Companies Find Retail Gold In California
Retailers and development companies continue to find areas in California where retail opportunities are golden.
Stephen O’Kane

Throughout the state of California, retail development is still at the top of its game. Whether companies are constructing new mixed-use lifestyle centers or redeveloping existing centers, retail continues to flourish due to the rise in population and the growing economy. These factors are an encouraging sign to retailers and developers just now entering the California market as well as to those companies who are familiar with the ups and downs of developing in such a densely populated, regulated environment. The bottom line? The entire state of California is experiencing the growth needed to keep the retail market alive and well.

SOUTHERN CALIFORNIA

Los Angeles County

Los Angeles County has been seeing massive growth in regards to retail developments. Mixed-use centers are popping up all over the region in response to the population growth, but that is not stopping developers from constructing traditional retail centers as well. “California has a varied demographic that lends to a diverse environment that is active in all strata,” says Robert Montano, business district coordinator for the City of Pasadena. “Such conditions tend to foster greater creativity and demand for a broader base of products.”

The City of Pasadena is right in the middle of this growth and is experiencing its effects. “The Los Angeles region is one of the fastest growing regions for employment in all fields from technology, manufacturing, importing and service,” says Montano. “For this reason Pasadena has recently had a wave of new development delivering approximately 3,000 new high-end downtown condominium and apartment units and is expecting another 2,500 over the next couple of years.” Trizec Hahn developed the retail tract for Paseo Colorado in Downtown Pasadena. Paseo Colorado, which opened approximately 5 years ago, was one of the first developments in the area to cater to the need for retail and residential space and continues to inspire other projects in the area and throughout the state. The center features 560,000 square feet of retail and theaters along with 350 apartment homes above. Major tenants of this large mixed-use center include Macy’s, Cole Hahn, Sephora, Equinox Fitness and P.F. Chang’s China Bistro. The project is now owned by Developers Diversified.

Another large-scale mixed-use development finding its home in Los Angeles County is Atlantic Times Square. Construction began this summer on the $200 million project, which is being developed by Kam Sang Co. As the first mixed-use project in the San Gabriel Valley, Atlantic Times Square depicts the new wave of projects developers are designing to satisfy the need for retail and residential in one place. Located along North Atlantic Boulevard in Monterey Park, the center, which has been inspired by Times Square in New York City, will be anchored by AMC Theaters and will include a mix of national and local businesses.NAI Capital is leasing a mixed-use center in Los Angeles County called Transit Village. The 750,000-square-foot project, which is located in El Monte, will include 450,000 square feet of retail and entertainment, 300,000 square feet of office space, a 200-room hotel and 1,500 apartment and condominium units. NAI Capital plans to include something else in this project as well. The Los Angeles-based real estate services company is working with Caltrans and MTA to incorporate a transit component into Transit Village. “California is the trendsetter and leader in new retail concepts,” says Luis Valenzuela, executive vice president of NAI Capital. “You need to treat every project like it is a political campaign.”

While these mixed-use developments seem to be the new trend when it comes to retail in California, traditional shopping centers are not being ignored. The City of Pasadena is currently seeing two major shopping centers being constructed — 64 West Colorado and 88 West Colorado. CIM Group is developing the 24,000-square-foot 64 West Colorado shopping center in downtown Pasadena. Anchors for the center, which is scheduled to open this year, will include Tiffany & Co., Abercrombie & Fitch, Kenneth Cole, Le Pain Quotidien and Melting Pot. 88 West Colorado, a development of S+R Partners, will span 35,000 square feet in downtown Pasadena. This center, which is scheduled to open this year, will also include Kenneth Cole, Le Pain Quotidien and Melting Pot.

Woodland Hills Village in Woodland Hills spans 70,721 square feet and is currently 100 percent occupied.

Majestic Realty Co. is currently involved with two traditional retail centers in City of Industry, California. One of these projects is Marketplace at Grand Crossing East, a 203,994-square-foot center that includes tenants such as Kohl’s, Bed Bath & Beyond, Pier 1 Imports, Famous Footwear and El Pollo Loco. Marketplace at Grand Crossing East, which is located at the southeast corner of Grand Avenue and Valley Boulevard, is currently open. The second of these projects, which will open next fall, is Marketplace at Grand Crossing West, a 73,000-square-foot retail center located at the southwest corner of Grand Avenue and Valley Boulevard.

Westfield is currently revitalizing two of its centers in Los Angeles County. Westfield Century City in Los Angeles is in the middle of the second phase of renovations on the landmark center. Phase I, which opened in December 2005, included adding an al fresco dining terrace, luxury shops and a flagship AMC movie theatre. Phase II, which will open this year, will replace the former marketplace and movie complex with additional dining and premium shops. The next phase of the plan calls for the removal of two office buildings located at 1801 Avenue of the Stars and 1930 Century Park West to make room for the new retail, parking and a residential condominium tower. Bloomingdale’s, Macy’s, Gelson’s and AMC Theatres currently anchor Westfield Century City.

In Canoga Park, Westfield is in the middle of a large expansion and renovation of Westfield Topanga that will bring 100 new shops, a new Neiman Marcus, Nordstrom and Target anchor stores, as well as three new covered parking structures, new restaurants and a new café-style dining terrace to the center. Most of the renovation and expansion will be complete this fall, while Neiman Marcus will open in 2008.

The Festival Companies also has a presence in the Los Angeles market with two projects under development. With the area growing rapidly, The Festival Companies is recognizing and meeting the needs of the residents. “What we’re finding is that there are a lot of underserved markets all throughout Los Angeles,” says Bryce Ross, acquisitions director for The Festival Companies. “So what we are doing is moving in and acquiring properties to fill that retail void in the marketplace.”

One of The Festival Companies’ projects is Sante Fe Trail Plaza in El Monte. The development will span approximately 225,000 square feet on 25 acres. A department store will anchor the center, which will also include two to three sub-anchors in the range of 20,000 to 30,000 square feet. Also included in the plans is a 15,000-square-foot strip center. Construction is set to begin next year with an expected date of completion in 2008.

The Festival Companies is also working on El Centro Huntington Park in Huntington Park. This retail center will be developed in six phases with the first phase set to begin construction early next year. Phase I will include approximately 20,000 square feet of pad retail and Phase II will include a discount department store. The first phase is scheduled to open late 2007 or early 2008.

In addition to the new retail sites The Festival Companies is developing, it is also taking on a significant redevelopment project — Baldwin Hills Crenshaw Plaza in Los Angeles. The existing 850,000-square-foot regional mall will be redeveloped over the next 2 years. Current tenants include T.J. Maxx and Wal-Mart.

Inland Empire

The Inland Empire is experiencing similar growth to that of Los Angeles County. A few major mixed-use projects are being developed while traditional retail centers continue to be constructed. Fritz Duda Co. is developing TownGate, a 590-acre mixed-use, master-planned community in Moreno Valley that will feature five shopping centers, office space and residential neighborhoods. Currently, three retail centers for the community are under construction — TownGate Crossing Plaza, TownGate Promenade and TownGate Square. The 465,000-square-foot TownGate Crossing Plaza, which will open next spring, will feature tenants such as Lowe’s Home Improvement Warehouse, Circuit City and Boston Pizza. TownGate Promenade, a 140,000-square-foot lifestyle center will be anchored by Costco and two hotels, which are expected to open next summer. Other tenants include Applebee’s, Famous Dave’s BBQ and Red Lobster. TownGate Square will span 206,000 square feet with WinCo Foods, its anchor, expected to open this month. “The future will hold more opportunity for mixed-use development to replace older under-performing shopping areas,” says Barry Foster, economic development director for the City of Moreno Valley.

Ontario, California, is also seeing the mixed-use trend come to fruition. NewMark Merrill is developing The Marketplace on Grove, a project located at the corner of Grove and Philadelphia. The 210,000-square-foot center will be anchored by Lowe’s Home Improvement Warehouse, PFF Bank, Starbucks Coffee, McDonald’s, El Pollo Loco and Panda Express. Also included in the plans for The Marketplace at Grove, which is scheduled to open this November, are 270 residential apartments.

In addition to these large-scale mixed-use developments, numerous lifestyle centers, as well as traditional shopping centers, are being designed and constructed throughout the Inland Empire. One of these is Victoria Gardens in the City of Rancho Cucamonga. The first phase of this retail center opened almost 2 years ago with 70 stores and restaurants, but Victoria Gardens continues to be the subject of expansion. Forest City Enterprises and Lewis Retail built the center in 2004 and have kept up with the demand of the area by adding outdoor seating, water fountains, lush landscaping as well as new tenants. The center even includes Town Square, a gathering place for special events and occasional live music performances.

“The trend for outdoor lifestyle shopping centers is strong, especially in Southern California where weather is not a key factor that needs to be worked into the overall project design,” says Linda Daniels, redevelopment director for the City of Rancho Cucamonga. “There is a strong trend in attracting upscale retail to Victoria Gardens — recent additions include the Apple Store, Banana Republic, Pottery Barn and The Cheesecake Factory.”

NewMark Merrill, in addition to creating The Marketplace on Grove, is developing traditional retail centers as well. The company currently has two underway in the Inland Empire — Upland Town Square in Upland, and Arlington Square in Riverside. Upland Town Square, which is located at the corner of Foothill and San Antonia, will span 109,000 square feet. It was scheduled to open in August. Arlington Square will span 89,000 square feet and include tenants such as Ross Dress For Less and Big Lots. Arlington Square will open in November.

NAI Capital is leasing Toscana Marketplace in Corona. This mixed-use center, which is located at the southeast quadrant of 15 Freeway and Temescal Canyon Road, will span 405,000 square feet and feature a 200-room hotel as well as office condominiums. Tenants have yet to be announced for Toscana Marketplace, which is scheduled to open in 2008.

Poag & McEwen Lifestyle Centers is among the list of retail developers participating in mixed-use projects in the Inland Empire. The Memphis, Tennessee-based company is currently working on The Promenade Shops at Dos Lagos, a 575,000-square-foot retail center that will be part of the master-planned Dos Lagos development in Corona. “There is a continued change towards open-air, lifestyle centers,” says Judi Staats, economic development program manager for the City of Corona. “One of the reasons is the reduction in the number of traditional regional department stores that are doing new deals in the West.  While the luxury stores like Nordstrom, Neiman Marcus and Saks are doing well, there is a reduction in the middle tier and a major rise in the discount department stores like Target, Wal-Mart and Costco,” Staats explains. “All of these stores are outdoor oriented and that’s where the movement is.”

The City of Moreno Valley, which is home to the TownGate master-planned community, is also seeing several lifestyle and traditional retail centers constructed or redeveloped. Majestic Realty Co. is developing Mountain Grove located at the northwest corner of Interstate 10 and Interstate 210 in San Bernardino County. No tenants have been announced for the 738,000-square-foot center, which is expected to open next fall.

Three other major retail centers will be calling Moreno Valley home — Moreno Beach Plaza, Stoneridge Towne Centre and Moreno Marketplace. Pacific Retail Partners is developing Moreno Beach Plaza, a 350,000-square-foot power center that will open in two phases. The first phase, which opened this spring, constructed a 227,000-square-foot Wal-Mart that anchors the center. Phase II will add 85,000 more square feet and will open by next summer. Stoneridge Towne Centre, a 575,000-square-foot lifestyle center, is being developed by Stoneridge Partners. The retail center will open next fall and include tenants such as Kohl’s, Best Buy and OfficeMax. Empire Commercial is leading the development of Moreno Marketplace, which is located at Moreno Beach Drive and Cactus Avenue. The 97,000-square-foot neighborhood shopping center will be anchored by Stater Bros. Market.

Redevelopment and expansion are also playing an important role in the retail market of the Inland Empire. Moreno Valley Mall in Moreno Valley is currently undergoing a 145,000-square-foot expansion that will include a 16-screen Harkins Theatre and Macaroni Grill. General Growth Properties is handling the expansion of Moreno Valley Mall, which, upon completion, will span 1.2 million square feet.General Growth is also expanding the Galleria at Tyler, which is located  in Riverside. The existing 1.1 million-square-foot mall will add another 145,000 square feet of outdoor shopping space to include new tenants such as P.F. Chang’s China Bistro and AMC Theatres. The projected date of opening for the lifestyle expansion is next fall with the AMC Theatre opening in spring 2008. Currently, Galleria at Tyler is anchored by Nordstrom, Macy’s and JC Penney.

A little further along, Donahue Schriber is currently developing Smoke Tree Commons in Palm Springs. This retail center, which will be anchored by Walgreens and Jensen’s, will span 168,000 square feet. Smoke Tree Commons is expected to open next fall.

Orange County

The District at Tustin Lake, which is being developed by Vestar Development Co. and Kimco Realty Co., will span more than 1 million square feet in Tustin.

“The rising value of land, along with intensified competition, has challenged developers to create authentic environments which entice consumers to shop at their centers,” says Steve Ruth, executive vice president of Perkowitz+Ruth Architects. “Even grocery-anchored centers are looking to incorporate a sense of place. Grocery stores are becoming part of larger lifestyle centers, such as the case with The District at Tustin Legacy.”

Euclid Plaza, a 132,000-square-foot shopping center located in Anaheim, is being developed by Investment Real Estate Assoc.

San Diego County

The San Diego metro area is no exception to the retail growth taking place throughout the Golden State. There are numerous retail centers being designed and built in San Diego and the surrounding area, many of which are focused specifically on retail. “San Diego has recently turned into a hot retail market opportunity with the introduction over the last 5 years of thousands of single-family homes,” says Duncan Budinger, vice president of retail development for McMillin Commercial. “Increased population of commuters to suburban areas creates additional retail opportunities. In addition to the new suburban development opportunities, new retail prospects also exist in the urban sectors of populated cities, where the trend is redevelopment of residential and retail.”

Albertson’s anchors The Shops at San Miguel Ranch, a 103,000-square-foot retail center in Chula Vista.

San Diego-based McMillin Commercial is developing three retail centers in the San Diego metro area market. Among these centers is Otay Ranch Eastern Urban Center in Chula Vista. Phase I of this 350,000-square-foot project is scheduled to open in 2009 with tenants that will include mid-box anchors, fashion retail, fine and casual dining, and service retail. Another project McMillin is undertaking in Chula Vista is The Shops at San Miguel Ranch. This retail center will span 103,000 square feet with anchors that include Albertsons, Starbucks Coffee and USA Federal Credit Union. The Shops at San Miguel Ranch will begin to open in October. McMillin Commercial is also developing Liberty Station Retail Districts in San Diego, with tenants that will include home décor, furnishings, hardware, design retail and fine and casual restaurants. The 180,000-square-foot center will begin opening next February.

The Shops at San Miguel Ranch, a 103,000-square-foot retail center, will begin to open this October in Chula Vista.

General Growth Properties is developing Otay Ranch Town Center, an open-air center in San Diego County. The center is anchored by Macy’s and also includes tenants such as Anthropologie, The Cheesecake Factory and P.F. Chang’s China Bistro. Otay Ranch Town Center will open October 27th.

NewMark Merrill is also creating a presence in the San Diego metro market with Mission Marketplace located at the corner of Mission and College in Oceanside. The retail center, which is scheduled to open in November, will span 378,000 square feet and feature tenants such as Henry’s Market, K-Mart, CinemaStar Cinema and Rite-Aid.

NORTHERN CALIFORNIA

San Francisco Bay Area/Sacramento

New retail and lifestyle centers continue to be a natural choice for developers in Northern California. “Like elsewhere across the country, lifestyle centers are very much in vogue in California and there are a large number of them currently in development,” says Lindley Miller, general manager of Retail West. The Streets of Brentwood is a lifestyle project Retail West is currently working on. Located at Route 4 Bypass and Sand Creek Road in Brentwood, the center, which is scheduled for completion next fall, will span approximately 310,000 square feet.  “The lifestyle center in Brentwood has surprised many and shown that trade area to be stronger than expected,” says Miller. Continental Real Estate is developing The Streets of Brentwood.

Another project Retail West is currently undertaking in Northern California is The Fountains at Roseville. This lifestyle development, which is located at Roseville Parkway and Galleria Boulevard in Roseville, will span approximately 500,000 square feet and feature tenants such as Whole Foods Market, West Elm, DSW Shoe Warehouse and Anthropologie. The Fountains at Roseville will also include an office component. It is scheduled to open next fall.

Retail West is not only working on developments in Northern California, but redevelopment as well. The company is currently working on The Forum at Sunnyvale Town Center for Thomas Enterprises, a regional enclosed mall in Sunnyvale that will be redeveloped into an open-air, street front retail center. “Many developments in California require some very creative, very unique ideas,” says Miller. The approximately 1 million-square-foot mall, which features tenants such as Macy’s, Target and Century Theatres, is scheduled to open in spring 2008.

Tallen & Keshen Holdings is also creating a presence in the San Francisco Bay Area with two retail centers that are currently open. Gateway Retail Center, which is located at 100 Donahue St. in Marin City, is a 182,000-square-foot center featuring tenants such as Best Buy, Babies “R” Us, Longs Drugs, Ross Dress For Less and Outback Steakhouse. The company is also responsible for Napa Tahoe Retail Specialty Center located on Business Center Drive in Fairfield. This 40,000-square-foot center, which is 100 percent occupied, features tenants such as Pet Club and Bank of America.

Donahue Schriber will open three new neighborhood centers this year — Green Valley Marketplace, Atwater Marketplace and Colony Plaza. Green Valley Marketplace, which is located at the northeast corner of Green Valley and Francisco Drive in El Dorado Hills, will span 109,000 square feet. This retail center, anchored by Safeway, is expected to open in November. Donahue Schriber is also developing Atwater Marketplace, a 116,000-square-foot retail center located at the northeast corner of Winton Way and Bellevue Road in Atwater. SaveMart will anchor the center, which opens late this year. Colony Plaza, which is located at the southwest corner of Brady and Hoff in Ripon, will be anchored by SaveMart and span 85,000 square feet. It is scheduled to open late this year.

General Growth Properties plans to develop Elk Grove Promenade, an open-air center in Elk Grove, 17 miles southeast of Sacramento. The open-air project will include three anchors, inline shops, a day spa, a theater and a gourmet grocer.

Westfield and Forest City Enterprises will open the largest project in the Bay area this month with the expansion and renovation of San Francisco Centre. San Francisco Centre is a combination of the existing San Francisco Shopping Centre and an expansion that was created by amassing several properties in the area. The project will be anchored by Nordstrom, Bloomingdale’s West Coast flagship and a new state-of-the-art Century Theatres multi-screen cinema.

Fresno Metro Area

Regency Centers and San Diego-based Cahan Properties are currently developing Clovis Commons, a 347,825-square-foot lifestyle center in Clovis.

Land Value Management is leading the expansion of Sierra Vista Mall in Clovis, which will add 90,000 square feet to the existing 150,000-square-foot mall.

American Assets is also involved in redevelopment with Del Monte Shopping Center in Monterey. The 675,000-square-foot project will complete its first phase next spring. Major tenants include Macy’s, Whole Foods Market and Century Theatres.

Del Monte Shopping Center in Monterey will complete its first phase next spring.

“To be successful in California, you need to have as much of an appreciation for the opportunities as you do for the challenges,” says Chris Sullivan, vice president of retail leasing for San Diego-based American Assets. “California is a complex state to do business in; there are incredible opportunities that come from a state that has one of the strongest economies in the world, ever-increasing population, strong tourism spending, and solid income of residents. However, the rewards can be tempered by the construction constraints, regulatory requirements, infrastructure challenges and overall high cost of doing business.”

“Tremendous population growth is the life blood for retail expansion and California is leading the charge in these departments,” says Majestic Realty’s Dereck Andrade. “We expect to see this trend begin to slow but still remain strong in relative terms. Many of the nation’s biggest and strongest retail chains successfully operate throughout the state and developers are able to secure the requisite pre-leasing levels for new projects as these retailers expand.”