COVER STORY, OCTOBER 2004

CALIFORNIA TEEMING
Retail activity abounds in the Golden State.
Katie Foxworth

Each year, California leads the nation in new and innovative retail development. How does the Golden State do it? For one, there’s the near-perfect climate of Southern California, where the sun seems to always shine against a vast expanse of blue sky. Such prime conditions naturally encourage the development of open-air shopping centers — a trend that was arguably conceived and perfected in California. Northern California has the natural beauty inherent to its region, with an attractive coastline still brimming with development potential. Everywhere across the vast state — whether it’s the beach, a dry desert valley or lush forests — residents are flocking to California in record numbers. The retail needed to meet such accelerating demand cannot be built fast enough. California truly is a golden opportunity for developers and retailers alike.

Arthur Pearlman Corp. and Rancon Real Estate are developing Village Walk in Murrieta, California. KKE Architects is designing the center, which opens in October 2005.

“Retailers love California,” says Bernard J. Haddigan, national director of Encino, California-based Marcus & Millichap’s National Retail Group. “California’s demographics and high level of consumer spending represent a jackpot for successful retailers. From a development standpoint, there is strong incentive to build in order to meet growing consumer demand. Plus, keep in mind that California has not seen a tremendous amount of development over the past 15 years; it was the boom of the 1980s when the state last saw a great deal of new retail construction. So, to a certain extent, there is pent-up demand that is being addressed.”

Much of that demand is being satisfied in the form of mixed-use projects that offer something for everyone. Randall Lewis, executive vice president of Upland, California-based Lewis Retail Centers, notes the increased popularity of mixed-use projects. “They’re attractive to residents who enjoy having the vibrancy and convenience of a nearby retail center,” Lewis says. “And they’re attractive to retailers because they provide a built-in population from which to draw customers.”

Lewis Retail Centers is involved with several new projects statewide, including Phase I of Eastvale Gateway, an 801,000-square-foot community retail center in Mira Loma (Riverside County). Lewis Retail has also teamed up with Forest City to open the highly anticipated 1.3 million-square-foot Victoria Gardens Mall in Rancho Cucamonga this month. Beginning in summer 2005, Lewis Retail will open two new centers in North Fontana: the 112,000-square-foot Sierra Lakes Village and the 170,000-square-foot Sierra Lakes West. In 2006, Lewis Retail will open, as part of a joint venture, The Murrieta Triangle, a 511,000-square-foot mixed-use center in Murrieta.

Mark Whitfield, executive vice president of development with Donahue Schriber, adds that retailers are attracted to many of the same things developers are: sustained growth, resilient economy, historic homebuilding pace, increased consumer spending and ethnicity shifts — all of which California offers in record numbers.

In Temecula, California, Donahue Schriber recently opened Plaza at Silverhawk, a 91,000-square-foot neighborhood center anchored by Vons and Walgreens.

“Yet California looks at development with a cautious eye, which results in fewer opportunities and more sensible alignment of consumer demand,” Whitfield says. “In Northern California, San Diego and in parts of Southern California, there are clearly barriers to entry in effect.”

O&S Holdings’ Austin Bettar, Jr. also has noticed the high barriers to entry and the numerous government-imposed hurdles to get entitlements, but he adds that locating in California is worth it. “When you have over 35 million people, which is one out of every eight people in the United States, coupled with a highly educated work force and strong economic base, retailers are in the California market looking for new, high-traffic locations,” he says. “I’ve heard it said that if California was a country, its economy would be one of the world’s largest.”

“Because of our entitlement process and the sheer cost of coming to California, I believe this acts as a barrier to entry,” says Bob Bahen, president and CEO of Alamo, California-based Transcan Development, LLC. “But, the good news is that once you have an entitled piece of property or project in California and it is well located, it is certainly worth every tenant’s effort to get on the site.”

Sandy Sigal, CEO and co-founder of Woodland Hills, California-based NewMark Merrill Companies, also understands California’s unique entitlement situation and points out the added difficulty often posed by the state’s Environmental Impact Reports (EIRs). But all the positives outweigh the negatives in his mind.

“California has always provided a strong environment for retailers,” Sigal says. “For starters, there is obviously strong population growth and the influx of the Hispanic shopper. In addition, because the major cities are so big and spread out, and without any formal central business district, retailers need to cover a much wider area. Finally, due to our weather, outdoor shopping is much more of a year-round phenomenon, which leads to higher sales for outdoor [centers].”

Stuart Tanz, president and CEO of Vista, California-based Pan Pacific Properties, says not only are retailers attracted by great demographics, high barriers to entry and historically strong retail sales, in the grocery-anchored sector, the operating costs in high-growth markets in California are often considerably less as a percent of occupancy costs. Pan Pacific has projects all over the Los Angeles area: Tustin Heights in Tustin, Heritage Park in Suisun City, Gordon Ranch in Chino Hills, Skypark Plaza in Chico, Anaheim Plaza in Anaheim, and North County Plaza in Carlsbad.

De-malling traditional enclosed malls into open-air centers is also popular in California. “Shoppers are now showing that they prefer an open-air center,” says Jennifer Gordon, vice president of marketing and tourism with Los Angeles-based Caruso Affiliated Holdings. “People are tired of regional enclosed malls that are all the same in design and generally non-descript. An open-air center is refreshing and works well in California’s warm climate.”

Caruso Affiliated is involved with several new projects statewide, including Golden Gate Fields, a 555,000-square-foot center opening in Albany in spring 2008; Marina Waterside, a 13,000-square-foot center hosting its grand reopening in Marina Del Rey in July 2005; and Playa Vista, a 225,000-square-foot center opening in Playa Vista in fall 2007.

SOUTHERN CALIFORNIA

Inland Empire

“Southern California in general is one of the hottest markets in the country,” says Marcus & Millichap’s Haddigan. “The Inland Empire is booming as far as population and job growth.”

Bettar of O&S Holdings agrees. “Without a doubt, the Inland Empire is at the top of the list for long term population growth and development potential in California,” he says. O&S Holdings will open Foothill Crossing this month in Rancho Cucamonga, a key Inland Empire town, directly opposite Forest City and Lewis Retail’s new Victoria Gardens super-regional mall, which also opens this month. The 315,000-square-foot Foothill Crossing is anchored by Sears Grand, CompUSA, Red Robin and Joe’s Crab Shack.

Marcus & Millichap forecasts 4.3 million square feet of new retail development in the Inland Empire market during 2004, according to Haddigan. The new development, however, is expected to be met with a decline in vacancy to 4.7 percent as most new properties are coming online pre-leased. Haddigan adds that San Diego, especially North County, is also experiencing strong growth. “We expect retail sales to grow by 4.4 percent in San Diego this year as employment growth is expected to reach approximately 30,000 new jobs,” he says. “Orange County is also a strong market that has a sub-4 percent vacancy rate and strong consumer spending.”

Rancho Cucamonga remains a driving force for Inland Empire retail. In addition to O&S Holdings’ Foothill Crossing, the aforementioned Victoria Gardens will span 1.3 million square feet and be anchored by Robinsons-May, Macy’s, JC Penney, and AMC Theatres when it opens this month.

“The Inland Empire up until very recently was highly underrated, but the prediction of it becoming the ‘new’ Orange County is fast becoming a reality,” says Brian M. Jones, president of Los Angeles-based Forest City West, an affiliate of Cleveland-based Forest City Enterprises, Inc. “Victoria Gardens is situated in the heart of the Inland Empire and is perfectly situated to serve the enormous, pent-up retail demand. It doesn’t get any hotter than the Inland Empire, both demographically and numerically as measured in new homes built. It is one of the fastest growing areas in the United States today.”

Victoria Gardens and Foothill Crossing are not the only exciting retail developments opening this month in Rancho Cucamonga. Nearby, Regency Commercial will open Victoria Gateway, a 115,000-square-foot center anchored by REI, Circuit City and The Men’s Wearhouse, according to Jan Reynolds, redevelopment analyst with the City of Rancho Cucamonga.

In Fontana, Ontario, California-based Empire Commercial Real Estate is underway on Sierra Crossroads, a 100,000-square-foot Stater Brothers-anchored center on 7 acres. Designed by Nadel Architects, Inc., the project is expected to open in March 2005. In North Fontana, Empire Commercial is also busy with a proposed 100,000-square-foot grocery-anchored center adjacent to an 800-unit planned residential development. Anticipated groundbreaking is summer 2005, with a grand opening expected for spring 2006.

“New retail markets follow the construction of housing,” says Jim Brooks, president of Empire Commercial Real Estate. “The Inland region of Southern California — which will double in population during the next couple of decades — is a great opportunity for retail development and one of the real bright spots in the industry nationally.”

In the relatively young suburban town of Chino Hills, much of the new retail activity centers around open-air lifestyle centers, entertainment mixed-use centers and grocery-anchored centers. The city has no downtown, but its demographics and central location (abutting Orange, Los Angeles and Riverside counties) are attractive to retailers and developers, according to Henry Noh, associate planner with the City of Chino Hills.

“The city is the third safest in the state of California, with populations over 50,000,” Noh says. “In 1999, the Meyers Group found the City of Chino Hills to be the ‘Most Livable City’ in the Inland Empire. In January 2004, Money magazine ranked Chino Hills eighth on the list of ‘Best Places to Live’ in the Western United States, with populations less than 100,000 residents.” Noh adds that Chino Hills boasted a median household income of $86,443 in 2002, and the median new home price in third quarter 2003 was $511,000.

Some of Chino Hills’ newest retail projects on the drawing board include Opus West Corp.’s plan for The Shoppes at Chino Hills, a mixed-use development to be located at Grand Avenue and Peyton Drive. Still in the preliminary stages, the City of Chino Hills and Opus West Corp. are discussing project details, which would likely include more than 200 residential units, a city hall or library, and 355,000 square feet of retail and restaurant space. At Grand Avenue and SR-71 (Chino Valley Freeway), Treh Partners is developing Gateway Village, an 88,574-square-foot center anchored by Henry’s Marketplace and Chili’s. Phases I and II are already open, with the 21,533-square-foot Phase III projected to open during first quarter 2005. Adjacent to the Chino Valley Freeway is another project, Crossroads Entertainment Center, which is a Lennar Entertainment development. Lennar has received approval for the planning entitlement, and the 18-screen movie theater anchoring the project is expected to open in August 2005. Other components of the mixed-use project will include a three-story hotel, four restaurants, 9,200 square feet of inline shops, 40,000 square feet of office space, a daycare and a gas station.

In nearby Corona, two key projects are underway. In the Temescal Canyon area of town, Memphis, Tennessee-based Poag & McEwen Lifestyle Centers is developing Dos Lagos, a 435-acre master-planned community that will blend residential, lifestyle retail, recreation and business activities. Ground broke in 2003. The project will include an amphitheater, a championship golf course and more than 600,000 square feet of upscale retail opportunities. Along North Main Street, another new project is helping to rejuvenate the area. The revitalization efforts, which began in 2000, were completed in 2004 and include new medians, lighting fixtures, bridge treatments and landscaping improvements. Façade improvements are also nearing completion on North Main Plaza (formerly Butterfield Square). New restaurants and retailers have joined the center, with Walgreens having opened earlier this year. When completed, approximately 185,000 square feet of existing retail space will be rehabilitated, 33,000 square feet of new space will be added, and 13,950 square feet will be developed for restaurant use. Current restaurants include Villa Amalfi, Don Jose’s Mexican Restaurant, Fat Daddy’s Barbeque and Chicago Bistro.

In Riverside, Transcan Development is busy with Canyon Crossings at Canyon Springs, which is situated at Interstate 215 and Hwy 60 in the heart of the 180-acre Canyon Springs master-planned commercial hub. The project features 740,000 square feet of retail space, anchored by Wal-Mart Supercenter, as well as 144,000 square feet of office space. Construction completion of Phase I is scheduled for fall 2005.

In Victorville, north of San Bernardino, Santa Monica, California-based The Macerich Company is active with the Mall of Victor Valley, a 505,355-square-foot center that is adding a 16-screen AMC Theatre, which will open in fall 2005. Other major tenants include JC Penney, Harris, Sears and Mervyn’s.

Just below Victorville is the town of Apple Valley, located in the “High Desert” between San Bernardino and Barstow. There, the Victorville office of California-based Lee & Associates is marketing Jess Ranch Marketplace, a 55-acre project anchored by Target. Jess Ranch Marketplace adjoins a soon-to-be constructed 16-screen movie theater with a food court. Everything is situated in front of a 55-plus senior living community and an 18-hole golf course that is being expanded to 27 holes.

“The entire High Desert has a population estimated at over 300,000 and has been neglected by retailers until recently,” says Nick DiCosola of Lee & Associates. “Interest is huge at the moment due to the affordable housing in the area. This area is one of the most affordable areas near the Los Angeles area and in Southern California, which has seen an explosion in demand for housing — even though some residents commute 60 to 80 miles to work.”

Farther east, downtown Palm Springs is seeing several new open-air lifestyle centers and loft residential over retail projects in the works. “The new infill is just beginning the design phase, in response to a desire to live in the historic village,” says Jerry Ogburn, director of the Village of Palm Springs Development Center. According to Ogburn, the historic village of Palm Springs is located in an urbanized market area of more than 16 million permanent residents within a 2-hour drive, plus more than 2 million hotel guests and visitors per year. Ogburn also credits a rapidly growing seasonal and retirement population with spurring development in the area.

In Murrieta, Santa Monica, California-based Arthur Pearlman Corp. and Murrieta-based Rancon Real Estate are developing Village Walk, a 330,000-square-foot power center, the largest planned shopping center fronting Interstate 15 north of Temecula. Opening October 2005, the center will be anchored by Babies ‘R’ Us, Bed Bath & Beyond, David’s Bridal, Famous Footwear, Levitz Furniture, Office Depot, PETCO and Sportmart. KKE Architects is designing the center.

“Lifestyle or power-type centers such as Village Walk remain a focus for our firm,” says Arthur Pearlman, president and CEO of Arthur Pearlman Corp. Pearlman points out that most of his company’s work is either in the evolving and growing markets, like Murrieta, or within urban redevelopment areas. The Murrieta area, he says, is one of the state’s fastest growing areas for new housing.

Also in Murrieta, Carlsbad, California-based GMS Realty is underway on Murrieta Plaza, a Sam’s Club-anchored center located at Murrieta Hot Springs Road and Interstate 215. According to Jeff Sterk, executive vice president of GMS Realty, the center will open in spring 2005 with a 212,000-square-foot first phase. Sterk says an additional 200,000 square feet are planned for future phases.

Los Angeles Area

“The downtown Los Angeles market is on fire,” says Larry Hudson, director of asset management with Santa Monica, California-based MJW Investments, Inc. “There are several mixed-use and residential projects in process in downtown L.A. We were lucky enough to buy into this market back in 1998. We have seen this market ‘asleep,’ and now the giant has ‘awakened.’ Many developers are looking to get into this downtown market at this time.”

MJW Investments has opened Phase I of Santee Court, a mixed-use project in downtown Los Angeles.

One of MJW Investments’ key projects downtown is Santee Court, a mixed-use project that opened its first phase in June 2004. More phases will open in 2005 and early 2006. All told, the project will feature 100,000 square feet of retail and 550 residential loft units, located in the 700 block of South Los Angeles Street.

In the Boyle Heights area of Los Angeles, MJW Investments is currently at work on a project tentatively named Olympic & Soto (also known as the “Sears Project”). Located at Olympic Boulevard and Soto Street, the 3 million-square-foot project will begin opening in October 2006 when Sears is scheduled to be complete. Later phases will open through December 2008.

Westfield Shoppingtown Century City in Los Angeles is undergoing a $127 million redevelopment.

In Century City, Los Angeles-based Westfield is undertaking a $127 million redevelopment of Westfield Shoppingtown Century City. Phase I will open in 2005, with Phase II following in summer 2006. Currently, the center stands at 810,000 square feet, anchored by Bloomingdale’s, Macy’s and AMC Theatres (to be added). The expansion will also add up to 30 new high-fashion retailers, top-rated restaurants and a new food court.

In Huntington Park, Los Angeles-based The Festival Companies is underway on El Centro De Huntington Park, a major 800,000-square-foot regional shopping center projected to open in first quarter 2007. Northeast of Huntington Park, in El Monte, The Festival Companies is also busy with Santa Fe Trail Plaza, a 150,000-square-foot mixed-use community lifestyle center opening in first quarter 2006.

In Whittier, also in metropolitan Los Angeles, Newport Beach, California-based Hopkins Real Estate is redeveloping Whittwood Mall, a 900,000-square-foot de-malling project opening in August 2005 with Sears, JC Penney, Mervyn’s and Target as anchors. Hopkins’ financial partner on the project is Lennar.

“More and more older malls are being de-malled, such as the Whittwood project,” says Stephen Hopkins, president. “The older malls are becoming functionally obsolete and we are seeing more lifestyle-type centers. Lifestyle centers will be the wave of the future. You will also see a residential application in many of these de-malled centers that become lifestyle centers.”

Redevelopment and infill continue to be hot — and with an unstoppable surge in residential population statewide, many cities are left with few other alternatives to meet the growing retail demand.

“First of all, there’s going to be 10 million more people in this state within the next 10 years,” Hopkins says. “[And] the majority of the cities in the state of California will have redevelopment agencies. A city that has a redevelopment agency can put a specific project in a project area and there is a tremendous amount of benefits for the developer. These types of public and private partnerships are very attractive.”

Hollywood, California-based CIM Group has long been a key player in urban infill and redevelopment activities in downtown L.A. Most recently, the company has broken ground on Midtown Plaza, a 390,000-square-foot urban retail center in an underserved area of Los Angeles. Working closely with city, community and business leaders, CIM Group’s principal and co-founder Avi Shemesh says his company hopes to bring much needed retail to Los Angeles’ urban core. Situated on 12 acres at the corner of San Vicente and Pico boulevards (one of the largest properties zoned for commercial use north of the 10 Freeway and west of the 110 Freeway), the $114 million project will be anchored by a 105,000-square-foot Home Depot. A new MTA bus terminal will also be incorporated into the site, surrounded by 15,000 square feet of street front retail. The new terminal will replace the existing facility currently mid-block on Pico Boulevard. Designed by Perkowitz + Ruth Architects, Midtown Plaza is scheduled for completion by second quarter 2006.

Also in Los Angeles, Macerich is keeping busy with several ongoing projects. One is Westside Pavilion, a 757,159-square-foot center undergoing a major expansion. Macy’s Home Store and a 14-screen Landmark Theatre will join the center in fall 2005. Existing anchors include Nordstrom and Robinsons-May.

In Orange along the 55 and 91 freeways, new tenants are joining The Village at Orange, an 858,350-square-foot regional mall formerly known as the Mall of Orange. The enclosed mall was acquired by Rawson, Blum & Leon (RBL) in 2002, and is currently being redeveloped. Charlie’s Grilled Subs and Dippin’ Dots will open this month, while Busy Bee opened in September. PacSun will open by the 2004 holidays. The Village at Orange is anchored by JC Penney, Sears and Wal-Mart.

In Irvine, four new tenants have joined Irvine Spectrum Center, a center owned by Newport Beach, California-based The Irvine Company. The center features a 21-screen movie theater and more than 100 specialty stores, restaurants and other entertainment venues. Newly opened at the center is Baliston (its first U.S. store), and Hollister Co., Finish Line and Angl will soon follow in time for the 2004 holiday shopping season. This will be Hollister Co.’s first store in South Orange County. These stores are in addition to the previously announced Javier’s Cantina & Grill, California Pizza Kitchen and Bodies in Motion, which will open in the coming months. Nordstrom will open at Irvine Spectrum Center in late 2005, followed by Target in late 2006.

Westfield is opening its Westfield Shoppingtown Santa Anita redevelopment this month in Arcadia, California.

Also in Orange County, in Newport Beach, The Irvine Company is busy with new tenants at Fashion Island. Several of the new stores will be exclusive to Fashion Island in Orange County. Lululemon Athletica, Oliviers & Co., and Jules Allen and chloe & jack b. will open their first Orange County stores this fall. Fashion Island is anchored by Neiman Marcus (the only Neiman Marcus in Orange County), Bloomingdale’s and Bloomingdale’s Home Store, Macy’s Women’s Store and Robinsons-May. Irvine Company’s Crystal Promenade, also in Newport Beach, recently saw six new stores opening and two existing stores expanding. Mitchell Gold, Erin Hanan Jewels, Andavi Salon & Skin Therapy, Trio, Trade Secret and Pier 1 Imports have all joined the center, while Williams-Sonoma and Juxtaposition Home are both expanding their current stores. In Arcadia, Caruso Affiliated is working on Santa Anita Park, a 775,000-square-foot retail center opening in spring 2007, while Los Angeles-based Westfield America is working on Westfield Shoppingtown Santa Anita, a major redevelopment opening this month. The $113 million project is anchored by Nordstrom, Macy’s, Robinson’s-May, JC Penney and AMC Theatres.

“Upon completion this month, the center will grow to 1.4 million square feet with a 16-screen AMC Theatre complex and 250,000 square feet of new specialty shop space, and lifestyle and entertainment retailers such as Dave & Busters, Sport Chalet and Borders Books,” says Catharine C. Dickey, vice president of corporate communications for Westfield America.

New restaurants will also join Westfield Shoppingtown Santa Anita, including Bacchus Wine & Champagne Bistro, McGrath’s Fish House (making its California debut), Wood Ranch BBQ & Grill and Café Verona. The center is located just south of the 210 Freeway in the San Gabriel Valley, adjacent to the historic Santa Anita racetrack.

North of L.A., in Santa Clarita, GMS Realty is underway on Golden Valley Ranch, a 612,000-square-foot center located at Golden Valley Road and SR-14 Freeway. Anchors will include Target, Kohl’s and Lowe’s Home Improvement.

In Glendale, Caruso Affiliated is underway on Glendale Town Center, an 80,000-square-foot center with retail and residential components. Major tenants include Anthropologie, Cheesecake Factory, Cole Haan and Mexx. The center is scheduled to open in fall 2006.

West of Santa Clarita and Glendale, in Simi Valley, Forest City is underway on Simi Valley Town Center, an 800,000-square-foot center opening October 2005. The center is being developed in partnership by Forest City, The Corti Gilchrist Partnership LLC, and The Finley Group, LLC. Major tenants will include Macy’s, Robinson’s-May and Lowe’s. Los Angeles-based Colliers Seeley is leasing the center.

South of Simi Valley, in Thousand Oaks, Macerich’s 1 million-square-foot The Oaks project is adding a 144,000-square-foot Nordstrom and approximately 100,000 square feet of additional mall GLA. The remerchandised portion will open in fall 2006. Current anchors include JC Penney, Macy’s, Macy’s Men’s and Robinson’s-May.

“Successful mall developers will continue to remerchandise their properties to incorporate those tenants to better serve their trade areas and customer preferences,” says Bruce Johnston, vice president of leasing with Macerich.

Also in Thousand Oaks, NewMark Merrill Companies and Caruso Affiliated are very active. NewMark Merrill is repositioning and adding new tenants at Janss Marketplace, a 455,000-square-foot center located at Moorpark and Hillcrest. Existing tenants include Toys ‘R’ Us, Mervyn’s, Gold’s Gym, Marshalls and Buca di Peppo. Caruso Affiliated is underway on The Lakes, a 50,000-square-foot project scheduled to open in July 2005. Tenants will include Claim Jumper, California Pizza Kitchen and P.F. Chang’s China Bistro.

Farther west, in Oxnard, Colliers Seeley is keeping its Oxnard branch office busy with several ongoing projects, including RiverPark Towne Center, a 700-acre development opening fall 2006 with 850,000 square feet of lifestyle retail; Carriage Square, a 150,000-square-foot redevelopment anchored by Lowe’s Home Improvement Warehouse opening fall 2006; and Wagon Wheel, a 600-acre mixed-use redevelopment opening in 2007.

San Diego

Westfield’s redevelopment of Westfield Shoppingtown Parkway in El Cajon (San Diego) includes a two-level Wal-Mart — its first from-the-ground-upintegration into a regional mall environment.

According to Westfield’s Dickey, a $26 million redevelopment of Westfield Shoppingtown Parkway in El Cajon (San Diego) opens this fall and includes a new two-level, 160,000-square-foot prototype Wal-Mart, marking the retailer’s first from-the-ground-up integration into a regional mall environment. The $26 million project also includes 10 new specialty shops and a restaurant. The 1.14 million-square-foot center is anchored by Robinsons-May, Sears, JC Penney, Mervyn’s and now Wal-Mart.

In nearby Chula Vista, Chicago-based General Growth Properties has completed Phase I of its Chula Vista Town Center renovation project. The 884,880-square-foot open-air center now welcomes a new streetscape design and a newly opened Subway, Rubio’s Fresh Mexican Grill and Jamba Juice. Renovations have also taken place inside the mall between Macy’s and JC Penney. Other new retailers include Shimmer/Shimmer Plus, Finish Line, Victoria’s Secret/Victoria’s Secret Beauty and New York & Company.

NORTHERN CALIFORNIA

In urban Northern California markets, adaptive reuse and redevelopment is key, according to Kent DeSpain, a partner with San Francisco-based Retail West, Inc., which has several projects ongoing in Northern California.

“Land values and a lack of raw land are forcing developers to go vertical with their projects,” DeSpain says. “Lifestyle centers are still popular, and most are doing very well, but they are difficult to build in the urban environment unless they go vertical. De-malling is clearly a product of the new lifestyle push, and we do see some de-malling in Northern California, but it is not the trend. Mixed-use projects, incorporating a variety of components, have certainly become the favorite of urban developers.”

San Francisco/San Jose/Sacramento

Retail West is currently underway on a de-malling redevelopment project in Sunnyvale, just outside San Jose. When complete in 2006, The Forum at Sunnyvale will be redeveloped into several mixed uses, including retail, entertainment, office and residential. The town center retail portion will be anchored by Macy’s and Target.

In Carmel By The Sea, just south of San Jose, Macerich is involved with Carmel Plaza, a 115,215-square-foot center that is being completely remodeled and remerchandised. Tiffany & Co. and Polo Ralph Lauren will join the Saks Fifth Avenue-anchored center in 2005.

In Roseville, part of the Northern Sacramento market, Retail West is busy with The Fountains at Roseville, a 350,000-square-foot lifestyle retail development of Peter Bollinger Company - Inter-cal Real Estate. Also in Roseville, Donahue Schriber and Tom Winn are teaming up to develop Highland Reserve Marketplace, a 195,000-square-foot community retail center that opens this fall. Tenants include Kohl’s, PetsMart, Sport Chalet and Beverages & More.

In Antioch, Transcan Development is in the planning stages on a 200-acre mixed-use development that would include more than 1 million square feet of retail, office, residential and a proposed BART station.

In Brentwood, California, Donahue Schriber is developing Lone Tree Plaza, a 460,000-square-foot power center opening winter 2005.

In the small Contra Costa County town of Brentwood, near Antioch, Donahue Schriber is developing Lone Tree Plaza, a 460,000-square-foot power center that is expected to open in winter 2005. Donahue Schriber will also manage the center upon completion. Anchors include The Home Depot, Kohl’s, Sports Authority, Michaels, Linens ‘N Things and PETCO.

In San Francisco, Newport Beach, California-based Wattson Breevast is planning a grand re-opening in fall 2005 for The Shops at Tanforan. Old Navy, New York & Company, Master Cuts, Regis Salon, Hawaiian Barbeque, Kiddy Candids, Verizon and Thai Soon recently signed on to join the center, which will be fully redeveloped and redesigned by Altoon + Porter Architects, a firm nationally recognized for its redevelopment at centers such as Arden Fair in Sacramento and Fashion Show in Las Vegas. Whiting Turner is handling construction of the redevelopment project.

Also in San Francisco, Forest City and Westfield are partnering on San Francisco Centre, a 1.5 million-square-foot Nordstrom-anchored project with additional square footage currently under construction. The expansion — including the addition of Bloomingdale’s — will be completed in 2006, according to Forest City’s Brian Jones.

Forest City and Westfield are partnering on San Francisco Centre, a 1.5 million-square-foot project with additional square footage currently under construction. The expansion will include a new Bloomingdale’s.

“At the end of 2003, together with Forest City, we broke ground on the $410 million expansion,” says Westfield’s Dickey. “The new center is expected to attract 25 million visitors each year and generate $500 million in annual sales.”

Dickey says the project involves transforming the landmark Emporium building and the existing San Francisco Centre into a combined commercial venue with mixed uses. San Francisco Centre will be home to both the second largest Bloomingdale’s and Nordstrom in the country. In addition, the center will feature 200 specialty stores and exclusive boutiques, fine dining, an international gourmet marketplace, first-class office space and a nine-screen Century Theatres multiplex.

Outside San Francisco, according to Retail West’s DeSpain, other hot markets in Northern California include eastern Contra Costa County, the greater Sacramento market (including the active Roseville) and the Central Valley. “These areas are experiencing an explosion in home and commercial growth,” DeSpain says. More under-the-radar markets, so to speak, are the Northern California coastal communities with captive trade areas and a loyal customer base. “And, the barriers to entry in these zones are such that if you can get in, you will find yourself protected somewhat from future competition as they will more than likely have a very difficult time getting in.”

Tough approval processes and high barriers to entry are a running theme in California commercial development. “California can be a difficult place to develop, which can tend to limit the amount of retail, which prevents over building,” Randall Lewis of Lewis Retail Centers points out. “The risk and difficulty of developing in California can be harder due to lengthy approval processes and, in some cases, organized opposition to growth. But the rewards are greater.”

Organized opposition to growth is not uncommon in California, especially in the northern areas of the state. DeSpain refers to such groups as “not-in-my-back-yarders” or NIMBYs. “The barriers to entry are high, to be sure,” he concedes. “Low vacancy rates, low tenant turnover, high rents, stiff competition, sometimes very prohibitive city councils, and the NIMBYs can make entry very difficult.”

DeSpain adds, however, that retailers’ desire to operate here often wins out in the end. Many are willing to face the hurdles because of the state’s excellent demographics; quite simply, demographics in California are stronger than most anywhere else in the country. “I’ve heard from some tenants that they have better bottom lines in other states, but that to be an industry leader or true national player, they must have a presence in California,” DeSpain says. “National retailers desire to be a part of this community.”

And that community is rapidly growing. Retail has always followed rooftops, and that fact is no different in California. There are just so many more rooftops to follow. According to Mark Whitfield of Donahue Schriber, following rooftops is made easier due to population growth in traditional markets, as well as the emergence of new sub-markets generating additional retail demand.

“Along with Sacramento, where we have experienced active growth in our centers for 5 years, Fresno, Bakersfield, the Central Coast, the Coachella Valley and the extended East Bay are all areas creating new activity and broadening the retail offerings,” Whitfield says. “Anything that approaches institutional core with a strong credit tenant lineup — no matter where the location — realizes a lot of attention.”

In Natomas-Sacramento, Donahue Schriber is developing Phase II of Park Place, whose 105,000-square-foot Raley’s-anchored first phase was completed in 2001. Phase II will add 270,000 square feet of GLA to the mix when it opens this fall. Anchors include Kohl’s, Dress Barn, Lane Bryant, Borders, Bed Bath & Beyond and Marshalls.

In Elk Grove, also part of greater Sacramento, Donahue Schriber is developing two centers: Elk Grove Commons, a 242,000-square-foot center opening this fall with Kohl’s, Trader Joe’s, Lane Bryant and Dress Barn as anchors; and Laguna Reserve Plaza, a 90,000-square-foot Safeway-anchored center that will open in fall 2005. Just east of Sacramento along Interstate 80, Donahue Schriber is developing Missouri Flat Village in Placerville. The 120,000-square-foot neighborhood center opens this fall with Safeway and T.J. Maxx as anchors.

Fresno / Clovis

In Fresno, Macerich is busy with a 100,000-square-foot expansion of the 873,329-square-foot Fashion Fair Mall. The expansion, which will include 80,000 square feet of lifestyle retail and 20,000 square feet of restaurants, will open in fall 2005. Anchors at Fashion Fair Mall include Macy’s, Macy’s Men’s, JC Penney and Gottschalks.

In Clovis, part of metropolitan Fresno, several new retail projects are underway or in the pipeline. Sierra Vista Mall, a 580,000-square-foot regional mall anchored by Mervyn’s, Gottschalks, Sears and Target, is planning a 150,000-square-foot expansion that will include a 16-screen movie theater, bookstore and inline shops. LandValue Management owns the mall. According to Michael E. Dozier, community and economic development director with the city of Clovis, the Sierra Vista Mall project is currently going through the entitlement process and could begin construction in early 2005.

Also in Clovis, Paynter Realty has been approved for a 550,000-square-foot big box center located on Herndon Avenue between Clovis and Sunnyside avenues. The center will be anchored by Wal-Mart Supercenter; construction is scheduled for 2005. At the corner of Herndon and Willow avenues, Regency Centers has received the green light to develop a 350,000-square-foot retail center anchored by Target. Target hopes to open by October 2005. Nearby, at the southwest corner of Clovis and Herndon avenues, Sierra Crest Equities (which currently has 23,000 square feet of restaurant pad sites under construction on the northwest corner of Clovis and Herndon) and Silver Creek Properties have submitted separate plans for a 34-acre mixed-use office/retail development.

Dozier says a need currently exists in the city for more lifestyle and entertainment centers. “Clovis is a city of 80,000 located in the northeast portion of the 550,000 population Fresno/Clovis metropolitan area,” he says. “In the last 4 years, Clovis has set the pace for the metropolitan area with 4 percent to 6 percent annual residential growth.” Dozier adds that population growth has also resulted in rising incomes for the city. “Clovis is now poised to attract retailers who once would not have considered it as a potential location.”

J.H. SNYDER CO. ACTIVE IN CALIFORNIA As one of California’s most active developers, J.H. Snyder Co. is always busy in the Golden State. Bella Terra, J.H. Snyder Co.’s 1 million-square-foot lifestyle redevelopment in Huntington Beach, California. Most recently, the company has broken ground on Bella Terra, a $170 million open-air lifestyle center that will be a redevelopment of Southern California’s oldest enclosed mall, Huntington Shopping Center, in Huntington Beach. Originally built in 1966, the mall was purchased by The Ezralow Companies in 1999. In 2001, J.H. Snyder was brought on as the lead developer in partnership with Ezralow to reconfigure the enclosed regional mall into an open-air lifestyle center renamed Bella Terra (“beautiful earth”). When complete, Bella Terra will span 1 million square feet anchored by Kohl’s and a 20-screen Century Theatres megaplex, along with new tenants Bed Bath & Beyond, REI, ULTA Cosmetics, Solitaire Diamonds and T-Mobile. The project’s architectural team comprises The Jerde Partnership (concept design), Perkowitz + Ruth (project design) and L.A. Group (landscape design). J.H. Snyder is also redeveloping a prime site in the heart of Commerce. Located at Telegraph Road and Tubeway Avenue, fronting the Interstate 5 Freeway, Commerce Town Center will be a 350,000-square-foot urban retail center featuring an eclectic mix of popular retailers, eateries and a 3,000-seat theater. Construction will begin in 2005. Venice, California-based The Jerde Partnership is also working with J.H. Snyder on the design of Commerce Town Center. In Hollywood, J.H. Snyder has officially opened West Hollywood Gateway, located at 7100 Santa Monica Blvd. The project is the East Side’s largest redevelopment project. The 243,000-square-foot shopping center is anchored by Target and Best Buy. Other tenants include Starbucks Coffee, Baja Fresh, Daphne’s Greek Café, EB Games and many more. The Jerde Partnership also designed this project for J.H. Snyder. — Katie Foxworth

LUXURY RETAILERS RENEW LEASES ON RODEO DRIVE Things are always golden for retail in swanky Beverly Hills. There, high-end retailers Tiffany & Co., Gianfranco Ferre and Versace have signed lease extensions with Two Rodeo at Wilshire Boulevard and Rodeo Drive. A flagship tenant since 1990, Tiffany & Co. has renewed its lease for another 15 years. The 18,000-square-foot boutique is the jeweler’s largest store outside Fifth Avenue in New York City. Versace has signed on for 7 more years at Two Rodeo and will expand to 9,000 square feet. Gianfranco Ferre has renewed its lease for another 8 years. Two Rodeo, a unique shopping, dining and lifestyle destination, is managed by Trammell Crow Company. — Katie Foxworth

SUNNYVALE TOWN CENTER REDEVELOPMENT Forum Development Group and Retail West are collaborating on The Forum at Sunnyvale Town Center in Sunnyvale, California, just outside San Jose. In Sunnyvale, California, just outside San Jose, The Forum at Sunnyvale Town Center redevelopment project is one step closer to becoming a reality. In August, the project became fully entitled and, after what seemed like countless redevelopment plans proposed by several different companies, Atlanta-based Forum Development Group now has the rights and means to demolish the antiquated enclosed mall and transform it into a multi-level, mixed-use, outdoor lifestyle center. The 1.3 million-square-foot redevelopment will encompass 900,000 square feet of specialty retail and restaurants, including a 16-screen movie theater. In addition, 292 residential for-sale units will be built along with 280,000 square feet of office space. These elements, along with a pedestrian-friendly streetscape, will help the city of Sunnyvale re-establish itself among the Bay Area’s elite retail hubs. Trish Inguagiato, a broker with San Francisco-based Retail West, Inc., is helping to represent Forum Development Group in the deal. “We are working very hard to bring quality retail tenants to The Forum, and so far the interest level has been remarkable,” she says. “Despite a couple of years of economic woes in the Silicon Valley, Sunnyvale’s retail sector has maintained positive momentum.” According to Retail West, the project is located in a densely populated area with a daytime population of 125,000 and a high residential base of 409,000 within a 5-mile trade area. The area also boasts strong income levels of $117,000 (median household income). The grand opening of The Forum at Sunnyvale Town Center is scheduled for third quarter 2006. — Katie Foxworth

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.