ACRE Southern California hosted its annual Los Angeles area focused event this past Wednesday, November 16th, at the Olympic Collection in the heart of West LA. The event, entitled “Los Angeles + The Retail Experience,” consisted of a panel discussion that focused on how cultural influences and technological innovations currently shape-shift the Los Angeles retail marketplace. The esteemed panelists sought to answer that all important, yet utterly elusive question: How does the industry adapt?
The Panel
For the third year in a row, Michael Pakravan of Matthews Real Estate, moderated ACRE’s Los Angeles focused event. And, onceagain, Michael assembled an exceptional troupe of real estate development heavy weights, including Dennis Borowsky of Merlone Geier Partners; Christy Kord or Westfield; Adrian Berger or Cypress Equity Investments; and Vincent Manzenberger of Greystar.
The diverse group of panelists represented a range of voices from across the commercial development industry. Everything from international mall developers (Westfield) to national multi-family developers (Greystar) to Southern California-based firms redeveloping existing properties (Merlone Geier Partners) and developing high street retail projects (Cypress Equity Investments).
Ongoing Projects
To offer a practical glimpse of retail development’s current response to the shifting marketplace, Mr. Pakravan invited each panelist to present a project they are currently working on prior to delving into the meat of discussion. Dennis Borowsky offered Merlone Geier Partners’s NoHo West project, the redevelopment of a former Macy’s anchored center that includes retail, office, and residential uses. Christy Kord served up Westfield’s Topanga Canyon Food Hall, the redevelopment of an existing mall exclusively into small-format food tenants. Adrian Berger delivered Cypress Equity Investments’ 4301 Riverside West, an upscale strip center situated between Burbank and Toluca Lake. Finally, Vince presented Greystar’s AMO Lofts, a mixed-use residential and retail project currently in development in Downtown LA’s Arts District.
Retail Evolution – The Foodie Generation
Following the individual presentations, Merlone Geier Partners’s Dennis Borowsky addressed the question of why the NoHo West development continues to focus on leasing space to “traditional retail” users. “[Traditional] retail wants to be next to other [traditional] retail,” Borowsky responded, further noting “you have strike balance” in reference to the current heavy-demand for restaurant users.
Picking up that thread, Westfield’s Christy Kord offered her take on the tipping issue of “how much food is too much food?” Kord noted it all boils down to location and timing. Office developments in Warner Center, along with increasing numbers of mixed-used projects in the area “need dining options.” In turn, Westfield’s research shows, if done right, the Topanga Food Hall could do “$40 million in food related business” in 2019. Kord also noted that a development like the Topanga Food Hall serves several purposes. It’s a “gathering place” where people “meet for drinks and socialize. The mantra of “fill your belly, feed your soul” was discussed throughout the conversation regarding the trend of food-uses and gaining consumer attention.
Food, Food and more Food – The Risk and The Reward
In an expansive space like a Food Hall, a significant demand for variety is paramount for success. This necessarily ushers in independent food purveyors, outside of the typical chain tenants, into the scenario. But how do developers qualify niche food operators, such as chef driven concepts? For larger spaces “a proven track record” with “prior locations” and “proven operators” behind the venture are key consideration according to Kord. But Westfield is also reserving small spaces in their Food Hall for unproven operations, and hedging the untested risk factor with shorter term leases.
In a food only environment, how do developers navigate exclusive uses? While leases are fashioned around specific concepts, Westfield doesn’t grant true exclusive uses. To shift focus, users must “request a change” with the developer Kord says. And again, “shorter term leases” are a hedge against uses that fail to perform Kord further adds.
Mixed-Use – Public and Private Approval
What’s driving the shift toward mixed use development? “City requirements” and “synergy for residential tenants” are two prime factors motiving Greystar’s current approach to development in Los Angeles says Vince Manzenberger. The growing demands of municipalities are making straight-ahead urban residential developments increasingly difficult. And more and more, tenants are looking for residential environments that offer more than just living space.
Continuing in this direction, Cypress Equity’s Adrian Berger notes the success of mixed-use projects depends on “designing around density.” Further adding “Proximity to services” that allows for “walking rather than driving” and “eliminating need for parking” are also critical considerations in mixed-used development.
Manzenberger echoes this point, noting the prohibitive costs of creating significant subterranean parking, and the “out-of-date zoning codes” are huge barriers to mixed-used development. Berger also feels zoning codes are “lagging behind the times,” and is frustrated by municipalities’ “refusal to work with developers” to resolve this issue.
The Future of Transportation – Fact vs. Fiction
As the parking issues persists, is Uber a significant factor? According to Manzenberger: “86% of renters still want a parking space.” And while “residents may walk on the weekend, they still need their car come Monday,” Berger says. Even with “Uber lounge” projects in the works in many locations, “parking is still imperative,” Berger further adds. “You need a car if you live in Southern California” Borowsky states, and as such “cities require parking accommodation.” But increasingly “Uber is part of the deal making discussion” Kord notes.
In closing the discussion, Pakravan inquires where the respective panelists would develop in Los Angeles if given the opportunity. Downtown LA’s “Arts District,” Manzenberger says, for its “huge growth potential.” Northeast LA’s “Echo Park,” which Berger deems a “cool neighborhood that’s only getting better.” Venice “East of Lincoln,” which Kord proclaims is “the next Abbot Kinney.” And with a less specific response “anywhere in Southern California” works for Borowsky, provided it’s “near a freeway, high density, and ideally in an upscale area.”
If You Build It, Will They Come?
The state of retail is a continually shifting environment, a fact well-illustrated by the panelists. The incorporation of more creative and enticing food uses coupled with service-oriented businesses will continue to be the wave for the impending future. The convergence of chic, yet warm and friendly, will attract the varying crowds necessary for the survival of any new development. In the attempt to appease differing consumers, the ingenuity and creative forces of designers and developers will be tested. Tenants will always drive the projects. But, attaining the confluence of dream with reality or cost versus income will be the determining factor of how these projects are realized.
Don’t Miss the ACRE Holiday Party!
Just a final note before departing, don’t miss ACRE’s upcoming annual holiday party! December 6th at The Fifth in Anaheim. We hope to see you there!
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