Retail Impacts Perception of Mixed-Use Builds

LOS ANGELES—Although retail is a small investment at the Bloc—a major mixed-use development in Downtown Los Angeles with retail, office and hotel from a joint venture between the Ratkovich Co. and National Real Estate Advisors—it has one of the biggest impacts on perception. The property is approximately six months from its opening, and has signed a healthy roster of retail tenants, all of which fit into a unique mold: they are mostly boutique in style, have a creative edge and have an entertainment or experiential quality. These tenants have received the most buzz, despite the significant office and hotel components.

“It started with the retail. From an economic perspective, the retail is a small part of the overall investment. The hotel and the office are much bigger investments, but the retail has a disproportionate impact on the perception of the project and on the value of the other parts,” Jeffrey J. Kanne, president and CEO of National Real Estate Advisors, tells GlobeSt.com. “As a national investor, retail is a hard thing to invest in today because the real competition isn't the store down the street the competition is the internet and everything that you can buy online. The retail that really makes sense in an urban setting is, other than service retail, experiential retail that is really different.”

The retail roster includes Macys, which had long occupied the space before the joint venture purchased and began renovating the property, along with men's retailer Wingtip, cultural hub Free Market, and independent movie theater Alamo Draft House. “We are trying to pick tenants that will offer an experience, and that can be anything from a service to excellent food. I think tenants are looking to be in a similar environment, because that is where young people want to be,” adds Kanne.

The mixed-use property is highly anticipated, and will have a huge impact on the Downtown market once it is open. One of the most significant characteristics of the project is its proximity to public transit—it has a metro station on site. That is highly unusual for Southern California and is expected to be a game changer. As a result, however, the project has been very complicated—especially considering that it is an adaptive reuse project, not new construction as are most of the mixed-use developments springing up nearby. “The Bloc is a very complicated project, and very few people would have taken it on,” says Kanne. “Those are the kinds of projects that we invest in because we would prefer to invest in properties that we can buy off market, that require a lot of capital and that are complicated because that really sorts out the competition. Had we not found Ratkovich as a partner—with their knowledge of downtown and their ability to do adaptive reuse projects—we would not have done this one.”

The Bloc recently announced signing three new tenants to the office portion of the project, bringing the office occupancy to 60%. The new office tenants include DLR Group, Newmark Grubb Knight Frank and Studio One Eleven.