Orange County developer Stanley Cohen was all smiles for last week's ceremonial opening of the 462-room downtown Sheraton Hotel. He beamed as dignitaries dished out praise, joined in the ribbon-cutting and watched as the assembled hotel staff warmly welcomed guests entering through the huge glass doors.
When asked a few minutes later about the other half of the $130-million Shoreline Square project--the adjoining 21-story office tower--Cohen turned serious. With the tower's opening about two months away, leasing agents say they have firm commitments for only about 10% of the 360,000 square feet of tenant space.
"It may require more patience than we anticipated," Cohen said, "but our enthusiasm for Long Beach . . . is undiminished."
A 'Bellwether' Project
There is more riding on the future of the stunning peach-colored tower at Long Beach and Ocean Boulevards than the fortunes of developers. The success or failure of Shoreline Square could send a clear signal as to whether the much-ballyhooed resurgence of downtown Long Beach will take root.
It is the first of a new wave of luxury office buildings being constructed to rejuvenate a dying downtown and erase the city's dowdy image. It is, in Cohen's words, "a bellwether" for future projects.
Shoreline Square was designed with the expectation that large corporations would flee expensive, congested quarters in downtown Los Angeles and elsewhere in favor of ocean views through golden-hued glass and interiors of imported Portugal marble and Honduran mahogany.
Although the Sheraton has reported a healthy business--even a few full houses--in the weeks preceding the official grand opening last Friday, office tower leasing has not fared as well.
Leasing activity has been "a little bit less than anticipated," Cohen said.
Spreading the Word
He said, however, that although Long Beach is bursting with promise, success comes when word begins to spread that "something exciting is happening" in an area. Long Beach is not quite there, Cohen said, but it is edging closer. "I don't think we're at that flash point yet."
The vacancy rate for top-quality office space in downtown Los Angeles is 15%, compared to downtown Long Beach with 13.5%. But the real estate brokerage firm of Cushman & Wakefield is estimating that the vacancy rate could soar to 31.3% when Shoreline Square and the World Trade Center are fully available in December.
The building's agents say that slower-than-anticipated leasing reflects the fact that it will take time for the city to establish itself as a major business office location, said Harold A. Ellis Jr., chairman of Grubb & Ellis Co. of San Francisco.
"What you see is people starting to look at Long Beach as an alternative," he said.
Jack A. Rosenberg, a Grubb & Ellis vice president, said that besides the number of offices leased in Shoreline Square, his agents are meeting with prospects whose leases would compose nearly two-thirds of the tower.
Cohen said Columbia Savings & Loan Assn. will occupy the ground floor and the stock brokerage firm of Paine Webber is also moving in.
Comparisons May Be Unfair
Other office tower developers are watching, but so far remain undeterred by the relative slow pace of leasing at Shoreline Square. Some say that comparisons are unfair because they are trying to attract a specialized type of client to their buildings.
"It's hard to compare the World Trade Center to other structures because we're a different animal," said Karen Avrashow, spokeswoman for project developer IDM Corp. The building is being pitched to companies seeking international ties and as a self-contained environment, featuring a day-care center, post office and food court.
Apparently, that strategy has met with success. More than half of the 27-story building has been leased. The first companies are not expected to move in until Jan. 1.
Three of the nation's eight largest accounting firms have already committed to leasing entire floors--Ernst & Whinney; Peat Marwick Main, and Deloitte Haskins & Sells, she said. And the brokerage firm of Bateman Eichler Hill Richards Inc. is planning to relocate to the building, she said.
Potential Is Unlimited
The marketing and leasing director handling Landmark Square, a 24-story luxury high-rise at Ocean Boulevard and Pine Avenue due for construction starting in December, said that Long Beach may be starting slow, but its potential is unlimited. And when Landmark Square opens, "likely we'll be the only new building in town in 1991," said David J. Churton, of Cushman Investment and Development Corp.
The Pike Project, an ambitious $1-billion office, residential and retail complex on the site of the city's famous old amusement park, will follow yet another kind of development strategy, said Paul W. Stern, executive vice president with the Ratkovich Co. which is co-developing the parcels.
Instead of starting with the tallest towers, the initial phase of the project will focus on construction of office buildings of between eight and 10 stories that are expected to attract smaller-sized companies, he said.
Although construction of the Pike Project will not start until late 1989 at the earliest, Stern said that success in Long Beach may well depend on the kind of aggressive salesmanship that IDM is using to lease the World Trade Center.
If agents for Shoreline Square are having trouble leasing space, "they have to be more aggressive. They do have a fine product," he said.