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Shopping Centers Today -> February 2003
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RETAIL TO THE RESCUE
Stores, restaurants attract shoppers (and tax dollars) back to Long Beach
BY DONNA MITCHELL
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| Until recently, downtown Long Beach wasn’t a place you went shopping — unless you wanted to buy a tattoo, that is. But it’s a different place today. |
Downtown Long Beach, Calif., became something like a faded silent-movie starlet with a glamorous past. Soon it may be ready for its close-up again.
In the early 1900s the area was a hub for the motion picture industry as well as a popular resort town. But that was before Hollywood emerged and stole its thunder. What remained was a port city with the busiest maritime facility in California, but one of the ugliest downtowns in a state that is otherwise renowned for its attractive coastal communities, explained Robert Zurschmiede, a redevelopment project officer for the City of Long Beach, a community of 437,816 that lies 22 miles south of Los Angeles.
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“It is a lot more like what people associate with Eastern cities,” he said.
The downtown accommodated the Long Beach Naval Shipyard and Long Beach Naval Station until they closed in 1997 and 1992, respectively. But while they were open, they attracted a lot of tattoo parlors and similarly downmarket enterprises, fostering a grubby image of the district. That in turn drove a lot of basic retail, not to mention upscale shops, from the downtown.
“Frankly, that kept people away,” said Kraig Kojian, president and CEO of Downtown Long Beach Associates, which manages the city’s business improvement districts. “They felt it was unsafe and not as clean as they wanted it to be.”
The retail that did stay behind suffered. Long Beach Plaza, an 800,000-square-foot, enclosed regional mall project built in the 1970s, never prospered and was itself a blight on the area for most of its existence.
“There was an incongruity of having a depressed area along the coast,” said Jeff Goldman, vice president and regional manager in the Long Beach office of Marcus & Millichap, a commercial real estate brokerage, noting that the city became better known for its decay than for its ocean views.
California’s municipalities rely heavily on sales taxes to fill their coffers, so the lack of retail wasn’t just an inconvenience. Recognizing the crisis, city officials and commercial developers took a two-pronged approach to rebuilding the city’s image and retail infrastructure. Businesses occupying two business improvement districts in the downtown laid the groundwork soon after the closure of the naval facilities by voting to tax themselves nearly $1 million a year for graffiti removal, street cleanups and programs to promote the downtown as clean and safe, said Kojian.
Now the public and private sectors are cooperating in a nearly $1 billion investment program in downtown Long Beach to develop 1 million square feet of new retail, apartment and entertainment projects.
“With the revitalization, we are hoping that some people who have not visited in many years will be pleasantly surprised once they see what has occurred,” Kojian said.
No fewer than 18 mixed-use projects are under way in the downtown, most of which will be completed this year. The majority of these contain retail, but two major shopping developments are CityPlace and The Pike at Rainbow Harbor, both being built by Beachwood, Ohio-based Developers Diversified Realty Corp. The centers sit respectively on the north and south ends of Pine Avenue, a street popular for its restaurants.
Both projects are expected to give the downtown a revenue boost. The city’s annual sales tax revenues grew from $2.1 million in 1998 to $5.6 million in 2001, said the city’s Economic Development Bureau. CityPlace and The Pike at Rainbow Harbor could add a combined $1 million per year, said Eugene Fong, a revenue officer in the city’s treasury bureau.
“We really see these projects as an anchor to each end of the downtown area,” said Craig Trottier, development director for Developers Diversified’s Western division.
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| The Pike at Rainbow Harbor is expected to give a boost to Long Beach’s tax revenue. |
CityPlace is a $100 million mixed-use project that replaces Long Beach Plaza. Built by the Hahn Co. in the 1970s, the Plaza was an inward-facing structure spanning six blocks that cut off the city’s street grid between Fourth and Fifth streets, Trottier explained.
“The mall never really worked. It was a failure in its first year,” Trottier said. Developers Diversified bought the center for $13 million from New York City-based Teachers Insurance and Annuity Association-College Retirement Equities Fund in 1998 and demolished it in 2000 to create an urban village, Trottier said.
The first phase, featuring 450,000 square feet of retail, 221 apartments and 80 condominiums, opened in August with retailers geared to everyday shopping needs. The main stores include Albertsons, Nordstrom Rack, a Sav-on drugstore and Wal-Mart. In-line tenants include Ashley Stewart, an upscale apparel retailer; GNC; Payless Shoe Source; and T-Mobile. Developers Diversified is now focusing on leasing out the project’s residential portion.
Long Beach officials provided CityPlace a $17 million subsidy for infrastructure improvements that included the remodeling of a parking garage that had blocked access through the streets, Trottier said.
At the other end of Pine Avenue, Developers Diversified is trying to create a leisurely alternative to CityPlace’s functional retail mix. The Pike at Rainbow Harbor provides waterfront retail, dining and entertainment on the site of the Pike Amusement Park, once a popular destination that, like its Coney Island counterpart in New York City, faded with time.
Kojian noted that Long Beach officials are hoping the project will lure visitors who up to now have patronized the tony downtowns of such communities as the Third Street Promenade in Santa Monica and Old Town Pasadena, which are both within a two-mile radius of the city.
The 350,000-square-foot Pike at Rainbow Harbor is to be anchored by a 14-screen Crown Theatres cinema; GameWorks, an entertainment facility with high-tech video games and restaurants; and Carnival Club, a 16,000-square-foot nightclub.
There will be a lineup of full-service restaurants, including Bubba Gump Shrimp, a seafood restaurant whose name comes from the film Forrest Gump; California Pizza Kitchen; and P.F. Chang’s. Developers Diversified plans to open the project in November.
The Pike at Rainbow Harbor is a $130 million project. Long Beach helped finance some of its infrastructure and parking costs by issuing $43 million worth of municipal bonds. But the opportunity provided by the city’s barren retail scene was incentive enough for the developer, Trottier explained.
“When we began looking at the projects, we noticed a real lack of retail in the downtown,” said Trottier. “It’s a wide-open market with a high barrier to entry,” he added, explaining that there are no undeveloped parcels left.
But though the lack of available land could discourage further development, at least the downtown is no longer deterring shoppers.
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