Move to downtown L.A. site right on Target
Retail giant Target Corp. is heading to downtown Los Angeles, part of a growing trend of big-box retailers taking advantage of a beaten-down urban real estate market.
The 7+Fig mall downtown — which has been without an anchor tenant since Macy’s left early last year — will get the new Target, which will be smaller than most and carry a different merchandise mix, with a heavy emphasis on food and household basics.
“It’s really about trying to magnify the relationship that we have had with those urban central core guests,” said John Griffith, executive vice president of property development at Target. “We believe that as we offer them an alternative that is immediately adjacent to where they work, where they live, that we can increase the depth of that relationship.”
Expected to open in 2012, the store will be located in a combined space on one floor formerly occupied by Macy’s and Bullock’s department stores, with offices and storage on other levels.
It will also give downtown denizens the major retailer they’ve long been waiting for, and retail analysts say Target — which is perceived as a cool place to shop by consumers despite its discount label — is the right fit.
Christine Baisez, 41, moved downtown seven years ago because she liked the big-city feel, the growing art scene and the walkable neighborhood. But she grew frustrated at having to leave downtown to go grocery shopping and buy household staples for her loft.
“We don’t have anything. It’s terrible — I have to drive to Silver Lake or South Pasadena,” she said. Target “is a must.”
Target’s agreement to rent more than 100,000 square feet at the corner of 7th and Figueroa streets is one of the largest retail leases in decades downtown, easily surpassing the block of 54,000 square feet taken by a Ralphs supermarket in 2007.
It’s also the first step in a large-scale makeover of the 7+Fig shopping center, said Bert Dezzutti, senior vice president of landlord Brookfield Office Properties.
The 330,000-square-foot mall — about the size of a small regional shopping center — opened in 1986 and was intended to cater primarily to downtown office workers. Since then, thousands of residents have moved into the neighborhood, and the multibillion-dollar Staples Center and LA Live developments have opened a few blocks away.
“LA Live has food, but no place to shop,” Dezzutti said. Brookfield plans to turn 7+Fig into a more sophisticated center to complement the improvements on nearby streets. “There will be a lot of exciting apparel and consumer retailers as well as iconic brands and signature eateries.”
He declined to identify potential tenants but said other retailers were in discussions to rent space. The leases of some existing tenants expire at the end of the year and will not be renewed, he said. Among the largest businesses now are Morton’s Steakhouse, Gold’s Gym and California Pizza Kitchen.
With its emphasis on food, Target is expected to offer competition to the nearby Ralphs, which is popular with downtown residents.
Executives at Target and Brookfield declined to discuss financial details of the lease, which was signed earlier this week.
Downtown’s retail landscape is showing signs of improvement after hitting bottom in 2008, said real estate broker Derrick Moore of CB Richard Ellis.
Seventh Street has emerged as a restaurant row, and more upscale eateries are coming, along with other retailers, he said.
“Restaurants and bars still lead the way,” Moore said. “Now we have more supermarkets looking for sites, and soft goods retailers including fashion are testing the market.”
Target’s downtown move signals a new direction for the Minneapolis-based discounter to bring smaller stores to more dense metropolitan markets. The big-box retailer, which currently has 1,752 stores, is predominantly based in suburban areas.
Target rented nearly 104,000 square feet downtown; in comparison, the average Target store is 130,000 square feet, and the average SuperTarget is 175,000 square feet. With a smaller space and a mainly urban customer, the store will offer a reduced assortment of furniture and outdoor items.
Griffith said that in addition to the downtown L.A. location and a smaller store planned for Seattle, the discount chain is also looking at opportunities in San Francisco, Chicago, New York, Boston, Philadelphia, Miami, Minneapolis and the Washington-Baltimore area.
The announcement echoed similar plans recently announced by rival Wal-Mart Stores Inc. to open smaller stores that will focus on groceries in urban and small-town markets.
Bill Simon, chief executive of Wal-Mart U.S., said at the company’s annual meeting last month that there were “hundreds, if not thousands, of opportunities in the U.S. for small formats.”
Historically, discount stores have had a difficult time penetrating urban markets, said Bill Dreher, a retail analyst at Deutsche Bank Securities. With the recession opening up a glut of large commercial real estate spaces around the country, retailers have begun to focus on untapped opportunities.
“Both the major discount stores — Target and Wal-Mart — have recognized that to finish ‘storing up’ the United States they need to have a format which addresses the urban market,” he said, adding that city dwellers “tend to have a higher disposable income and higher taste level.”
Even warehouse behemoth Costco Wholesale Corp. has begun eyeing opportunities in more crowded areas, announcing over the summer that it would open a handful of stores in mall locations, including one at the Village at Westfield Topanga in Canoga Park.
“The markets that are underserved or attractive these days are urban areas,” said David Messner, vice president of real estate at Costco. “As we look at where our holes are, a lot of times it turns out to be those close-in, downtown areas that have high barriers to entry from a real estate perspective.
“With the market downturn, we’re seeing more opportunities now than we have in the past. But things are still expensive — no easy deals out there.”
Downtown workers said that having a Target nearby would add convenience to their busy schedules.
“A Target would be fantastic — it would be a welcome addition,” said Natalie Stone, a research attorney who lives on the Westside but works downtown. “I’d love to be able to pick up basics on my lunch break or on my way home.”
With Target on its way, there’s only one thing missing from the neighborhood, downtown resident Baisez said: “Trader Joe’s.”