Retail construction in Orange County has been a rarity over the past three years, but the city of Laguna Hills appears ready to make up for lost time.
Several hundred thousand square feet of new and reworked retail space appears to be in the cards for OC’s 28th largest city by population, which currently has a retail base estimated at about 2.5 million square feet, or about 8% of retail space in South OC.
The newest project in Laguna Hills broke ground last week at the intersection of Moulton Avenue and La Paz Road.
Vintage Real Estate LLC of Los Angeles began work on an expansion of the 60,000-square-foot property formerly known as Moulton La Paz Shopping Center, which is about half a mile from the San Joaquin Hills (73) toll road.
The estimated $17 million project includes the renovation of the existing center—it’s been renamed the Village at Nellie Gail Ranch—along with the expansion, which will nearly double its size
The additions to the property will include The Fresh Market, a high-end European-style grocery store that has two other locations in the state. It’s expected to open early next year.
The project “is in a central location in the heart of a mature community with strong demographics that are attractive to a variety of retailers,” Vintage Real Estate chairman Fred Sands said in an announcement about the project.
The developer’s data show a population of about 140,000 within a three-mile radius of the center, and an average household income of $120,000.
Other developers also appear sold on the city’s demographics and location.
Merlone Geier Partners of San Francisco is planning a major renovation of the 68-acre Laguna Hills Mall, the city’s largest shopping center, which it bought this month.
The center, which runs about 847,000 square feet and sits just off the Santa Ana (I-5) Freeway next to El Toro Road, was sold by Indianapolis-based Simon Property Group LP for undisclosed terms.
Simon’s latest annual report put the property’s value at about $98 million, with accumulated depreciation of the nearly 40-year-old property at nearly $30 million.
Merlone Geier partner Jeremy Meredith, who works from the company’s San Diego office, said his firm will take the next few months to finalize a strategy for revitalizing the dated property, whose anchor tenants include Macy’s, JCPenney, Nordstrom Rack and Sears.
Simon’s financial report shows the mall being about 73% occupied, although occupancy rates for the main common area of the mall appear well below that figure. The food court there has been shuttered for nearly two years, among other prominent vacancies.
Grocers, movie theaters, restaurants and other national retailers are said to be under consideration as part of the mall’s renovation. Tenants said they’ve been told that it could take close to six months before renovations move ahead.
Laguna Hills city officials last year put the price of the mall’s redevelopment, which at the time was expected to include some residential construction on underused portions of the property, at $55 million.
Merlone Geier officials wouldn’t provide specifics of their plans but noted the “unique opportunity” Laguna Hills Mall provides.
“It’s rare to be able to get 68 acres of real estate in the heart (of South OC),” Meredith said.
Few Mega-Projects
The plans moving forward in Laguna Hills come in a retail market that’s seen little development of late.
“Retail development remains sparse in general,” according to a recent market report by the Newport Beach office of CBRE Group Inc.
There’s been a smattering of small centers built across the county, as well as a number of single-tenant retail buildings in the 50,000 square foot and smaller variety, but there’ve been no stand-alone retail centers added to the county’s inventory in four years, according to CBRE’s data.
The last large shopping center to open, the 466,000-square-foot Anaheim GardenWalk, quickly fell into financial difficulty after its 2008 opening. Lenders took it over in 2010 after its initial developers defaulted on a $210 million construction loan
A trio of New York investors bought the Anaheim mall late last year and are now looking to revamp the center, whose vacancy rate was about 50% at the time of the sale.
A few larger projects are now in the works as the economy thaws.
In Buena Park, early-stage work is moving ahead for a 460,000-square-foot project called The Source, which is being developed by Lynwood-based M+D Properties.
The Source, going up at the intersection of Orangethorpe Avenue and Beach Boulevard, is expected to hold shops and offices, along with a four-star hotel and an entertainment center for concerts, conferences and other events.
The project is about a mile from Knott’s Berry Farm and is expected to open late next year.
Also expected to move ahead soon: the 191,000-square-foot retail portion of Huntington Beach’s long-stalled Pacific City development along Pacific Coast Highway. It is being handled by new owner DJM Capital Partners Inc. of San Jose.
Fitness Focus
Conversion of former big-box stores into gyms and fitness centers remains a busy source of business for area developers.
The largest retail project currently under construction, according to CoStar Group Inc. data, is just north of Laguna Hills in the city of Laguna Niguel, where a former Home Expo Design Center is being turned into a 127,000-square-foot gym operated by Chanhassen, Minn.-based Life Time Fitness Inc.
That’s more than twice the size of a typical gym replacing a big-box store.
The Home Expo had been shuttered since 2009, according to the city. The new fitness center is expected to open by early next year.
A flagship LA Fitness gym is also moving ahead at the Park Place mixed-use campus in Irvine. It’s set to open by year-end.
