Complex to Evolve From ‘Star Wars’ to Store Wares : Business: A retail, office and entertainment park will make use of El Segundo real estate vacated by military contractors.
Where some of the brainiest minds once designed the “Star Wars” defense system, Wolfgang Puck plans to make pizzas.
This is the Continental Development Corp.’s own kind of defense conversion: Vacant buildings once occupied by the likes of Hughes Aircraft Co. and TRW Inc. at Continental Park in El Segundo are being made into an office, retail and entertainment complex akin to Century City.
The now-quiet Nash Street will be turned into a palm tree-lined block with an 18-screen movie theater, a food court and shops, including a 43,000-square-foot bookstore. In addition to the Wolfgang Puck Cafe, the upscale eatery Kate Mantilini’s, of Beverly Hills, plans to open a location there.
The project’s developers promise to create a South Bay nightspot that will attract families from nearby cities and travelers from Los Angeles International Airport.
“There isn’t a project in the South Bay with a nucleus like a central plaza, where you have an energy level like this,” said Richard Lundquist, Continental’s president. “This will be a place to see and be seen.”
Real estate analysts applaud the development, which will be completed by the end of next year, as a sensible response to the skittish commercial real estate market.
South Bay landlords have been battered by cuts in the aerospace and other industries, leaving large chunks of vacant space.
In El Segundo and Manhattan Beach, which have the bulk of the South Bay’s office buildings, almost 20% of the space was vacant at the end of June, according to Grubb & Ellis Co. in Torrance. About 12% of the industrial warehouse space was vacant.
That is no worse than South Bay and Los Angeles County as a whole, but real estate experts say that El Segundo vacancies could rise in the next two years. Defense firms still hold leases on space, although the space is unoccupied.
El Segundo “is sort of dragging down the county,” said Robert J. Starkman, who directed a recent case study of the El Segundo real estate market done by Kenneth Leventhal & Co. “It’s one of the dark spots.”
The study recommended that landlords seek other types of tenants besides aerospace firms and manufacturers. Replacements might include transportation companies, warehouse storage firms, retailers and movie studios. Even golf courses and driving ranges could be built on vacant land, the study suggested.
“What property owners have realized is that the demand for the type of space given up by defense companies is virtually zero,” said Luke Staubitz, marketing specialist at The Klabin Co., a real estate brokerage firm. “You’ll see them converting buildings into other more sensible buildings.”
The 86-acre Continental Park has fared better than other business parks. It has been able to lease about 90% of the Terrace, an office building that opened in December, 1992, and one of three dozen in the complex.
Still, the departure of some defense contractors left the landlord with big holes to fill, including a 475,000-square-foot building at Rosecrans Avenue and Nash Street. The structure has been vacant since early 1993, after Hughes and TRW moved out of the building as part of a consolidation at both firms.
So instead of trying to find a large company to fill the space, Continental has invested $8 million to renovate the six-story structure. Former aerospace offices have been divided into smaller spaces that might attract doctors, lawyers, accountants or entrepreneurs trying to start their own companies.
On the first level, there will be atrium lobbies, a central tropical garden, the food court and the two eateries (Puck’s restaurant will be his largest in the United States). The remodeled building--called the Plaza at Continental Park--is scheduled to open later this year.
The company plans an even greater transformation for several buildings across the way on a block-long stretch of Nash Street. An office building will be converted into a retail courtyard, anchored by the massive Borders Books and Music.
Another office building will be torn down to make way for Pacific Theaters’ Beach Cities Cinema, an 18-screen multiplex that will be the South Bay’s largest. A former TRW research and development building will be converted into a parking structure with 550 spaces. (A portion of the building already included parking; the office park also already has several other parking structures.)
The retail and entertainment complex will have second-level walkways sheltered by canopies and shaded by Canary Island palms, so most of the pedestrian traffic will be separated from street-level traffic.
Retail analysts said the ambitious development makes sense with the recent growth in retail sales and a rise in consumer confidence. And even with layoffs, residents in the beach areas have strong spending power to go to movies and eat at restaurants.
“No matter what, wherever you locate a store, you always got nagging doubt if the economy is strong enough to support it,” said Jacquelin M. Fernandez, retail analyst for the Deloitte & Touche accounting firm in Los Angeles. “The core beach city residents are kind of younger and established in their careers. A lot of those people are not necessarily connected with the aerospace industry.”
In fact, it was a theater chain that first approached Continental about building a multiplex in the office park, Lundquist said. That gave Continental the idea to create the retail and entertainment complex, although it eventually chose another exhibitor.
Still, some landlords have considered retail centers only to back off over fears that the markets have become saturated. Rockwell International considered turning a former manufacturing site in El Segundo into a 47-acre center, featuring warehouse-type stores and outlet shops, according to Starkman of Kenneth Leventhal. But the company now wants to simply sell the site.
Such large centers, Starkman said, “were rapidly overbuilt.”
Continental’s new development will be in a market that already includes the Manhattan Village and Manhattan Marketplace, two shopping centers just across the street.
But Continental officials and retail analysts say that their movie theaters, shops and restaurants will prove an even greater draw to what is in the area now.
“Little by little you can see that area of El Segundo is changing, not only to retailing but to some forms of entertainment as well,” Fernandez said. The Continental development “has a good chance of being the centerpiece.”
If it works, Continental might expand and build even more shops. If it doesn’t, the developer still has a more diverse group of tenants moving in. Soon to occupy some office space in another portion of the business park: a nondenominational church.
