Southland's Pace of Development Running on High

By JESUS SANCHEZ

Jan. 4, 2000 12 AM PT

TIMES STAFF WRITER

Construction cranes and scaffolding have sprouted across Southern California as a plethora of major commercial real estate projects break ground or head for completion.

The region’s buoyant economy, low vacancy rates and a dearth of building in previous years have shifted construction activity into high gear across the region. More developers are scrambling to get financing and government approval to take advantage of the market. Local real estate developers have not been this busy since the real estate boom of the late 1980s.

An estimated 7.8 million square feet of office space was under construction during the third quarter of last year in Los Angeles and Orange counties, according to research firm Delta Associates in Alexandria, Va. Construction crews are particularly busy in Orange County, where 2.1 million square feet of office space--or 4% of the existing space--is under development.

All that activity has raised concerns about overbuilding in some markets, which could boost vacancy rates and push down rents. However, most real estate observers say the region as a whole will be able to absorb most of the new space without much problem. In Los Angeles County, for example, the vacancy rate for industrial space remains below 5% despite ongoing construction.

Here is an update on some major projects that are under construction or being planned across the region:

Burbank

Regent Properties of Beverly Hills has signed a development deal with the city for a sprawling office, hotel and retail project at San Fernando Road and Olive Avenue near the Media City Center mall. The $100-million project, called Burbank Plaza, will include an eight-story office building, a 300-room Marriott hotel and retail space. The project is scheduled to break ground in mid-2000.

Carson

Three buildings totaling 450,000 square feet are scheduled for completion later this month at Dominguez Technology Park, rising on a former oil field near Cal State Dominguez Hills. The park, one of the largest industrial projects under development in Los Angeles County, is designed to appeal to a mix of light industrial and office users.

Watson Land Co., which is developing the 150-acre project, said it has already leased one building, to an e-commerce company it declined to name.

Downtown Los Angeles

Developer Tom Gilmore is in the final stages of securing $32 million in financing to transform three buildings off Skid Row into loft-style apartments and stores.

Gilmore said the first of the 250 apartments--to be spread over three historic buildings along 4th Street--will be ready by June. About 65% of the retail space has been leased to a variety of tenants, including the owners of C Bar--a popular Beverly Hills caviar bar--and Hollywood Hills Coffee Shop.

On the western fringe of downtown Los Angeles, the 636-unit Medici apartment building is being built atop a large parking garage. The first phase of the $100-million complex--the largest now under construction in Los Angeles County--is scheduled to be completed later this year. The project is by G.H. Palmer & Associates of Los Angeles. It will also include ground-floor retail space and a private one-acre park for residents.

Fairfax District

Demolition crews will begin work later this month to make way for construction of a 650,000-square-foot retail and entertainment complex next to the historic Farmers Market.

Developer Rick Caruso of Santa Monica said that about 70% of The Grove at Farmers Market has been leased to retailers, including the Nordstrom department store chain. The $100-million open-air mall will wrap around the eastern and northern edges of the original Farmers Market. It is scheduled to open in August 2001.

Hollywood

A mammoth crater in the center of Hollywood marks the site for the $385-million Hollywood & Highland project. The crater will eventually be filled with the foundation and parking garage for the 650,000-square-foot entertainment and retail facility, which is scheduled to open in 2001.

The construction site has been busy for several months, but developer TrizecHahn Corp. of Canada has remained low-key about announcing leasing activity. At the time of project’s groundbreaking in October 1998, entertainer Quincy Jones had signed a lease to open a large live-music club and restaurant and Eastman Kodak Co. indicated its interest in the complex. However, the developer has made no leasing announcements since.

The city of Los Angeles approved plans last month by Los Angeles-based Pacific Theatres to build a 175,000-square-foot entertainment center around the landmark Cinerama Dome on Sunset Boulevard. Work on the $60-million project is expected to start soon. The project, which is 80% leased, will have a 12-screen theater, health club, restaurants and shops.

A legal dispute over parking has stalled plans for a $50-million retail complex at Vine Street and Sunset Boulevard. Developer Regent Properties said the lawsuit filed by affiliates of Meringoff Equities has cost it one tenant and has scared away others that may have signed up. Negotiations are in the works to resolve the dispute and get the Hollywood Marketplace--which has been approved by the city--off the ground.

Irvine

One of Orange County’s largest commercial projects involves the construction of a new regional headquarters campus for AirTouch Cellular. Lowe Enterprises of Los Angeles is developing the 450,000-square-foot headquarters, which features a cluster of low-rise buildings in the Irvine Spectrum.

The complex is scheduled to be completed in the second half of 2000, when nearly 2,000 employees will be relocated to the facility from across the area. AirTouch will lease the space from Lowe Enterprises.

Nexus Development Co. plans to break ground on twin nine-story office buildings near John Wayne Airport early this year. The Newport Beach firm had planned to start work on the 400,000-square-foot project last spring but ran into “unforeseen challenges in the financing,” said Jeff Bitetti, director of marketing.

The Twin Towers at MacArthur Place, as the project is known, has signed a lease with MSC Software for 125,000 square feet of space.

Long Beach

The developers of Queensway Bay, a $150-million entertainment and shopping complex, are awaiting the sale of municipal bonds later this year before breaking ground.

The bonds will finance the construction of a 2,200-space parking garage at the 20-acre development near downtown Long Beach. The Edwards Theatres chain has agreed to open a 3,440-seat multiplex movie house at the project, which is being developed by DDR Oliver McMillan of San Diego. The firm has set an opening date of May 2001 for the project.

On a vacant site north of Queensway Bay, Camden Properties Trust of Houston is in the early planning stages for a 9.5-acre residential complex. The firm has said it expects to complete about 400 apartments by 2002 on the site, formerly home to the Pike amusement park.

Palm Springs

Developer Excel Legacy Corp. of San Diego is working with city officials on its $64-million proposal to overhaul the Desert Fashion Plaza mall in downtown Palm Springs.

The developer would demolish most of the existing mall to create a 350,000-square-foot complex that would include a multiscreen movie theater, gourmet grocery and other shops. Work on the mall, which would be renamed Desert Walk, is expected to be completed in 2001.

A spokeswoman for Excel Legacy said city officials are reviewing its plans and that the firm is exploring what forms of economic assistance might be available from the resort city.

Playa Vista

Playa Vista developers are eager to show progress on the long-delayed project south of Marina del Rey. The ambitious 1,087-acre development received its first building permits--for a temporary visitor center and the foundation for a parking garage. The garage will serve the residents of a 409-unit apartment complex scheduled to open in early 2001.

However, Playa Vista’s owners have not yet said which companies, if any, have agreed to build the apartments and other residential communities the project plans call for.

Playa Vista also has yet to find a replacement for DreamWorks SKG, which last summer abandoned plans to build its headquarters and main studio on the site. The commercial section of Playa Vista is being handled by Los Angeles developer Maguire Partners.

Santa Monica

Water Garden Phase II--the single largest office project currently under construction in Los Angeles County--has begun to lease out space as construction crews work to finish the first part of the complex by July.

The Foothill Group, a subsidiary of Wells Fargo & Co., signed the first lease in September for 60,000 square feet of space. In addition, Santa Monica Bank has leased 30,000 square feet of space for its headquarters, according to Jerome Snyder, whose Los Angeles-based firm, J.H. Snyder & Co, is developing Water Garden Phase II in partnership with Transactional Financial at the intersection of Cloverfield Boulevard and Colorado Avenue.

Van Nuys

Two industrial buildings are nearing completion on the last portion of the former General Motors factory site to undergo redevelopment.

Veratex Inc., a maker of luxury bed linens, will occupy a 110,000 square-foot building; and Zodak, which produces home accessories, will move into a 100,000-square-foot complex.

Both buildings, which are part of Van Nuys Center at the Plant, are scheduled to be completed next month, according to development partners Voit Cos. and Selleck Development Group Inc. Both companies are based in Woodland Hills.

West Hills

The 590,000-square-foot West Hills Corporate Village is nearly complete. The $100-million project, situated on a portion of a former Hughes missile plant, includes the renovation of about 420,000 square feet of existing buildings and the construction of new buildings for Sterling Software. About 75% of the space is already leased, and the Sterling Software building is scheduled to be completed in June, according to developer Regent Properties.

West Los Angeles

EToys Inc. has agreed to lease the entire 151,000-square-foot office building under construction at the Westside Media Center. The four-story structure is scheduled to be completed by October, according to El Segundo-based developer Kilroy Realty Corp. EToys, an Internet retailer focused on children’s toys, will locate its headquarters at the facility.

The rapidly growing company also has an option to lease space in the third and final building planned for the seven-acre office park, which is at the intersection of Olympic Boulevard and Bundy Drive.

Westchester

Construction is underway on a 10-story office building and an entertainment complex at Howard Hughes Center near Westchester.

The 250,000-square-foot tower, developed in partnership by Beverly Hills-based Arden Realty Inc. and Lowe Enterprises, is scheduled to be completed in May. The law firm Fulwider Patton Lee & Utecht has agreed lease the two top floors in the building, known simply as 6060 Center Drive.

Nearby, the Howard Hughes Promenade, a project of J.H. Snyder & Co. has broken ground. The complex, to be situated next to the San Diego Freeway, is scheduled to open in November with a 22-screen movie theater, Borders Books & Music, Nordstrom Rack and other retail stories and restaurants.

In addition, Univision, the Spanish-language television network, has announced it will expand its operations at Howard Hughes Center by agreeing to lease space in a 160,000-square-foot broadcast facility that is expected to completed in late 2001.

West Hollywood

The City Council last month approved plans for a $250-million office, retail and hotel complex on the Sunset Strip. The Sunset Millennium project will include a 371-room hotel, more than 300,000 square feet of retail and office space, and two auditoriums for live theater. The project--a joint venture between Mark Siffin, a partner in Indianapolis-based Maefield Development Corp., and Leon Black, a former aide to investor Michael Milken--will rise on the south side of Sunset Boulevard west of La Cienega Boulevard.

Westwood

The $35-million renovation of the former Monty’s building is scheduled to be completed later this month, according to developer Arden Realty. About 15% of the 21-story building--renamed Westwood Center--has been leased. New tenants include legal research specialist LRN, Lehman Bros. and Grubb & Ellis. Monthly asking rents at the 21-story building exceed $3 a square foot, said Robert Peddicord, senior vice president of marketing and leasing at Arden.

The penthouse space once occupied by the former Monty’s restaurant will be leased to an office tenant. A new restaurant may occupy the ground floor.

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Hot and Not

Some Southland commercial real estate markets are seeing more construction activity because of higher demand, more available land and rising rents:

What’s Hot

urbank

Pasadena

Hollywood

Valencia

Irvine

Eastern Santa

Monica