Growth From Within

The claim that Los Angeles is a multitude of suburbs in search of a city has never been entirely fair. Today, it is downright wrong, especially as shown by the strength and diversity of its entertainment and retail centers, the most booming of which are bolstering urban cores throughout the region. These retail districts have been a source of economic strength even as the housing market—traditionally a prime economic engine—for the most part has dramatically deflated.

These districts are found in the wide array of independent municipalities that have invested in redeveloping their downtown cores—from Santa Monica and Glendale in Los Angeles County to cities such as Brea in Orange County. The prime example is Los Angeles’s own downtown, whose mix of fortuitously preserved historic districts and new construction provides a diverse canvas for retail innovation.

The retail innovation at play in Los Angeles has also produced significant civic leaders. Rick J. Caruso, founder and CEO of Caruso Affiliated, has not only developed landmark entertainment districts such as the Americana at Brand in Glendale, but is also considered a likely 2013 Los Angeles mayoral candidate. And Timothy J. Leiweke, president and CEO of Anschutz Entertainment Group (AEG), after putting downtown’s L.A. Live entertainment district on the map, has raised his profile even higher by proposing a new NFL stadium.

ULI has long recognized the importance of leadership in development and its potential—when it works best—to provide vision for entire communities. Recently, ULI launched the Robert C. Larson Leadership Initiative to focus on how leaders affect trends in the commercial/retail financing and development space.

Another institution focused on large-scale retail’s development role in cities is the University of Southern California (USC) Center for Megacities. It promotes the renaissance of large urban areas such as Los Angeles by pulling together innovations in financing, research, technology, private sector initiatives, planning, and public management. Jean-Pierre Bardet, chair of the USC Sonny Astani Department of Civil and Environmental Engineering and director of the USC Center on Megacities, researches how retail and entertainment developments affect communities and infrastructure, especially as they relate to health and cultural environments.

“The landscape of Los Angeles has changed dramatically over the past ten years. Among other things, it has evolved into a culturally diverse playground for entertainment experiences,” says Bardet.

Although people flock to megacities such as Los Angeles for better job opportunities, they also seek a better quality of life, says Bardet. He cites developments such as L.A. Live—the large-scale, mixed-use district around Staples Center—as those emerging to satisfy an innate human need for exciting as well as secure urban environments. “Energy is continually evolving in downtown Los Angeles, and L.A. Live is a vibrant example of city rebirth,” he says. “It is a testimony of why clean and safe cities have attracted people together in the history of mankind.”

The L.A. Live entertainment campus includes 5.6 million square feet (520,000 sq m) of apartments, nightclubs, ballrooms, restaurants, movie theaters, and concert halls, as well as the landmark Ritz-Carlton Residences at L.A. Live.

“At AEG we have always prided ourselves on creating projects that are innovative, sustainable, guest friendly, and able to not only fit into but also complement the existing infrastructure of our environment,” says Leiweke.

Downtown Los Angeles would do well to replicate the success of New York City’s Time Warner Center.

The project’s evolving partnerships and plans now include a proposal for Farmers Field, a $1 billion privately funded, 72,000-seat stadium that would return the National Football League to Los Angeles 15 years after the Rams and Raiders left within months of each other. Leiweke is quick to insist that the proposal involves no additional taxes. In July, he told the city’s Ad Hoc Committee on the Proposed Downtown Stadium and Events Center that the proposal’s memorandum of understanding provides for “full repayment of the city bonds by new revenue sources,” and “expressly contemplates that the majority of new tax revenues generated by Farmers Field will accrue to the general fund, providing a much needed source of new revenue for our city in the coming years.”

The stadium plans revolve around smart growth principles and are intended to trigger economic drivers for the community. With or without football, L.A. Live has already capitalized on the billions of dollars of transportation infrastructure investments surrounding it, including the Metro Red Line subway. This is one reason why Leiweke envisions the stadium as “the ultimate piece in this world-class, urban event destination,” he told the committee. “We see the entire L.A. Live sports and entertainment district as the perfect urban infill project . . . to create a true 24-hour environment.”

Leiweke remains confident that the city will move forward with the development plans for the NFL stadium, which could bring 25,000 new jobs, five new hotels, and other new projects that would change the dynamics of the city.

AEG is developing entertainment centers around the globe. Chief among them is London’s new O₂ destination with the live music club indigO₂; a multiplex theater; an exhibition center; bars, restaurants, and leisure attractions at Entertainment Avenue; and the O₂ arena, where rock, pop, and classical music performances will be held, as well as sporting events, including 2012 Olympic competitions.

The smart growth opportunities in such large districts are also what inspire companies such as MacFarlane Partners, the prominent investment and development company focused on urban revitalization. As a partner in a number of large projects—including the Time Warner Center in New York City, as well as developments in Washington, D.C., and the San Francisco Bay area—MacFarlane Partners has provided investment management services for institutional investors since 1987. In Los Angeles, MacFarlane Partners is an equity investment partner for select joint ventures, including the 54-story Ritz-Carlton Residences at L.A. Live.

“People want to live in urban settings where they can work, live, play, and shop as a pedestrian,” says MacFarlane Partners president Greg Vilkin. “We are committed to helping create and foster those settings.”

He advocates “the great city strategy,” in which an educated workforce encourages new entrepreneurs—models of which date back to Renaissance cities such as Florence. “Hundreds of years ago, there were great city-states, and in some ways we aspire to return to that,” says Vilkin. “The Bay Area, Seattle, southern California—there are eight to ten American cities that are the major growth drivers of the next generation based on human resource development. If you look at the last 100 years of the economy, we went from an agricultural economy—driven by natural resources—to a much more human-resource economy.”

With the decline of the for-sale housing market and no rebound apparent anytime soon, Vilkin believes the potential exists for entertainment districts to take up the slack of urban revitalization. This coincides with the rise of the for-lease multifamily market—dominated in many ways by members of the millennium generation.

“The rental housing market is not in decline. What makes a household is household formations and jobs,” says Vilkin, who notes that the millennium generation, now surpassing the baby boomers in number, dominates this housing market. The cultural shift represented by the rise of this generation—which is far more mobile and not predisposed to owning a single-family suburban home—is also found in the desire for high-density urban nodes based on mass transit and walkability. These values also underlie large downtown entertainment districts.

“It’s all about smart growth—compact and walkable urban regions with developments that are transit oriented and promote walkable and bicycle-friendly land use, including for neighborhood schools, and mixed-use development with a range of choices for housing,” says Vilkin.

The team at Caruso Affiliated has a similar philosophy. Over the past 20 years, it has completed new developments and property repositioning throughout southern California while setting new standards for retail environments. Based in Los Angeles, it has a portfolio of successful and recognizable open-air retail and entertainment centers throughout the country that includes the Grove in L.A.’s Fairfax District and Americana at Brand in Glendale.

“Creating great places is not just about properties and their surrounding geography,” says Rick Caruso. “It’s about evolution, responding to the consumer, and addressing what the consumer desires and cares about. That continually changes, so we are constantly listening and changing.”

The Grove in Los Angeles, Its design of shops and restaurants incorporates multiple architectural styles,

The Grove, which debuted in 2002, currently attracts 18 million visitors per year. Its design, with 575,000 square feet (53,400 sq m) of space offering shops and restaurants on 20 acres (8.1 ha), incorporates multiple architectural styles, including classic art deco, Italianate/Mediterranean, and Spanish mission. Although they are new construction, the Grove’s two- and three-story buildings are characteristic of urban shopping districts that have developed over time and are adjacent to the historic Farmers Market complex that dates to 1934.

Following on the success of the Grove, Caruso took outdoor shopping, dining, and entertainment destinations to another level with the Americana at Brand in Glendale. Opened in 2008 with 75 shops and boutiques, as well as casual and fine-dining restaurants and residences, Americana at Brand is designed as one- to three-story retail buildings with three to four stories of residential space above—including 100 luxury condominiums and 238 apartments. The project also has signature Caruso elements such as a large green for free entertainment, an elaborate fountain, and a trolley to transport guests around the center.

Caruso officials estimate that Americana at Brand has generated 2,500 jobs, and the residential component of the Glendale campus added 338 housing units downtown. Caruso Affiliated is poised for growth with plans to double the company’s size through new developments in the next five years.

“The appeal of destination developments like the Grove and the Americana at Brand is that they can be a magnet for visitors and serve as a catalyst spurring additional private development and investment,” says Caruso. “For cities, that means several sources of additional revenue from sales, property, and utility taxes, as well as improving the image of the city, which helps in attracting new businesses and residents. When the Grove opened, nearby businesses on Third Street, Fairfax Boulevard, and Beverly Boulevard also benefited from the influx of new visitors to the area. Homeowners saw their property values increase as they now have a very desirable amenity in the heart of their neighborhood.”

While such large, new-construction entertainment centers grab the spotlight, historic districts in the region have also made a strong showing by repurposing the city’s cache of architecturally significant buildings into retail and residential districts. Downtown L.A.’s Old Bank District, historic Broadway Theater District, and other neighborhoods are integral to the economic viability of the city and convey authenticity.

“Don’t let anyone tell you L.A. has no history,” says Cedd Moses, proprietor of 213 Inc., which owns a string of restaurants and bars built in the city’s architectural gems. “Block after block, it’s everywhere you turn in downtown—classic old buildings that are absolute, mind-blowing jewels. Large and small, these places are products of long-forgotten craftsmanship just waiting to be discovered by new generations.”

Driving the success of both types of retail—new construction and historic—is a thirst for interacting with other people. In retail today you can buy anything online, but as Vilkin explains, “The reason people go shopping is to satisfy a social need.”

He points to equally successful mixed-use areas—although smaller in size—such as Los Angeles’s Larchmont Village, which has thrived for decades just west of downtown. “People are looking at authentic, safe areas like the Larchmont area where everything is clean, safe, accessible, and you can live, eat, work, and play all within a few hundred feet,” he says. “Different clientele want different types of environments. With the diversity of historic districts and new developments, it is the best of all worlds.”