APARTMENTS — Long Beach Heats Up for Apartment Builders

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Everyone, it seems, wants to build multifamily housing in downtown Long Beach these days.

Six projects are currently underway that will cumulatively add about 3,000 units to downtown. And most of them are high-end units.

The flurry of activity comes after a long building drought in the multifamily sector: The last new apartment project in Long Beach was built in 1992, just as the real estate recession was hitting bottom.

But in the past couple of years, a more diverse economy has emerged. Among the factors leading to the current demand for apartments were the expansion of the Convention Center, increased activity at the port, the opening of Aquarium of the Pacific, plans for new retail development at Queensway Bay and the revival of Pine Avenue, which is lined with shops and restaurants.

Now, developers are scrambling to round out the picture with residential development.

“What was needed and lacking was the development of new urban housing to bring people in and complement the renaissance taking place,” said Cliff Ratkovich, vice president of development for Atlanta-based Post Properties, which is developing a 1,200-unit project covering 10 blocks of downtown.

There also seems to be pent-up demand for housing. A preliminary study by real estate consultants Keyser Marston Associates found a market for 10,000 luxury units within a three-mile radius of downtown Long Beach.

High-end development also makes sense based on the steep development cost about $100,000 per unit. To pencil out, monthly rents will have to be set at $1,000 to $1,200 for a one-bedroom apartment and $1,500 to $1,800 for a two-bedroom, said Joshua Deng, a manager of research services for Marcus & Millichap.

Long Beach, of course, has its share of rundown housing and doesn’t hold the glamour of an address in West L.A. or Santa Monica. But downtown Long Beach does offer a mild climate, proximity to the ocean, an urban feel and a central location between downtown L.A. which is accessible by Blue Line and Orange County.

“Long Beach is a great middle-ground choice,” said Kathleen Head, a principal at Keyser Marston. “A lot of people are commuting two directions.”

Long Beach is also more affordable than other coastal areas. Overall, rents average $660 per month in Long Beach, vs. $950 in nearby beach cities.

Post’s $180 million project is the largest one on the drawing boards. It calls for an urban-style neighborhood four-story, high-density structures built to the edge of wide sidewalks, varied architectural styles and some ground-floor retail, including a market and cafes. The hope is to bring “a critical mass of people living, working and recreating in downtown,” Ratkovich said.

‘Authentic urban project’

“Our approach is to develop an authentically urban project from the ground up,” Ratkovich said. “It’s important to us to design it so it doesn’t have the feel of a project but rather a collection of buildings fused together that evolved over time.”

Several years ago, Ratkovich hooked up with Post which has shifted its focus from garden-style, suburban complexes to urban infill as Ratkovich was looking to create a downtown urban neighborhood and Post was trying to expand its operations to the West Coast.

Currently, block after block of underutilized property fills the area that Post plans to redevelop, which runs from Broadway to Fourth Street and the Long Beach (710) Freeway to Cedar Avenue.

Post has an exclusive negotiating agreement with the city, which is assembling the property and readying it for redevelopment. The Redevelopment Agency is expected to consider a master plan for the Post project area within the next month and construction is slated to begin on the first 325 units early next year.

Another huge multifamily project in the works is Houston-based Camden Property Trust’s high-end, 750-unit development targeted for the former Pike amusement park site. The 9.5-acre parcel runs along Ocean Boulevard near Pine Avenue and the waterfront, just north of DDR OliverMcMillan’s planned $150 million entertainment and shopping complex.

Like Post, Camden is envisioning an urban-style project.

“It will have a pedestrian, urban character,” said Peter Cossavella, vice president at Camden, which hopes to break ground in October. “There’s a lot of energy in Long Beach.”

Meanwhile, Genesis Realty Co. of Dallas plans to build two, 17-story apartment-condo towers comprising 556 units on Ocean Boulevard, not far from the Camden project. And as many as 350 luxury apartments and condos will be part of Developers Diversified Realty’s planned mixed-use project at the site of the defunct Long Beach Plaza mall. That project will also include a Wal-Mart and other retail stores.

“We think (housing) is a vital component to the overall project,” said Craig Trottier, development director at DDR. “The trend toward people moving to downtowns is strong.”

Two smaller, loft-style projects are also in the process of obtaining approvals. The York Rite Masonic Temple is being transformed into 72 residential units. In addition, the vacant, late-1920s Walker’s Department Store building is being converted to 46 luxury lofts with ground-floor retail.

The two loft projects were spurred by the success of the Kress Lofts, built at the site of another former department store, that has drawn a broad spectrum of residents since hitting the market in 1995. The asking price of a 2,000-square-foot Kress Lofts unit without a view is $425,000.

Ratkovich said the flurry of activity has “validated the market” for Post, which first started exploring multifamily housing in Long Beach more than two years ago, well ahead of the pack.

“What it’s done is give us a comfort level we are on target with Long Beach,” he said.

Growing population

Ratkovich and others noted there has been little new apartment development in recent years. In fact, permits were issued for only 6,500 multifamily units in all of L.A. County last year, according to the Construction Industry Research Board.

At the same time, the population has grown steadily, a trend that will continue. Long Beach’s population of about 438,000 is expected to grow by 3 percent, or 13,000 people, in the next five years, according to Marcus & Millichap Research Services, which tracks the multifamily sector.

“Even with all these (planned Long Beach developments), it’s still well below what the demand in the marketplace would suggest,” Cossavella said. “They will play off each other.”

Employment trends also appear more favorable for the city these days. While Long Beach took a big hit in the 1990s from cutbacks at Boeing Co. and other aerospace companies, a host of entrepreneurial and high-tech firms has moved into the area.

The office market has also started to come back. The vacancy rate for office space in suburban Long Beach dropped from 17 percent at the end of last year to 14.5 percent in the first quarter, while office vacancy in downtown Long Beach dropped from 18 percent to 12.5 percent in the same period, according to Grubb & Ellis Co.