Big Retailers Bet Big on the Inner City
The largest commercial development to be built in South-Central Los Angeles in more than a decade will soon test a premise long held dear by urban planning theorists--that large companies can turn a tall profit in the inner city.
Most national and regional retailers, however, have been notoriously reluctant to test that theory, opting instead for neighborhoods that are more prosperous, if less densely occupied. When Southern California emerged from the early-1990s recession, developments sprouted throughout the region--but not in South-Central. Perceptions of low local incomes and high crime were widely credited with thwarting new construction.
Ceremonies today will mark the official groundbreaking for Chesterfield Square, a $75-million shopping center at the southwest corner of Western Avenue and Slauson Boulevard being built by Los Angeles developer Chris Hammond and his partners, including locally grown pro football star Keyshawn Johnson and Brentwood-based developer Katell Properties.
Hammond’s Los Angeles-based Capital Vision Equities development firm and Katell Properties already have signed Home Depot, Food4Less and McDonald’s to leases at Chesterfield Square, which is scheduled to be completed in December. The developers expect to rent several smaller shops before or soon after construction is finished.
Hammond and his partners hope the presence of prominent retailers at Chesterfield Square, and the hoped-for success of those retailers, will serve as a catalyst for additional developments in South-Central and other low-income neighborhoods.
Finding large retailers willing to lease space in the 285,000-square-foot center was one of many hurdles to launching the Chesterfield Square project, according to Hammond, a onetime political aide to former Los Angeles Mayor Tom Bradley. Hammond switched to development 10 years ago and has spent those years developing about 2,000 affordable housing units, primarily apartments, in South-Central Los Angeles.
Hammond said other keys to getting the project underway included the assistance of a number of city officials, especially Councilman Mark Ridley-Thomas, a loan from Los Angeles Community Development Bank, financing from Bank of America, the partnership with Katell Properties and the support of a number of church and community groups, including Ward Economic Development Corp., West Angeles Economic Development Corp. and the Greater Bethany Economic Development Corp.
Hammond said he first thought about building housing when he learned the Chesterfield Square site might be available, but decided on a retail center because he believes nearby residents are starved for places to shop. He said he sought the partnership with Katell Properties for its expertise in retail project design and development, as well as the greater financial clout of a larger firm such as Katell.
The 22-acre site is the largest parcel currently available for development in South-Central L.A. and the biggest project to be developed there in more than 10 years, according to Hammond, who said the developers assembled seven separate parcels to create the space.
Nineteen tenants were relocated, and demolition crews in December began clearing the land of buildings that once housed a dairy, an old lumberyard, a brick-making facility, a neon sign company, a few retail shops, two cold-storage lockers and a liquor store.
Hammond said development has been slow in coming to central Los Angeles, despite Southern California’s sustained economic recovery, because, “It’s taken awhile for people to realize that there have been improvements here.”
He credited a Pepperdine University study last year with pointing out the need for retail stores and other service businesses in the inner city. As reported previously in The Times, the study found that South Los Angeles is served by 65% fewer grocery stores and 40% fewer banks than most other parts of Los Angeles and Southern California.
Hammond and partner Katell say Chesterfield Square is ripe for retail development because of the density of the population in South- Central, where about 500,000 people live within a three-mile radius of the future shopping center--coupled with the spending power of the residents and the lack of competing retailers.
Based on the Pepperdine study and other economic data, Hammond said, “It doesn’t take a lot of vision to see that there are lots of pretty decent medium incomes looking for a place to shop in these areas.”
Jerry Katell is accustomed to building in more-affluent areas of Los Angeles and the San Fernando Valley, and admits he had reservations when he considered his first central-city development.
“I was skeptical because we hadn’t done any development in this area, but it didn’t take me very long to realize that the demand was there, the demographics were there to support a major retail center, and that this is one of the most under-retailed areas in the entire region,” Katell said.
Once his firm and Hammond’s company agreed to go forward with the project, Katell said, “it became an issue of convincing tenants to lease there.”
As pleased as Katell and Hammond are to have big national chains committed to their project, they pointed out that not all such retailers are ready to take the leap into South-Central, and a number of companies turned them down.
“We still have a ways to go in getting people comfortable in the inner city, and, given the economics, it’s hard for us to understand that,” Hammond said.
Most large national and regional retailers remain reluctant to open inner-city stores in Los Angeles despite what many consultants believe is an opportunity to reap substantial profits, according to Alfred Gobar of Placentia-based Alfred Gobar Associates, a longtime retail real estate consultant in Southern California.
“There are some small grocers who have gone into the Hispanic areas of Los Angeles who are doing tremendous sales volumes,” Gobar said. Some of the small operators are achieving per-square-foot dollar volumes of sales that are “twice what a good Vons in a middle-class Orange County development would do,” Gobar said.
Shopping centers in the inner city potentially represent “the next wave” of retail development, according to Tom Jirovsky, a partner at Los Angeles-based Kosmont Associates, a business and real estate consulting firm.
Jirovsky said “a lot of opportunities” exist for inner-city retail developments despite the general overbuilding of retail stores in other parts of Southern California.
“While the average incomes are lower, the population density is sometimes two to three times as high,” Jirovsky said.
Jirovsky said retail development has been a long time coming to South-Central Los Angeles “because of the perception that it’s a high-crime, low-income area"--not because of any lingering effects from the early-1990s recession that virtually halted commercial development in Southern California.
“Development didn’t go there for decades before the recession, so the recession wasn’t really a factor one way or the other,” Jirovsky said.
He said big corporate retailers, especially, have been reluctant to venture into the inner city.
However, “If this project is developed well and managed well and the tenants do as well as I think they can do, then certainly other retailers are going to see that this is a good opportunity,” Jirovsky said.