Up and down the waterfront near downtown Long Beach, there is a mini-boom in the apartment and condominium construction market.
On a sandy lot near the Aquarium of the Pacific, Camden Property Trust has several trucks and trailers parked, as it prepares to build an upscale 750-unit apartment development that will have sweeping views of the ocean, Catalina Island and the Queen Mary.
Down the road at 350 Ocean Blvd., Genesis Realty Inc. of Dallas is getting ready to build two, 17-story apartment-condo towers with 556 units.
And blocks away, Brookfield Homes Southland Inc. is already selling condos in its 70-unit luxury housing project called the Meridian.
The mini-boom in apartment and condo projects is being fostered by pent-up demand for upscale housing in an urban environment with a beachside atmosphere.
“What we are seeing is that there is a huge demand for high-end apartments,” said Jeffrey S. Goldman, a regional manager for Marcus & Millichap, a real estate investment brokerage company.
During most of the 1990s, nothing was built to satisfy this market because capital was scarce and rents were flat. The last new apartment project in Long Beach was built in 1992, just as the recession-ravaged real estate market was hitting bottom.
A preliminary study last year by real estate consulting firm Keyser Marston Associates Inc. concluded that there was strong consumer demand for 10,000 luxury units within a three-mile radius of downtown Long Beach.
“All of a sudden, at the end of the 1990s, capital became available,” said Kathleen Head, a principal at Keyser Marston Associates.
And then everyone seemed to have a project on the drawing board.
Scuttled attempt
The largest project was drawn up by Post Properties. The Atlanta-based company was planning to develop a 1,290-unit project covering 10 blocks of the downtown area, running from Broadway to Fourth Street and the Long Beach (710) Freeway to Cedar Avenue. The city of Long Beach was assembling the property for redevelopment.
But Post Properties dropped out of the $180-million project late last year. Some industry observers said the primary factor behind that decision was the intense competition in the downtown apartment sector. “They came to the conclusion that there were so many projects on line further ahead and in better locations, that it would be tough,” said consultant Head.
But Cliff Ratkovich, vice president of development at Post Properties, said the primary reason was that the city of Long Beach wasn’t coming up with enough money to improve infrastructure, such as roads, around the property.
“We’re not terribly concerned about there being a glut in the market,” he said, “because there is a significant pent-up demand for multifamily housing in Southern California. Long Beach is no exception.”
As for the numerous Long Beach projects that are going forward, the most successful ones will be those that finish first and have the best location near the ocean, several industry observers agreed.
“We’ve always said there is going to be a first-mover advantage and that location is going to play a role,” Head said. “We definitely thought there was going to be a glut, but now that the Post Properties project is dead, it won’t be as much.”
While the Camden and Genesis projects are expected to satiate much of the demand for luxury apartments, there are a few smaller developments that will do well even though they are located in the heart of downtown.
Assorted activity
The York Rite Masonic Temple is being transformed into 72 residential units. And the old Walker’s Department Store building from the 1920s is being converted to 46 luxury lofts with ground-floor retail space.
Both of these small projects are close to the shuttered Long Beach Plaza mall, which is being overhauled by Developers Diversified Realty. The Ohio-based company is calling the new mall City Plaza and redoing the entire structure, which will be anchored by a Wal-Mart store. The $60 million project will also have a 120-room hotel and 350 luxury units.
Over the years, Long Beach, which has an overall 9.5 percent apartment vacancy rate, has become a more desirable housing market for several reasons. While rents in middle-class neighborhoods average about $600 to $700 a month for a one-bedroom apartment, upscale one-bedroom apartments go for $800 to $1,000 month.
To cover costs in the new luxury apartment buildings going up near the beach, one-bedroom rents will have to average $1,000 to $1,200. But retail experts believe that there are enough upwardly mobile residents searching for an urban setting who will pay those prices to live near a downtown that has become a happening spot on weekends.
Over the last few years, the city has made a concerted effort to turn its once-dying downtown, dominated by Pine Avenue, into a vibrant commercial area. And it has been relatively successful.
After expanding the Long Beach Convention Center several years ago, a flurry of well-heeled restaurants opened up in the downtown area. Then retailers like Crate & Barrel, The Limited and Z Gallerie moved in.
In 1998, the Aquarium of the Pacific opened with the promise that across the way a $100 million entertainment/retail project called Queensway Bay would be developed, housing 15 movie screens, a McCormick & Schmick’s and other retail stores.
That development, also being undertaken by DDR, has been stalled since Edwards Cinema dropped out of the project.
While developers are optimistic that there will be a flurry of demand for the new apartments and condos near the downtown area, they are hoping they won’t see a repeat of the early 1990s, when two seaside high-rise condo projects stood vacant for years before they were occupied.
