The Mall Comes Home

With land at a premium, developers are transforming old, underperforming strip malls into attractive complexes that blend residential and commercial use

By Diane Wedner
LA Times
March 29, 2004

The brick building with cream-colored trim, landscaped interior courtyard and balconies overlooking the boulevard is just steps from banking, restaurants and shopping. Mere blocks from live theater and movies, museums and colleges. Minutes from a light-rail station.

Sound like a tony residence on the Champs Elysees in Paris? A high-rise on New York City’s Upper East Side? Actually, it’s a fashionable, 120-unit apartment complex in Pasadena atop a commercial center, on a corner that a year ago housed a bank and parking. Same lot size, radically different use.

Around the Southland, in areas both worn down and wealthy, one- story retail strip malls that have seen better days are undergoing a transformation into attractive complexes that house retail and commercial businesses at street level with apartments and condominiums on top.

City officials, builders and architects -- once disinterested in mixed-use projects -- are eager to convert underperforming nail salons, liquor stores and frozen-yogurt shops, which often occupy prime real estate, into dynamic commercial and residential centers.

The reason is simple: Los Angeles and Orange counties are running out of vacant land. The urban core of Los Angeles already is built out, and parts of Orange County will be as soon as 2010, said Jack Kyser, chief economist of the Los Angeles Economic Development Corp.

At the same time the land is being gobbled up, the region will gain 1.2 million new residents. With housing already in short supply, many city planners and government officials now embrace building up, not out, combining commerce and living spaces.

“All cities should look at this trend,” said Steven Plenge, executive vice president of Somera Capital Management, a real estate investment company in Santa Barbara. “It’s a great way to combat the eyesores of dilapidated centers, it’s a good catalyst to revitalize areas and it’s a smart use of land.”

City planners in Beverly Hills agree, as do those in Los Angeles, Anaheim, Santa Ana and Long Beach. Huntington Beach is definitely on board. A former 2-acre strip mall on the city’s Main Street, which housed about 12,000 square feet of restaurants and shops, today features 37,000 square feet of retail and offices, 275 parking spaces and 42 one- and two-story residential units. The newly dubbed Plaza Almeria, which was completed in 2000, won the 2002 California Redevelopment Agency Award of Excellence in the mixed-use category.

The early success of these projects has architects and builders, many of whom used to concentrate solely on residential projects, enthusiastically pursuing the trend.

Van Tilburg, Banvard & Soderbergh of Santa Monica, designer of the Pasadena complex, already has completed dozens of mixed-use projects and has 50 in the pipeline. Among its first was the late- 1980s conversion of a dilapidated theater and hotel into a restaurant with 32 rental units on top at Broadway and 3rd Street in Santa Monica. Currently it’s redeveloping a strip of stores at Wilshire Boulevard and Crescent Drive in Beverly Hills into a 40,000- square-foot commercial center with 88 housing units aloft.

Its Pasadena complex, at the corner of Colorado Boulevard and Oak Knoll Avenue, is surrounded by retail and is close to Caltech and Pasadena City College and walking distance to the Paseo Colorado shopping center. The units, which became available six weeks ago and rent from $1,615 to $3,514, have built-in washers and dryers, walk- in closets and computer niches. The building has a pool, spa, private terraces and a sports club.

To streamline the transformation of underused commercial strips into mixed-use projects, the city of Los Angeles in 2003 passed the Residential and Accessory Services ordinance. Under RAS, which allows an increase in density for mixed use, projects may be 100% residential; if they include a commercial component, it must be on the ground floor.

With RAS in place to speed the process, the city is targeting the narrow commercial strips along Venice, Pico, Washington and Adams boulevards and Vermont Avenue, about 90% of which are underused, for mixed-use redevelopment, said Jane Blumenfeld, principal city planner for Los Angeles. The goal is to build 108 residential units to the acre.

“Strip malls have outlived their usefulness,” said Randy Johnson, a consultant at the Planning Center in Costa Mesa, a firm that advises local and county governments. “We must look at those pieces as small jewels that can be reattached for development.”

There are plenty of “jewels” in the kingdom. About 700 strip malls are ready for reuse in Orange County, Johnson said, and at least double that number in Los Angeles County.
On one mile of boulevard -- Wilshire Boulevard in Los Angeles, for example -- builders can produce about 4,000 units, architect Johannes Van Tilburg said. There is underutilized space on 250 miles of major boulevards between West Los Angeles and downtown that, if redeveloped as mixed-use complexes, could add 1 million housing units, he added.

“You look at these boulevards, at how dilapidated they are, with teeth missing, on Wilshire Boulevard at the edge of Santa Monica and Los Angeles,” Van Tilburg said. “An out-of-towner wouldn’t believe that’s the high end of town.”

In cities with high-housing density, such as Paris, there typically are 200 units to the acre, he added. In Los Angeles, there are 12 to 14 units to the acre. “We’re a one-story city. If we can build just three to four stories over retail, we’d be in good shape.”

The challenges for developers are manifold, however. Because mixed-use projects are still catching on in Southern California, lenders are unsure of their viability and reluctant to finance them, said John O’Brien of Brookfield Homes in Costa Mesa.

He added that because a complex includes a combination of uses, residential and commercial lenders don’t always know where to draw the line, with”financing gymnastics” the result.

Rezoning often is necessary to address noise, traffic and parking issues. Cities such as Chicago, New York and Philadelphia successfully adapted the mixed-use model a century ago, but residents there have easy access to public transportation and are accustomed to walking to stores. Strip malls here typically occupy shallow plots of land, which can create insurmountable parking problems for a complex that will house both retail stores and living units.

Subterranean parking lots cost about $35,000 per space, according to Hamid Shirvani, provost and architecture professor at Chapman University in Orange. Those costs, tacked on to the price of the residential units, can make them prohibitively expensive.

Developers therefore seek lots on boulevards with alleys in the back that can be converted to parking spaces. Some developers settle for “shared parking” arrangements, in which retail customers share the parking spaces with the condo or apartment residents, who vacate the spaces during daytime hours.

Overcoming these obstacles has left some builders, even those who now embrace mixed-use projects, longing for the days when building a limited number of single-story units on larger plots of land was a viable option.

“We’d prefer just residential, but we acknowledge that we have to include retail as part of our business now,” said Alan Boeker of Standard Pacific Homes, which is planning one such project in Pasadena.

Los Angeles City Councilwoman Wendy Greuel said that educating neighbors living near retail corridors about the benefits of mixed- use projects is a first step toward gaining acceptance. Also, cities must realize that the tax dollars retail outlets provide are greater when residents are housed nearby.

“This is the future,” Greuel said. “I’m an eternal optimist; I think we can do it.”