CoStar Market Insights: Developers Continue Adapting to Evolving Retail Environment
JULY 24, 2019|RYAN PATAP
Developers have received the message that certain retail segments face challenges, and as a result, are being quite selective with starting new projects in Los Angeles. Just 2.3 million square feet of retail space is currently under construction, which represents just 0.5% of the Los Angeles metro’s existing retail product.
Mixed-use projects and lifestyle centers dominate the construction pipeline, speaking to developers focus on experiential retail projects that will best appeal to today’s consumers.
The largest project to deliver in 2019 came online in May, when The Vineyards at Porter Ranch was completed in the West San Fernando Valley. The 345,000-square-foot lifestyle center has an AMC Theaters, Whole Foods and Nordstrom Rack as anchor tenants.
In North Hollywood, the NOHO West development will add 370,000 square feet of retail stock. The project will also include office and apartments when it completes in the spring of 2020. Tenants including a Regal Cinemas, Trader Joes and 24 Hour Fitness are committed to the project.
The Broadway Trade Center, being redeveloped from the former May & Company department store, is expected to finish in early 2020 as well. That mixed-use redevelopment project by Waterbridge Capital is 1.1 million square feet and is slated to have retail, office and hotel components. There will likely be several hundred thousand square feet of retail space in the center when fully built out.
In Long Beach, CenterCal Properties will deliver the 255,000-square-foot 2nd and PCH lifestyle center later this year. The project will be anchored by a Whole Foods and has a Shake Shack and Tocaya Organica lined up as restaurant draws.
Several other small, but notable, mixed-use projects delivering to the Los Angeles market in the next few years will also contain significant retail components. Mixed-use developments including Oceanwide Plaza in Downtown Los Angeles, Ivy Station in Culver City, and the Hyatt Place Hotel in San Gabriel, will include significant retail square footage.
Going forward, mixed-use and lifestyle projects should comprise an oversized share of retail development activity in Los Angeles. Retail properties that offer differentiated experiential or live-work-play settings will likely fare best in the current retail environment, where e-commerce will continue to capture an increasing percentage of total retail sales from traditional brick-and-mortar shops.
Article by CoStar