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South Bay Galleria Seeks Help From Neighbor

At a time when malls nationwide are losing customers and stores, the South Bay Galleria believes it can ease its own pain. The plan: develop an adjacent, nearly vacant shopping center in a way that drives traffic to the Redondo Beach mall.

The $30 million project by mall owner Four City Commercial Group – dubbed South Bay South because it’s on the Galleria’s south side – is expected to break ground this spring. It should take about 12 months to complete.

Currently, the 11-acre shopping center contains a Bank of America, a three-screen discount movie theater called Redondo Beach Cinema 3, parking areas – and lots of vacant space. A large building once housed a CompUSA store and a Rite Aid pharmacy, but they closed, respectively, in 2007 and 2009. A former bowling alley at the southern end of the site was demolished years ago.

Four City, which has owned the mall and shopping center since they were constructed in 1984, intends to preserve the bank but demolish the theater and vacant building. In their place, it will construct about 119,000 square feet of retail space, including three “anchors” of more than 20,000 square feet each, as well as several smaller shops. A separate sit-down restaurant also will be built.

“The idea is for people to go there from the mall to shop, or to go there first and then go to the mall,” said Kenneth Lee, vice president of development for Cleveland-based Four City, who acknowledged the shopping center is now blighted. “It will probably have a little different branding identity, but our intention is to make it a part of the mall.”

With about 140 shops and spanning some 950,000 square feet, the 25-year-old Hawthorne Boulevard mall is ranked by the Business Journal as the 14th largest in the county. It is anchored by a Macy’s; Nordstrom; and Kohl’s, which moved into a former Mervyn’s site after that chain closed in 2008.

But the Galleria faces stiff competition from the county’s largest mall, the Del Amo Fashion Center, in nearby Torrance. In addition, within a few blocks of the mall is a Target and, nearby, another large vacant storefront that once housed an Expo Design Center.

The planned development comes at a time when malls everywhere are hurting. U.S. mall vacancies rose to 8.6 percent in third quarter 2009, the highest in at least a decade, according to Canton, Mass., real estate research firm Reis Inc.

Several county malls have responded with major expansions and other strategies aimed at attracting tenants.

Culver City’s Fox Hills Shopping Center, hit hard by competition from other upgraded malls on the Westside, embarked on a $180 million renovation in 2008. The mall, owned by the Westfield Group, also changed its name to Westfield Culver City.

Santa Monica’s Macerich Co., which owns Los Cerritos Center, is in the final stages of a $95 million improvement there that will add a 139,000-square-foot Nordstrom store and other retail.

Bill Pearson, principal owner of Pasadena research firm Retail Analysis and Planning, said the Galleria’s plan is “logical,” but it was unclear how customers will react.

“Conventional retailing is really struggling right now, so they’re racking their brains to find out what will work,” he said. “The idea is well founded, but whether it works remains to be seen.”

Jury still out

Lee said Four City is being careful to lease out the rebuilt shopping center to tenants that will not compete with the existing anchors and smaller shops in the Galleria.

He would not disclose the name of the eating establishment, nor the center’s three major future occupants except to say that they will be “nationally recognized retail tenants” and that they already have committed to the spot.

The smaller shops, he added, will be occupied by “some services, some quick-serve restaurants and general retail.”

Four City also has designed the shopping center to facilitate pedestrian between it and the mall. Aside from signage, there are connecting sidewalks, shared parking areas and common landscaping that will encourage shoppers to view the complex as a single destination.

City Planning Director Aaron Jones said he believes Four City’s plan does an admirable job improving the linkage between the two shopping areas.

“Our intent is to encourage patrons of the main Galleria to make the journey on foot to the south side of the property; to basically activate that end,” he said.

One remaining question is whether Four City will be able to fully lease up the new shopping center in a miserable retail environment that has left vacant storefronts in the Galleria.

Laurie L. Koike, general manager of the Galleria, would not disclose the mall’s vacancy rate, but acknowledged the mall has been adversely affected.

“We’ve been hurt like everyone else, though, overall, we’re holding our own,” she said.

However, Pearson was optimistic that Four City would lease out the new space as long as it had solid tenants for the biggest stores.

“If they’ve got anchors lined up that are good, they could rent out the rest of the place with their eyes closed,” he said.

Also optimistic is Jones. He estimates the shopping center will generate nearly $50 million in annual sales – which would mean about $475,000 in additional sales taxes for the city.

“We’re really excited,” he said.

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