Downtown Sites Eyed for New Showroom

A group that proposes to develop a new gift industry showroom in downtown Los Angeles has identified five prospective sites for what would be one of the largest commercial real estate projects in downtown in more than a decade, a building of up to 1.4 million square feet that could cost well over $100 million.

The building would house permanent showrooms for the gift and decorative home accessories industry and could be anywhere from 800,000 to 1.4-million square feet, said Bill Winsor, chief executive of Dallas Market Center, a member of the development group and one of the country’s largest showroom operators.

Winsor would not identify the five prospective sites, saying only that some are close to the Los Angeles Convention Center, and that the development group hasn’t decided whether it will renovate an existing property or build from the ground up.

A downtown location is important, Winsor said, because the new building would tie in to the California Gift Show, staged twice a year at the convention center, where it typically fills several hundred thousand square feet of exhibit space and draws tens of thousands of gift trade buyers.

The company that manages the gift show, White Plains, N.Y.-based George Little Management, is one of the members of the development group. George Little manages the gift show for its owner, Britain’s DMG Worldwide Media, the third member of the development group.

The group is working with the Los Angeles office of Texas-based Trammell Crow Co. to evaluate the prospective sites, Winsor said. Trammell Crow developed the Dallas Market Center, which is owned by the Crow family.

The showroom project, announced earlier this year, would be the first commercial real estate development of its size in downtown since the skyscraper building boom of the late 1980s and early 1990s, said Carl Muhlstein of Cushman Realty Corp., which has brokered the sale of three showroom marts in Los Angeles in the last few years.

“I question the need for a new mart,” said Muhlstein, who said he is skeptical that demand is sufficient to fill another mart building when downtown already has the 720,000-square-foot L.A. Mart, a gift industry showroom on South Broadway at Washington Boulevard.

All three owners sold their marts for prices substantially less than the cost of erecting a new building, Muhlstein said. When commercial properties sell for less than the cost of new construction, it’s usually a sign that rents are not high enough to make new construction economically feasible.

Winsor, however, said the development group believes demand is strong enough in the fast-growing gift business and related industries that a new mart would be profitable.

The new mart would provide a second set of permanent showrooms catering to the gift trade, which already fills 10 of the 13 floors at the L.A. Mart, where manufacturers exhibit their wares year-round. The L.A. Mart is operated by Merchandise Mart Properties, a division of New York-based Vornado Realty Trust. The other three floors of the L.A. Mart are devoted to home furnishings.

Merchandise Mart Properties is preparing to convert the 50,000-square-foot second floor of the L.A. Mart to “permanent temporary showrooms,” said Mark Falanga, a company vice president.

Permanent temporary showrooms, already in use in Chicago and other cities, provide permanent showrooms for exhibitors who come to town only a few times a year for important trade shows, Falanga explained. Exhibitors are willing to pay rent year-round to avoid the inconvenience of assembling and dismantling their displays and hauling merchandise back and forth each time they come to town, Falanga said.

When the L.A. Mart’s second floor is converted, Falanga said, it will have 94 permanent temporary showrooms of about 500 to 600 square feet each.

Showrooms at the L.A. Mart and the twice-yearly temporary exhibits at the California Gift Show attract buyers from gift shops, department stores, discount chains, drugstores and a host of other types of distributors and retailers in what Falanga said is a $30-billion per year U.S. gift industry. The L.A. Mart has a long-standing arrangement with the gift show that grants admission to the mart to any buyers attending the show.