocery-anchored centers and community centers are springing up everywhere due to the areas' growth. In areas like Los Angeles and San Francisco, infill is the name of the game. Infill projects are finding pockets of underserved populations and servicing them with retail developments of all sizes.

Northern California

Northern California continues to rebound from the dot-com bust and now boasts a healthy and dynamic retail market. “Everybody looked at the Bay Area and said, ‘Oohh the tech boom, you guys really got hit,'” says Bruce Johnston, vice president of leasing at Santa Monica-based The Macerich Company. “Well we did, but we were never a single employer market. We've always had a diverse economy. We did have some ups and downs, but not nearly to the degree experienced in other markets around the country. The market is really in pretty good shape.”

San Francisco Bay Area

Westfield and Forest City are expanding San Francisco Centre. The project will attract tourists and locals alike when it opens in fall 2006.

One of the other large projects being developed in the area is The Shops at Tanforan, a redevelopment of the Tanforan Park shopping center in San Bruno, just south of San Francisco. Newport Beach-based Wattson Breevast is the developer of the project, while General Growth Properties is handling the leasing and management. The 1.1 million-square-foot center will be anchored by Sears, JC Penney and Target, and will contain tenants Barnes & Noble, Victoria's Secret, Charlotte Russe, Hot Topic and American Eagle when it opens early next month.

The Shops at Tanforan will open next month south of San Francisco in San Bruno. The 1.1 million-square-foot center will be anchored by Sears, JC Penney and Target, and will contain tenants Barnes & Noble, Victoria's Secret, Charlotte Russe, Hot Topic and American Eagle when it opens early next month.

Just across the Bay Bridge from San Francisco, a fund managed by BlackRock Realty Advisors has acquired a two-thirds stake in Bay Street Emeryville. The 1 million-square-foot center is managed by Madison Marquette and its 400,000-square-foot retail component is anchored by AMC Theatres, more than 65 retailers and nine shops. Retailers at the center include Coach, Apple, Abercrombie & Fitch, Williams-Sonoma, Pottery Barn, Pasta Pomodoro and P.F. Chang's China Bistro. Madison Marquette has plans to add another 30,000 square feet of retail to the center.

One of Westfield's most successful redevelopments to date, Westfield Shoppingtown Oakridge, has been open for nearly 2 years in San Jose. Target was added to the center in October 2004. The renovation of the center, which featured an open-air development, included a 20-screen Century Theatres complex, five restaurants, and remodeled Sears and Macy's department stores.

One of Westfield's most successful redevelopments to date was its redevelopment of Westfield Shoppingtown Oakridge in San Jose.

Across from Westfield Shoppingtown Oakridge sits Federal Realty's Santana Row, which continues to be an attraction to locals and visitors alike.

In San Jose, CIM Group is developing a mixed-use project at Second and Santa Clarita streets, which will feature the Lucky Strike Lanes bowling concept and a residential component. Opening is scheduled for mid 2006. Nearby, the company is also planning another mixed-use development, called Block Three, which will include 335 condominiums over 68,000 square feet of ground-floor retail.

In Sunnyvale, Forum Development Group is planning to develop The Forum Sunnyvale at Mathilda and Washington avenues. The center is a redevelopment of Sunnyvale Town Center and will contain 950,000 square feet of retail and dining space, nearly 300 housing units and 275,000 square feet of office space when it reopens in 2007. The retail portion of the project will be anchored by the center's existing Macy's and Target, while a Century Theatres cinema will be added.

In Marin County, Macerich is renovating The Village at Corte Madera, its 428,000-square-foot center. Completion of the remodel is scheduled for December. Pankow Special Projects, L.P. is handling the construction for Macerich, while Patri Merker Architects is the architect for the renovation.

In Brentwood, Continental Retail Development is developing The Streets of Brentwood, a 515,000-square-foot lifestyle center at the corner of Highway 4 and Sandy Creek Road. The center will include specialty retail, a multiplex cinema, a grocery store, a bookstore and several restaurants. Columbus, Ohio-based Continental will break ground on the project in fall 2006 and plans to open the center in fall 2007. Retail West is handling the leasing for the project.

In Silicon Valley, Equity Office's The PruneYard has completed a 2-year, $2 million renovation. The mixed-use property contains outdoor shopping, dining, entertainment and an upscale hotel. Barnes & Noble, Camera 7 Cinemas, Marshalls and Trader Joe's anchor the retail portion of the project, which is located along Campbell and South Bascom avenues in Campbell.

The Macerich Company is involved in redeveloping a couple of projects in Northern California, including The Mall at Northgate in San Rafael. Plans call for tearing off the mall's roof, and remerchandising and remarketing the center for a younger consumer, says Johnston. With anchors that currently include Macy's, Mervyns and Sears, The Macerich Company is considering attracting retailers serving moderate price points. Construction is scheduled to begin in 2007 on the 742,000-square-foot mall.  

In Albany, Caruso Affiliated is currently planning Golden Gate Fields, a mixed-use development that will combine residential, dining, entertainment and retail next to the Golden Gate Fields race track. The 450,000-square-foot center will open in spring 2009.

In Antioch, The Macerich Company is considering adding a 50,000-square-foot lifestyle village to Somersville Towne Center. In 2004, the company added Macy's to the project, which also includes anchors Gottschalks, Mervyns and Sears. “That continues to be an area in the Bay Area with a tremendous amount of growth, and because of that growth, there are better customers in that market then there ever have been, so we're looking to accommodate those customers,” says Macerich's Johnston. The lifestyle village is scheduled to open in 2006.

The growth in the Bay Area has not only spilled into areas like Antioch, but also even further into the central valley. Markets like Modesto, Tracy and Stockton are benefiting from the population growth and high housing costs in the San Francisco Bay Area. “If you would have told me 10 years ago that somebody would have driven from Modesto to San Jose to go to work, I would have said you were nuts,” continues Johnston. “But we know that's happening every day now.”

Central Valley

The Macerich Company is adding another lifestyle village to Fashion Fair, its 880,000-square-foot mall in Fresno.

A lifestyle village is also in the works for Vintage Faire Mall in Modesto. The 1.2-million-square-foot mall is anchored by Sears, Macy's, Gottschalks and JC   Penney. Macerich's Johnston says the addition could be as large as 65,000 square feet, with an opening planned for fall 2006.

Macerich plans to add a lifestyle village to its Vintage Faire Mall in Modesto.

Donahue Schriber has three centers under development in the Sacramento/Central Valley area. In Sacramento, Donahue Schriber is developing Laguna Reserve Marketplace, a 90,000-square-foot neighborhood center in Elk Grove. Opening this fall, the center will be anchored by Safeway. In Lathrop, Donahue Schriber is developing Lathrop Crossroads, a 91,000-square-foot neighborhood center anchored by SaveMart, that will open this fall. In Fresno, Donahue Schriber is developing Herndon Place, a 95,000-square-foot neighborhood center anchored by SaveMart that will open this fall.

Monterey Peninsula

The Monterey Peninsula, an area that has typically been characterized as a slow-growth area, is experiencing some new activity. “The biggest development taking place is the University Village in Marina,” says Bill Grimm, executive vice president, Cannery Row Company. Developed by Marina Community Partners, the 650,000-square-foot retail center will be anchored by Target, Michaels and Bed Bath & Beyond, and will also include two hotels. “University Village will really be quite a nice addition to the overall peninsula from a retail perspective,” says Grimm.

In Monterey, Willy's Smokehouse Bar & Grill will open an 18,000-square-foot venue at Cannery Row by year's end. In addition, construction on a new Westin hotel will commence in November. Cannery Row Company will be leasing the 20,000 square feet of retail included with the hotel and is targeting upscale retailers for the space, says Grimm.

Also, at Cannery Row, the American Tin Cannery is undergoing a transition. The 140,000-square-foot outlet center is receiving a facelift, with new paint, signage, landscaping and lighting. In addition to continuing to attract value retailers, Cannery Row is also adding a wellness element to the outlet center. Aquatic Fitness opened its third U.S. store at American Tin Cannery at summer's end, and Gold's Gym is expected to open a 7,000-square-foot facility. Grimm says Cannery Row is also currently in negotiations with IMAX and Gordon Biersch to open venues there.

In neighboring Carmel-by-the-Sea, The Macerich Company is renovating Carmel Plaza to be more pedestrian friendly. Plans include new roof details, lighting and landscaping. Tiffany & Co. has opened as Carmel Plaza's new anchor; additional new tenants include Sur La Table, J. Jill and Coldwater Creek. Remodeling will be complete by year's end.

SOUTHERN CALIFORNIA

The population growth in Southern California shows no signs of slowing, which bodes well for retail development — if you can find the land, that is. “The barriers to entry to develop in Southern California — zoning wise and just being able to find property — is such that there continues to be a shortage of retail,” says Cliff Goldstein, senior partner, the J.H. Snyder Company. “And if you are patient and successful in being able to assemble large enough properties and navigate the entitlement process, there's still almost unlimited opportunity in developing retail projects here.”

Ventura County

Many retailers are finding opportunities in areas like Ventura County. “More people are moving here and we're seeing that next level of retail come into our market, such as restaurants,” says Linda Hagelis, senior vice president of retail properties in Colliers Seeley International's Ventura County office.   She says that in Westlake and in Simi Valley, she ran out of space for interested tenants. “I have more restaurants than I can place, which is a good problem to have.”

“With migration from Santa Barbara and Los Angeles, the higher-income population has moved here,” says Bill Hagelis, also senior vice president of retail properties for Colliers Seeley, Ventura County. “The homes are expensive and incomes have increased way beyond the demographic estimates. That's why the high-end retailers are now attracted to this region.”

Forest City and Corti Gilchrist are preparing to open Simi Valley Town Center on October 27th.

Specialty retailers such as White House/Black Market, Kalologie Skin Care and Brighton Collectibles opened in August at The Lakes in Thousands Oaks. Developed by Caruso Affiliated, this 50,000-square-foot development also includes restaurants P.F. Chang's China Bistro, Claim Jumper and Sushi Ko.

In Oxnard, Shea RiverPark Properties is planning to develop RiverPark, a master-planned community that will include 2,800 housing units, pools, parks and 1 million square feet of retail to be leased by Colliers Seeley. The retail portion is slated to open in early 2007.

Colliers Seeley is also handling the leasing for Town Center at Westlake Village, which will open next door to Westlake Village's new Four Seasons Hotel and Wellness Center. Developers Charles Rotkin and Joseph Kornwasser plan to open the 300,000-square-foot retail center in early 2007.

The east end of the Santa Clarita Valley is also underserved as more and more people move into the area, says Jeff Sterk, executive vice president, GMS Realty. His company is developing Golden Valley Ranch Shopping Center in Santa Clarita. The 615,000-square-foot center is scheduled to open in fall 2006 with anchors Target, Kohl's and Lowe's.

Los Angeles County

Retail activity still abounds in Los Angeles County, with downtown being a particular hotspot, says Jeff Kreshek, principal-leasing at CIM Group. “We probably have more people watching downtown Los Angeles and evaluating that now than in the last 25 years combined,” he says. “There are so many dynamics going on. Everything from critical mass of investment to developers building projects, coupled with demand for housing, scarcity of land and traffic patterns. It just makes downtown Los Angeles an ideal central hub.”

Kreshek reports that downtown will receive its first full-service supermarket in 87 years, when Ralphs opens at CIM Group's The Market at Ninth and Flower in early 2007. The first two phases of the project will include 600 residential units and 75,000 square feet of retail, with additional tenants including The Coffee Bean & Tea Leaf, Cold Stone Creamery and Quiznos.

One of the most talked about projects in Los Angeles is the anticipated redevelopment of Westfield Shoppingtown Century City. Westfield is investing $137 million in the center, which sits along Santa Monica Boulevard in Los Angeles. Westfield is following its Hy-Style program for the center, combining traditional fashion retailing with innovative elements like entertainment and lifestyle retail. Included in the renovation are a remodeled Gelson's The Super Market, a new level of retail, an al fresco dining terrace, and an AMC Century 15 Theatres will all open during the fourth quarter of 2005. The former AMC theatre at the site will be converted into new retail space, which will open during 2006. The center is expected to attract 15 million shoppers annually.

At Hollywood and Vine, Legacy Partners is developing a mixed-use project containing retail, multifamily and a hotel. Scheduled for completion in 2007 and designed by MVE & Partners and HKS Architects, the Hollywood & Vine project will contain 65,000 square feet of retail, 350 apartments, 140 condominiums and a 300-room hotel. The project will also incorporate an existing MTA station into its design.

In Hollywood, CIM Group is redeveloping the former Hollywood Galaxy at 7021 Hollywood Boulevard. The company is replacing the movie theaters with LA Fitness and Longs Drugs. The company continues to reposition Hollywood and Highland, a 387,000-square-foot retail and entertainment center featuring Kodak Theater and the Renaissance Hollywood Hotel. The company is adding escalators at the street level, changing the storefronts and — moving away from a 100-percent tourism-based retail focus — bringing in more local-service tenants.

In North Hollywood, the J.H. Snyder Company is developing a mixed-use project at the Red Line subway station called Noho Commons. The project's first two phases will feature more than 700 residential units and 60,000 square feet of retail, with a third phase that could include office, residential and more retail. In total, the venture will span 1 million square feet. Noho Commons will open next summer with Hows Markets, The Coffee Bean & Tea Leaf and Cold Stone Creamery.

J.H. Snyder is also planning a 1 million-square-foot center for Sun Valley. Construction will begin in early 2007 on Sun Valley Plaza, which will be anchored by a department store and a movie theater. And in South Los Angeles, J.H. Snyder will develop Adams La Brea, a 250,000-square-foot urban infill retail project anchored by Costco, with full-service restaurants and a boutique supermarket. The project will also include approximately 120 residential units.

By year's end, J.H. Snyder will have opened Bella Terra, a renovation of Southern California's oldest mall in Huntington Beach. The 780,000-square-foot open-air lifestyle center will include Circuit City, REI, Cost Plus World Market and Kohl's.

In Arcadia, Westfield has incorporated its Hy-style program into Westfield Shoppingtown Santa Anita in a $113 million renovation that opened last October. An open-air portion of the center opened, incorporating al fresco dining, entertainment, value and lifestyle tenants into the center. The 250,000-square-foot expansion included a 16-screen AMC Theatre complex, 30 new specialty stores and the first Los Angeles County location of Dave & Buster's. New retailers joining the center included Sport Chalet, Borders Books & Music, Wood Ranch BBQ & Grill, Bacchus Wine & Champagne Bistro and McGrath's Fish House.

The $300 million redevelopment of Westfield Shoppingtown Topanga will add Neiman Marcus, Nordstrom and Target to the center.

In Long Beach, Combined Properties is developing a mixed-use transit-oriented project with 550,000 square feet. American Marketplace will contain 450 condominium units and 60,000 square feet of ground floor retail on 10.7 acres on the southwest corner of Anaheim Street and Long Beach Boulevard. In addition, Combined has several infill projects underway in Los Angeles County, including Venice and three in West Hollywood.

In Carson, Hopkins Real Estate Group is renovating SouthBay Pavilion, a 30-year-old IKEA, JC Penney and Sears-anchored center just off the 405 Freeway. Target has signed on to anchor the center, and new leases at the renovated center include 24 Hour Fitness, Chili's and Washington Mutual. A new image, dynamic architecture, new graphics and new retailers and restaurants will be part of the center's renovation. Target will open next month, while the balance of the project will open in spring 2006.

In Whittier, Hopkins Real Estate Group and Lennar Partners are demalling the former Whittwood Mall into Whittwood Town Center. The 793,000-square-foot project will be anchored by Target, JC Penney, Mervyn's, Sears and Vons. The 65-acre village setting will be home to not only retail, but 150 townhomes that are being developed.

In Chatsworth, Combined Properties is redeveloping Chatsworth Shopping Center at the corner of Devonshire Street and Canoga Avenue. The company acquired the property in April.

Adler Realty Investments is developing a furniture retail complex in Agoura Hills that will open in summer 2006. The 130,000-square-foot project is located off the 101 Freeway between Kanan and Chesebro Roads. Tenants for the project include Ethan Allen, Lane Home Furnishings, Drexel Heritage, Stickley and Treasures. May Realty Advisors handled the marketing of the project.

Caruso Affiliated is planning a 200,000-square-foot retail center for Playa Vista, a master-planned community in West Los Angeles. The Village at Playa Vista will also include 175 apartments and is slated to open in 2008. The company has also just begun construction on The Americana at Brand in Glendale, Caruso's first mixed-use development that will feature a residential component in addition to 475,000 square feet of retail, restaurants and entertainment. “The project will be modeled somewhat after The Grove,” says Todd Russell, senior vice president, retail leasing at Caruso Affiliated, “but the architecture will differ as well as the retail mix.”

Caruso is also developing The Shops at Santa Anita adjacent to the Los Angeles County Arboretum & Botanic Garden and the city's race track, Santa Anita Park. The 800,000-square-foot project will feature a lake, created by Caruso, and the Santa Anita Yacht Club. Opening is scheduled for fall 2008. And in November, the company will open its renovated 140,000-square-foot Marina Waterside in Marina Del Ray.

The Festival Companies is redeveloping Baldwin Hills Crenshaw Plaza in Los Angeles. The 850,000-square-foot mall includes the country's only 3-story Wal-Mart and the first Magic Johnson Theatre, says Mark Schurgin, president of The Festival Companies. Macy's will join Sears at the mall, replacing Robinsons-May as an anchor.

The Festival Companies is involved in numerous projects in the Los Angeles area. In Huntington Park, the company is working on El Centro, a 600,000-square-foot redevelopment project scheduled for opening in first quarter 2007. In San Gabriel, the company is developing a 6-acre mixed-use project that will feature 80,000 square feet of retail. Opening is scheduled for first quarter 2007. Santa Fe Trail Plaza is also scheduled for a 2007 opening in El Monte. The Festival Companies is adding four mid-box retailers to the Edwards Cinema already located there. The retail at that project will encompass 250,000 square feet.

CIM Group is developing several parcels in downtown Anaheim. The projects will all be mixed-use, with residential over convenience and service retail. The retail portion of the project will total 40,000 square feet.

Inland Empire

The Inland Empire is one of the strongest retail climates in the nation right now, according to Marcus & Millichap's 2005 National Retail Report. Population in the area is expected to grow by 100,000 people this year. The median price for retail properties in the Riverside-San Bernardino market has risen 15 percent since 2004, according to Marcus & Millichap, to $87 per square foot.

One of the markets leading the way in the Inland Empire is the city of Ontario, which has a number of retail projects under way. J.H. Snyder is developing the Downtown Civic Center, which is expected to revitalize the city's core community while invest in the area's growth. The $200 million redevelopment project will encompass a 12-block area and will include 750 housing units, 200,000 square feet of office space and academic space. The design, by the Jerde Partnership, will incorporate the existing City Hall, a new senior center and the city's public library.

Panattoni Development Company is developing Piemonte at Ontario Center in Ontario, a mixed-use project that will include 350,000 square feet of retail and restaurant space.

Ontario Mills, owned and operated by Arlington, Virginia-based Mills Corporation, continues to be a strong property for the region. The center is currently 99 percent leased. Recent additions include Disney Outlet, Lego Factory Outlet and Against All Odds.

Ontario city officials have committed to 1.6 million square feet of retail development that is underway and in planning in the city, making it one of the most active areas in Southern California.

“More than 10 million square feet of retail projects is either under development or in the planning stages throughout San Bernardino and Riverside counties,” says Brad Umansky, vice president in Sperry Van Ness's Ontario office. “Almost no space is sitting vacant that isn't leaseable. And that's different from 5 or 7 years ago, where you could have had space that you could have given away for free and somebody may still not have taken it.”

Umansky says that grocery-anchored centers dominate the retail activity in the Inland Empire. Lewis Retail Centers is developing a number of such centers throughout the area, including Sierra Lakes Village in Fontana. Ralphs and Walgreens will anchor this 112,000-square-foot center that will open in 2006. Lewis Retail Centers will also open another Walgreens-anchored center in Mira Loma: The Marketplace at the Enclave will open in 2006 with 104,000 square feet of retail. And in Ontario, Lewis Retail Centers is planning another grocery- and drugstore-anchored center, Parkside Plaza, which is scheduled to open in 2007 with 116,000 square feet.

In Riverside, Los Angeles-based Litchfield Advisors has announced the addition of three new tenants at its 500,000-square-foot Riverside Plaza. The new tenants include Borders Books & Music, California Pizza Kitchen and Panera Bread. Other tenants at the center include Regal Cinemas, Gottschalks, Trader Joe's, Vons Grocery, Sav-On and Islands Restaurant.

Hopkins Real Estate Group has acquired 40 acres in Mira Loma to develop a 360,000-square-foot community center.

Construction has begun on Foothill Village along Foothill Boulevard in Fontana. The 30,000-square-foot convenience center will be tenanted by service retail. Etiwanda Development is the developer, while Irvine-based REP Commercial is handling the leasing. In Foothill Ranch, Combined Properties has begun a $17 million redevelopment of its Foothill Town Center. The property is currently a shuttered 104,000-square-foot HomeBase store that's been redesigned to be tenanted by Sports Chalet, Babies “R” Us, Off Broadway Shoes and Red Robin. In La Verne, Combined is redeveloping its Commons at La Verne center. The 106,000-square-foot center will be redeveloped and expanded to 130,000 square feet and anchored by Vons.

In Murrieta, Combined has acquired 10 acres at the corner of Scott and Antelope Roads to develop a 96,000-square-foot grocery-anchored neighborhood center which will open in the fourth quarter of 2006. Also in Murrieta, Faris Lee Investments recently brokered the sale of an 89,079-square-foot portion of Winchester Springs, a 110,000-square-foot grocery-anchored center. San Francisco-based Krausz Companies sold the property to St. Louis-based Wolff Properties. Built in 2004, the center is anchored by Albertsons. GMS Realty will start construction on the second phase of Murrieta Plaza in the city in early 2006. GMS will add 160,000 square feet to the center anchored by Sam's Club and Walgreens. When complete, Murrieta Plaza will total 375,000 square feet.

In nearby Sun City, a joint venture of Hopkins Real Estate Group and Rockwood Capital has acquired 27 acres on which it plans to develop Menifee Valley Crossroads, a 270,000-square-foot community center anchored by a home improvement retailer, supermarket, fitness club and other tenants.

Forest City's Victoria Gardens in Rancho Cucamonga has gained a popular following in the area since opening.

DBN Development plans to develop San Jacinto Esplanade in San Jacinto. The $20 million project will be anchored by a 45,000-square-foot supermarket and will also include a Walgreens, gas station, restaurant and quick service food retailers. Leasing is being handled by the Newport Beach office of Grubb & Ellis.

ORANGE COUNTY

Vestar is developing The District at Tustin Legacy in Orange County. The more than 1 million-square-foot center will include destination shopping, dining and entertainment uses.

In La Habra, Hopkins Real Estate Group has acquired a 17-acre center that it will redevelop into a 220,000-square-foot community center. Imperial Promenade is an infill center that will be a joint venture between Hopkins and Arnel Capital Partners.

SAN DIEGO

General Growth plans to build an 867,000-square-foot lifestyle center called Otay Ranch Town Center near San Diego.

In El Centro, Chattanooga, Tennessee-based CBL & Associates and Dallas-based The MGHerring Group opened Imperial Valley Mall in March. Anchored by Sears, JC Penney and Robinsons-May, the center is 750,000 square feet and one of the few regional malls to open this year.