Builders Turn to ‘Infill’ Jobs : Development: New homes are rising on Orange County sites of played-out oil fields and failed shopping centers.
Much of Orange County north of the Costa Mesa Freeway long has been bulldozed and covered with homes, stores, factories and the other elements of growth.
But built-up as the central and northern sections of the county might be, numerous vacant and underused parcels remain. And a growing number of residential developers are looking at those mature communities and discovering an opportunity in previously neglected land.
The result is so-called infill building, residential developers’ version of turning lead to gold.
Abandoned factories, faltering shopping centers and played-out oil fields all beckon, and the attractions are many.
Many of the properties are not producing satisfactory revenue for their owners or are plagued with problems like contaminated soil, so they are often cheaper than land in outlying areas. And because they are surrounded by built-up areas, there is little competition for the development company: Its project is the only new one in the area.
That latter factor helps the builder to persuade real estate-shy bankers and other investors to come up with the money needed to buy and develop the parcels.
“It is always better when talking to a lender to be the only player than to be in some master-planned community with eight other builders,” said H. Lawrence Webb, president of A-M Homes of Southern California, a Newport Beach builder that does both infill and conventional tract home construction.
Bart Hanson, a principal of Shawntana Development Corp. in Newport Beach, agreed: “Exclusivity is the No. 1 factor for us.” His 10-year-old company, which specializes in entry-level housing, has completed three successful infill projects and wants to do more.
The company’s first infill project in the early 1980s was a condominium complex at Harbor Boulevard and Heil Avenue in what is now Fountain Valley. It involved combining parcels that contained stables for a horse boarding and rental business, several older single-family homes, a small outdoor farmers market and a commercial kennel.
Shawntana financed the project with the help of a city-backed revenue bond, sold the units under a local affordable-housing program and, Hanson said, “had a great success. We had very little competition in the area, people liked the close-in location, and we built and sold 164 units in 15 months.”
That was a decade ago. Today, there is greater opportunity--and need--for infill building in Orange County than ever, Hanson said. “It is time that we go back into those cities we swept past during the county’s growth spurt.”
Infill building is a term born of bureaucratic shorthand. It means simply to fill in a parcel of land that has been passed over during the growth of a community.
An infill target can be an empty lot or a piece of land being used for a purpose no longer suitable for the neighborhood. Key sites in Orange County include the aging oil fields of Fullerton, Brea and Huntington Beach, as well as parcels isolated by freeway construction, failing shopping centers and unused warehouses and office buildings.
By definition, infill projects are in established communities, generally close to the downtown or central core. Often they combine residential and commercial or retail uses in the same project--condominiums over stores, for example--or place homes or apartments in what previously had been a non-residential neighborhood.
“There seems to be a growing acceptance of the integration of commercial and residential now, and that is not something that the L.A. Basin has been too keen on in the past,” said Robert M. Hidey, principal in the Irvine architecture firm Stockton/Hidey Associates.
The Southland’s soaring housing prices, however, and the increasing use of state redevelopment law to revive ailing downtowns have contributed to the popularity of infill development by encouraging higher densities in housing projects, Hidey said.
“And people are starting to look for alternatives to suburbia. That gives us this new layer of development,” he said. “We are seeing the beginnings of a need for urban villages that take the European approach with people living above shops.”
While there is not much development of that kind going on in Orange County, several builders are considering such projects. One of them is Southwest Diversified Inc. in Irvine.
So far, the company has specialized in suburban infill projects, which Southwest Vice President H. Pike Oliver defines as residential developments that are not in true downtown locations but that do utilize problem sites. Southwest, for example, is building a major residential project atop the oil fields of Signal Hill, a project that has required it to relocate a number of active oil pumps and clean up a sizable volume of petroleum-contaminated earth on its 125-acre parcel.
But Oliver said he and other Southwest Diversified officials have recently begun contemplating the large number of high-rise office buildings standing vacant or nearly so in Orange and Los Angeles counties.
“We haven’t formalized anything, and we haven’t found any buildings that would be acceptable, but we are looking for something that has a floor plan that could be converted into residential units,” Oliver said. “We think maybe some of the suburban business parks or maybe a hotel that is not needed would be ideal.”
Developers have found that buyers like infill housing because it is close to jobs, shopping and recreation.
“It’s an outgrowth of urbanization and traffic congestion,” Hidey said. “People can only spend so much time commuting before they just won’t move any farther out. When the limit is reached, some people turn around and start looking close in to the center again.”
Builders who have tried it like infill development because, if everything else about the project is done right, it generally sells well and brings in a good profit.
“It is a safer marketplace, with more buyers because there isn’t that much product,” said Carl McLarand, president of McLarand, Vasquez & Partners, a Costa Mesa architecture firm that has designed a number of Southland infill projects in recent years.
Infill is especially popular now because the pace of housing sales has dropped to a slow creep and many builders’ profits are being eaten up by the interest they are paying on unsold units.
At a time when one sale a week in a typical housing project is considered good, many infill developers are boasting three or four sales a week.
One of the best-selling residential developments in Orange County in the last 10 months, for example, has been the Metropolitan, a high-density condo complex plunked in the middle of the high-rise office towers that make up the Irvine Business Complex across MacArthur Boulevard from the county airport.
In the first three months that its sales office was open, the project set a blistering pace, averaging eight transactions a week from early September through Thanksgiving of 1991, when the first unit of 97 condominiums was sold out. A second building was opened for sale last month; 20 of the 45 units sold in the first three weeks.
As of June 9, the average sales pace over a period that includes several months when there were no condos to sell was 2.8 units a week. Considering only those weeks in which the Metropolitan actually had something to offer buyers, the rate was closer to seven sales a week.
“All we have done in the last 10 years has been infill developing,” said Ernest Cohen, who with his father, Robert Cohen, builds residential projects in a variety of joint ventures. “We do infill because, if you do a great job with your project, it is a terrific market.”
The Metropolitan’s success has less to do with its prices--units sell from a low of $140,000 to more than $270,000--than with its location and appeal to a previously ignored market.
More than 60% of the buyers at the lavishly landscaped complex, which is designed to evoke images of a resort despite an apartment-like density of 45 units per acre, are young, single professionals who work within a 10-mile radius of the airport, Cohen said. “There just are not a lot of sophisticated non-suburban residential alternatives in Orange County,” he said, “and we were able to tap into the market that wants this lifestyle.”
But infill doesn’t have to be of the sophisticated, yuppie school to succeed.
Newport Beach’s A-M Homes of Southern California hit pay dirt with two upscale single-family residential projects designed to appeal to the conventional Southland move-up buyer--a family with equity enough from previous homes to afford a $300,000 home.
While neither project is in Orange County, both are close: one on the site of the old La Mirada Center shopping mall and the other on a former oil-storage facility in downtown Lakewood.
La Mirada was the first new residential development in that city’s center in 15 years. The initial offering of 22 homes late last year sold out in two hours, despite prices that ranged from $265,000 to $320,000.
Subsequent phases have sold out almost as rapidly.
“We thought so much of the site that we have purchased 92 more lots for a second project,” A-M President Webb said. “For the best projects, we look for the last remaining piece of land in the central core of the community.”
AM has also begun sales at a project in central Lakewood on a former oil-tank farm at Downey Avenue and South Street, about a mile from Lakewood Mall. The company plans to build 184 detached homes of 2,200 to 2,800 square feet. Prices are expected to range from $290,000 to $360,000.
By the time the models opened June 27, AM’s office had received more than 500 phone calls from people expressing interest in the project--the first new homes in the central city in 20 years and the largest tract homes ever built there.
On opening weekend, an estimated 3,500 people viewed the models. Webb said 75 people have signed a priority list to purchase one of the first 17 units, which are to be offered for sale Saturday.
Infill projects work, Webb said, “because they appeal to people who see them as close to where they work or grew up. They are in areas where most of the homes are a lot smaller and were built 20 or 30 years ago. A lot of the people have a lot of equity but don’t want to leave the neighborhood.”
