april 15-28, 2014 section b

INSIDE• Quarterly Overiew Of The Office, Industrial, Retail And Residential Real Estate Markets

• New Creative Office SpaceIn Downtown San Pedro

• Adaptive Reuse Projects HelpRevitalize Downtown Long Beach

• Explaining The Changes To TheHomeowners Association Civil Code

Real EstateQuarterly

The Psychic Temple’s new façade revealshow adaptive reuse projects are trans-forming aging and underutilized build-ings in Downtown Long Beach. (Photographby the Business Journal’s Thomas McConville)

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REAL ESTATE QUARTERLY2-B Long Beach Business Journal April 15-28, 2014

� By SAMANTHA MEHLINGER

Staff Writer

Across all sectors of the LongBeach real estate market, theredo not appear to be any storm

clouds in sight as local real estate agentsreport high demand for residential andindustrial properties and stable demand foroffice and retail space.Figures recently released by the

California Association of Realtors showthat the number of pending home salesstatewide decreased by 12 percent fromFebruary of last year to the same monththis year, but Robert Kleinhenz, chiefeconomist for the Los Angeles EconomicDevelopment Corporation, said that thisdoesn’t mean the market is cooling off.“It’s not necessarily because demand hasslacked off. I don’t think that’s the case,” hetold the Business Journal. “It is becausesupply continues to be a binding constrainton home sales activity.”Currently about 4.6 months of inventory

of single-family homes is available in LosAngeles County, meaning that the currentnumber of homes on the market would allbe sold in 4.6 months if no other listingscame onto the market, given currentdemand. “The long run average is morelike the 7 to 7.5 month range,” Kleinhenzsaid, although he did say that the supply hasimproved slightly since last February’s fig-ure of 3.3 months of inventory.“Discretionary sellers are not coming out

in the numbers that would otherwise hap-pen at this point in the housing cycle,”Kleinhenz said, explaining that potentialhome sellers are still waiting to accrue backvalue in their homes lost when the housingbubble burst in the Great Recession. Sales prices in the single-family market

continue to increase as supply cannotmeet demand. Kleinhenz said that theaverage sales price of homes in LosAngeles County increased 15.2 percentfrom February of last year to this year. InLong Beach, the increase was evengreater at 27.1 percent. The demand for single-family homes has

been partially driven by low interest rates,according to Eric Sussman, professor ofthe University of California Los Angeles’Ziman Center For Real Estate and manag-ing partner in Sequoia Real Estate Partners.However, now that interest rates and homeprices are starting to climb, fewer home-buyers are going to be able to afford thetypical 20 percent down payment needed topurchase a home at the median price range.Sussman said that he is projecting

demand to cool off this year as affordabil-ity decreases, and as other factors such aschanges in household formation trendsreduce demand. Demand in the multi-fam-ily market, however, should increase in thecoming year, Sussman predicted.“For five years now we have been seeing a

decline in vacancy rates here in the SouthernCalifornia region, including in Long Beach,and as that has occurred we have seen a

Urban Village, a mixed-use development at 1081 Long Beach Blvd. in Downtown Long Beach, is scheduled for an August completion, two monthsahead of schedule, according to Vice President of Coldwell Banker Commercial BLAIR WESTMAC Brian Russell, who is leasing retail space at theproperty. The development by AMCAL Housing features 129 market-rate apartments and 5,000 square feet of ground-floor retail space. The projectis across the street from St. Mary Medical Center and has direct access to the Blue Line, connecting Long Beach to Downtown Los Angeles.(Photograph by the Business Journal’s Thomas McConville)

Residential And Industrial Real Estate Markets Continue Going Strong, Other Commercial Markets Remain Stable

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REAL ESTATE QUARTERLYApril 15-28, 2014 Long Beach Business Journal 3-B

continuous increase in apartment rentalrates,” Kleinhenz said of the regionalmulti-family market. “I would expect to seethat the rental rates are going to continue torise, that vacancy rates are going to con-tinue to be quite low,” he added.Another strong market characterized by

low vacancy, rising prices and high demandis the South Bay industrial real estate mar-ket. Kleinhenz estimated that the vacancyrate of industrial properties in the SouthBay is currently about 2.3 percent, a single-digit vacancy rate that is “among the lowest[rates] in the country,” he said. He noted that there has been year over

year job growth in industries supportingthe industrial market, such as trade andtransportation, a sector that according tothe California Employment DevelopmentDepartment (EDD) gained 15,900 jobs inGreater Los Angeles from February of lastyear to the same month this year. He alsonoted that the San Pedro Bay Ports areanticipating about a three percent increasein cargo volumes this year, which couldalso play into demand.While Los Angeles County gained 27,000

jobs in the professional and business serv-ices sector last year, according to EDD sta-tistics, office vacancy rates in L.A. Countyand Long Beach remain high, Kleinhenzsaid. The latest figures available indicate theSouth Bay has a 20.9 percent vacancy rate inthe fourth quarter of 2013, he said, explain-ing that this figure was higher than L.A.County’s 16.9 percent vacancy rate. Long Beach also continues to have a

higher unemployment rate than the county– the city’s unemployment rate is currentlyabout 9.8 percent, while L.A. County’s is8.9 percent, Kleinhenz said. However, thisis an improvement over last year’s unem-ployment rate of about 12 percent. Despite improving employment figures,

Kleinhenz said that because the averageamount of space utilized per worker isdecreasing and office users are becomingincreasingly more reliant on telecommut-ing employees, “it will be awhile before theoffice market recovers.”While retail trade employment for the

Los Angeles County area dipped by about5,600 jobs from January to February, thatjob sector had growth of about 2.7 percentyear-over-year. The South Bay retail realestate market has a fairly low vacancy rateof about 4.2 percent, which closely mirrorsthe rates of Long Beach’s downtown andsuburban markets, according to a first quar-ter report from CoStar Group. Local retailreal estate agents told the Business Journalthat the highest demand continues in highlytrafficked areas, such as those along busi-ness corridors or adjacent to the waterfront.

Long Beach Office Market Remains Steady

In an otherwise sleepy Long Beachoffice market, activity spiked in Aprilwith the sale of the 383,652-square-footShoreline Square building at 301 E. OceanBlvd. for $101.7 million.San Diego-based Parallel Capital

Partners, Inc. purchased the 20-storyShoreline Square office building fromGuggenheim Real Estate due to its loca-tion, according to the company’s CEO,

Matt Root. “One of the most desirablecoastal markets in the region, DowntownLong Beach is undergoing a significantrenaissance and transforming from a mar-itime-centric economy into one ofSouthern California’s most diversified anddynamic waterfront destinations to live,work and play,” Root said in a statement.The building is 90 percent leased.Root’s comments reflect predictions

made by local office and multi-familyreal estate agents in the BusinessJournal’s 1st quarter real estate report.The brokers had anticipated that severalmulti-family developments underway inthe downtown area would attract morecommercial investments.Apart from the sale of Shoreline Square,

Long Beach office market activity has

remained relatively flat following somemajor leases to medical users in late 2013and early this year, according to RobertGarey, senior director at the commercialreal estate firm Cushman & Wakefield.“We had a nice little upsurge in the 4thquarter due to a couple of health care com-panies that expanded,” he said, referring toSCAN Health Plan leasing an additional50,000 square feet at the Kilroy AirportCenter/Long Beach and Molina Healthcareadding 42,000 square feet to its lease at1500 Hughes Way. “Since then, there hasbeen a little leasing here and there butnothing to really change or move the nee-dle at all,” Garey said.The health care industry continues to be

the main force in Long Beach’s officemarket, Jeff Coburn, principal at Lee &

Associates, observed. Coburn and his col-league, Lee & Associates’ Principal ShaunMcCullough, helped secure the sale oftwo planned office buildings in DouglasPark last year, which just broke groundlast month. Long Beach Gastroenterology,currently located near Long BeachMemorial Medical Center, purchased thesmaller, 38,000-square-foot building,while Laser Skin Care, currently locatedin Bixby Knolls, purchased the 52,000-square-foot building. Locating in Douglas Park allows the

medical groups to create their own Class A(high-quality) office space with easilyaccessible parking, Richard Lewis, manag-ing member of developer UrbanaDevelopment, LLC, told the Business

(Please Continue To Page 4)



Journal. “The location is just so central,” hesaid of Douglas Park’s appeal. The newmedical buildings are already about 65 per-cent leased, Coburn said.While he predicted a slight downtick in

occupancy in the coming quarter, Gareysaid the overall trend is that the office mar-ket is getting better. He noted that somecompanies are expanding their footprintswhile others are downsizing, so the marketis remaining stable. One company soon onits way out of Long Beach is HCP, Inc., ahealth care properties investment firm thatis relocating to Orange County in May andleaving behind 37,000 square feet of officespace at Kilroy Airport Center/Long Beach.

Despite the upcoming vacancy, Coburnnoted that the airport area submarket insuburban Long Beach is faring better thanDowntown Long Beach, with an esti-mated 11 to 12 percent overall vacancy.He estimated that the downtown officemarket has a vacancy rate of about 15.5 to16.5 percent. Coburn also pointed out that a compari-

son of the yearly and quarterly office mar-kets shows demand for office space isgradually increasing. “We’re in a strongerand better position today than we were lastyear or the year before,” he said. “Andbecause of that, we’re starting to see rentalrates . . . strengthen. Landlords are slightly

raising asking rates or holding firmer to therates that they have.”Due to low interest rates, the demand to

buy office space has been somewhatstronger than the demand to lease, Coburnobserved. However, there isn’t enoughavailable office space for companies look-ing to purchase. “We have a number ofclients right now . . . [who] are looking forbuilding sizes between 5,000 to 20,000square feet . . . and there is not a lot ofproduct out there,” Coburn said. Garey saidthat while there is little inventory, anythingin the office market “priced right will sell,”thanks to attractive interest rates.Both Coburn and Garey anticipate the

office market to remain steady and perhapsgradually improve this year and to mirrorjob growth. “The health of the commercialreal estate market is tied to employment,”Garey said. “When unemployment is onthe uptick, [there] goes the demand.”

Low Sales Inventory CausesIncreased Leasing ActivityFor Industrial Properties

Although demand to buy industrialproperty in Long Beach and the

South Bay is strong, a lack of inventory iscausing sales activity to slow as buyersstruggle to find buildings, according tolocal industrial real estate professionals.“The challenge is that we have very little

for sale,” John Schumacher, executive vicepresident at CBRE, Inc. told the BusinessJournal. Schumacher handled the sales ofproperties at Pacific Pointe at DouglasPark, and recently secured the 1.1 million-square-foot lease of a former Boeing prop-erty to Mercedes Benz with his CRBE col-league Brian DeRevere. “If you run a sur-vey of available buildings [that measure]50,000 square feet and up, 98 percent ofthose buildings are going to be for leaseonly,” he explained.Brandon Carrillo, a principal at Lee &

Associates who specializes in the industrialmarket, stated that while there is highdemand to buy industrial space in LongBeach, “There is no supply.” He added thatthe current lack of sales activity caused bylow inventory is “night and day” to early on

Former Charter Communications Building SoldThe former Long Beach offices and studios of Charter Communications was sold earlier this month to TriGate Capital, LLC of Dallas, and Lotus Real EstatePartners, LLC of Irvine for $6.1 million. The 83,000-square-foot building is located at 4031 Via Oro Ave. in the Freeway Business Center at the junction ofthe 710 and 405 freeways. The building was sold by Long Beach, LLC. Clyde Stauff of Colliers International’s Irvine office represented Lotus/TriGate in theacquisition, with Scott Becket of DTZ’s Los Angeles office representing the seller. (Photograph by the Business Journal’s Thomas McConville)



in the first quarter, when he had observedstrong sales activity as buyers took advan-tage of low interest rates. While his com-pany is still calculating first quarter marketstatistics, Carrillo anticipated that Lee &Associates’ industrial report might show a$2 increase in the average sale price ofindustrial buildings in Long Beach to about$114 per square foot. While most of the South Bay is built out,

Douglas Park offers companies the chanceto purchase land and build their own prop-erties. Recently, Schumacher closed

escrow on a 3.5-acre parcel of land atDouglas Park, where Shimadzu PrecisionInstruments, a company specializing inanalytical, medical and aerospace instru-ments, plans to build a 55,000 square footbuilding and relocate from Torrance.The lack of sales product is causing

some companies to lease space instead ofbuy, Carrillo noted. “That’s working out forlandlords because we’re getting good activ-ity on our lease product, whereas beforethere wasn’t much action on those,” he

Shoreline Square Office Tower Purchased ByParallel CapitalPartnersThe 20-story Shoreline Square officetower, the city’s first LEED Silver certifiedstructure, was sold earlier this month for$101.7 million to San Diego-basedParallel Capital Partners Inc. ShorelineSquare is located at Ocean and LongBeach Boulevards in Downtown LongBeach, across the street from the LongBeach Convention & EntertainmentCenter. The 383,652-square-foot officebuilding is 90 percent leased. The build-ing was developed by Stanley Cohenand North American Taisei Corp., withgroundbreaking in August 1986. A fewmonths later, Marubeni Real EstateDevelopment Inc. became a partner.Shoreline Square opened two yearslater. (Photograph by the BusinessJournal’s Thomas McConville)




said. This activity marks a shift away fromlast year’s market dynamics, when mostactivity in the local industrial marketoccurred in sales rather than leasing. Carrillo said lease rates might increase

as this trend continues. Lance Ryan, senior vice president of

marketing and leasing for Watson LandCompany, which has vast industrial hold-ings in the South Bay, made a similar pre-diction. “The market is very healthy andthe vacancy is so low that it stands to rea-son that there will be further upward pres-sure on rents,” he said.Overall, the industrial market in the

South Bay is “very tight,” Ryan said,adding that Watson Land’s properties are“virtually fully occupied.” The entire South Bay, which includes Long

Beach and other cities such as Carson andTorrance, has a current vacancy rate of about2.3 percent, according to Schumacher.Compared to the whole South Bay, LongBeach has a lower vacancy rate of 1.8 per-cent. The availability rate, which accounts forspace that is going to become available but isnot currently vacant, is 5.5 percent in theSouth Bay and 3.8 percent in Long Beach,Schumacher said. Overall, Long Beach is“faring better than average,” he added. The

South Bay has a total of 217 million squarefeet of industrial product, of which LongBeach has 19 million square feet.Certain types of buildings are experienc-

ing more demand than others, Schumachersaid. He has observed more activity insales and leasing for higher quality, newerconstruction buildings. Demand for build-ings in the small- to mid-size range of40,000 square feet to 100,000 square feetrange is strong, he added. “Where we have been feeling a little

angst is in the lack of velocity in the largersize range between 150,000 to 400,000square feet in both newer buildings and

second generation product,” Schumachersaid. Buildings with older construction aretypically less desirable because they have“insufficient characteristics” such as lowceiling clearance, old sprinkler systemsand tight yard areas, he explained.Watson Land Company has been gradu-

ally tearing down old buildings in its port-folio that have these less desirable qualitiesand has been replacing them with newbuildings with high clearances. For exam-ple, Ryan said the company has two leasesexpiring on buildings larger than 200,000square feet, and has plans to rebuild themin the next four months.

� By TIFFANY L. RIDER

Editor

In an office space market with limited supply, Topaz is agem. The newly renovated 11-story building at 222 W. 6thSt. in San Pedro is making waves in the bustling community.Formerly Pacific Place, the rebranded Topaz office

building was built to suit in 1990 for a defense companycalled Logicon. Logicon was later purchased by NorthropGrumman, which occupied the building until a year and ahalf ago. After Northrop left, the building was sold toNewport Beach-based Jupiter Holdings, which subse-quently invested in a multimillion-dollar improvement ofthe 292,540-square-foot office space.“Obviously, the defense industry – Northrop Grumman

and others – had a major presence here in the South Bayfor years,” Edmond St. Geme, managing member ofJupiter Holdings, told the Business Journal. “Over time,that has, for a variety of reasons, dwindled, at least interms of its presence here in the South Bay. . . . The build-ing itself is very high quality. It had gotten a little bit tired,which is what we’ve been working on over the last 15months or so. But the bones and the basic building arevery attractive with very attractive views.”The makeover of the lobby and interior hallways as well

as the addition of an entire floor of creative office spacewas a collaborative effort of architects, Jupiter Holdingsand commercial real estate firm CBRE, Inc.

A dozen or so creative suites that range in size from1,000 square feet to 2,500 square feet make up the 3rd floorof Topaz. “If you tour the floor, you’ll see the buildoutvaries from suite to suite,” St. Geme explained. “There’sone suite in particular that is what some people view asclassic creative space. It has polished, exposed concretefloors. It has exposed but somewhat refined ceilings, a lotof glass and open space. Part of the idea is that it is avail-able for leasing immediately, but also for viewing so[prospective] tenants can get an idea of the kinds of thingswe can do for them on either that floor or other floors.”Wireless Internet is up and running on the creative suite

floor, Smith said, and that service is being expanded to theentire building. The center of that floor also features acommon conference room for all tenants. “Right now it’s abox, but we’re in the process of furnishing it and installingother furniture, fixtures and equipment,” Smith said. The average cost for a creative suite is $2 per square

foot. “The early adopters who come in are going to get thebenefit of deals because, at this point, we’re just startingto create all of this,” Smith said. In addition to multi-level subterranean parking and an

adjacent parking structure, Smith said the company plansto provide bike racks and bikes for tenants. Electric vehi-cle charging stations are also being installed for eco-minded drivers.“Between the designers, the architects and everybody,

we came up with a plan for creating the type of space that

creative companies would like to be in,” David Smith,senior vice president of CBRE told the Business Journal.Smith represents Jupiter Holdings as part of the leasingteam for Topaz. A few legacy tenants remain in the building, including

Marymount College, the Law Offices of Mariam J.Lebental, Pacific Café and offices for the Port of LosAngeles. Rockefeller Philanthropy Advisors is moving innext month to oversee the development of urban marineresearch company and incubator facility AltaSea, accord-ing to Smith.Just last month, CBRE began inviting brokers and poten-

tial clients to preview the property. Part of showcasing thespace, which offers tremendous views of the San Pedro Bayand the new Ports O’Call Waterfront project, includes high-lighting the surrounding location and amenities. When tenants walk out onto the street from the building,

they are just two blocks from the waterfront. Distinct localcompanies, restaurants and retailers are within walkingdistance, as well as attractions like the U.S.S. Iowa, the LosAngeles Maritime Museum and the Warner Grand Theatre– not to mention San Pedro’s First Thursdays Art Walk,farmers’ markets, music festivals and other activities.“The community around here is terrific,” Smith said.

“There’s a lot of pride in San Pedro. Everybody herewants to see the area succeed. Everybody is excited aboutwhat’s happening in the area.”Both St. Geme and Smith agreed that the idea is to attract

small and large companies that represent different indus-tries and bring to the building various levels of energy.“We’re trying to create momentum,” Smith said. “Our

challenge is less to sell the building and more to sell the areaand to get people here to see what San Pedro is all about.” �

New Creative Office Space Topaz Shines Bright In San Pedro

Space at Topaz, the rebranded, reno-vated office building at 222 W. 6th St.in San Pedro, is now available for lease,according to David Smith, left, seniorvice president of CBRE, Inc., and Ed St.Geme, managing member of the prop-erty’s ownership, Jupiter Holdings. Theproperty, which was once home toNorthrop Grumman, has undergone ren-ovations in the entryway and mainlobby. The 3rd Floor includes brand newcreative office space that serves as ashowroom for prospective tenants,according to St. Geme. There are sev-eral legacy tenants in the building aswell, including the Port of Los Angeles.(Photographs by the Business Journal’sThomas McConville)



Retail Market RemainsSteady, Most Demand InDowntown And Shore Areas

The healthiest segments of the LongBeach retail market in terms of

demand and occupancy continue to beclose to the waterfront as well as in hightraffic areas such as the traffic circle,according to local retail real estate agents.“A space that is well located . . . with strong

visibility, good corners and high trafficcounts – those spaces are definitely seeingleasing activity,” Adam Friedlander, seniorassociate specializing in retail properties for

Marcus & Millichap’s Long Beach office toldthe Business Journal. Friedlander and Russellof Coldwell Banker Commercial BLAIRWESTMAC agreed that Belmont Shore andBelmont Heights, as well as areas alongPacific Coast Highway such as the traffic cir-cle are desirable to potential tenants.The corner of 2nd Street and Pacific

Coast Highway continues to experiencedevelopment activity, with a City NationalBank branch and CVS/Pharmacy recentlycompleted and a Lucille’s SmokehouseBar-B-Que underway adjacent to MarinaPacifica. A planned retail project acrossthe street called Shoppes At 2nd + PCH is

awaiting an environmental impact reportbefore moving forward.Downtown Long Beach also seems to

be experiencing more demand for retailspace, according to Senior AssociateNoel Aguirre and Associate SeanLieppman of Lee & Associates, who bothspecialize in retail real estate. “I wouldsay on our properties in downtown, ouractivity has definitely been increasing inthe past quarter,” Lieppman said. Aguirre speculated that office and resi-

dential projects underway downtown arecausing interest from potential retail ten-ants. Several multi-family developmentsin the area, such as the Shoreline Gateway

towers and Urban Village, have plans forground floor retail.While Aguirre reported that these prop-

erties are capturing interest, Russellpointed out that many retail users oftenprefer to move to spaces that have a suc-cessful history, which poses a challenge fornew Downtown Long Beach retail spacescreated by mixed-use projects. “Very fewtenants want to take a risk and be the firstin a project,” Russell explained.At the Gov. George Deukmejian

Courthouse, retailers Subway and theCoffee Bean & Tea Leaf opened last week,activity that has already generated interest

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After Metropolitan Furniture moved out of this space at 237-255 Long Beach Blvd., Lee & Associate’s LongBeach retail real estate team partnered with developer JR Van Dijs, Inc. to reposition the property for mul-tiple tenants. Sean Lieppman, associate at Lee & Associates, estimated that construction would be com-pleted in August. Pictured at the property are, from left, Lee & Associates’ Lieppman, Senior Associate NoelAguirre and Associate Graham Gill. (Photograph by the Business Journal’s Thomas McConville)




Staff Writer

Long Beach’s history isperhaps most apparent

in Downtown Long Beach,where views of the port serveas a reminder of the city’s ori-gins and historic buildings,aged 80 years and older, punc-tuate the streets. Now, thanksin part to the city’s efforts toencourage developers to investin Long Beach by passing anadaptive reuse ordinance inMarch, many of these build-ings are being revitalized.In an adaptive reuse project, a

developer takes an existingbuilding and converts it fromone use to another. Over the past few years, these devel-opments have been gaining traction in Downtown LongBeach, with projects such as Michelle and John Molina’sMillworks project, which converted the aging Press-Telegram and Meeker-Baker buildings into creative andmedical office space. A recently completed adaptivereuse project, The Loft On Pine, converted a formerMasonic Temple into an event space while preserving thebuilding’s historic elements.The adaptive reuse ordinance, passed in March,

incentivizes developers by loosening restrictive devel-opment standards such as parking allotments and set-back distance from the street. “It’s another tool in ourtoolbox to help us reduce risks for developers,” AmyBodek, director of Long Beach Development Services,told the Business Journal. “If we can reduce risk in theareas that we control, which is the regulatory process,that allows [developers] to focus their dollars and theirinvestments in the risk of the unknowns,” she said,explaining unidentified obstacles could arise duringconstruction simply due to the age of the buildings withwhich these developers work. “The adaptive reuse ordinance is going to add value to

a number of areas of the city, but it is going to be mostevident in the downtown because we have got such alarge inventory of potential buildings that could qualify,”Bodek said. Second District Councilmember SujaLowenthal, whose district encompasses much of down-town, put forth the request for the city to create the ordi-nance for this very reason, she told the Business Journal.“With the adaptive reuse effort, the buildings being

brought back to life through reuse and repurposing arerevitalizing and stabilizing neighborhoods andblocks by preserving the historic context ofour community and its architecture,”Lowenthal, who is an urban planner, reflected. “One of my favorites is the Millworks

project with the Molinas as the owners. It isalready activating the area and bringinginterest in co-locating around the building,”she continued. “You see a lot of thoseemployees walking around on Pine[Avenue], so it has really activated PineAvenue,” she said, adding that this is a primeexample of how adaptive reuse “brings lifeto areas that have taken a pause.”One type of conversion gaining popularity

in Downtown Long Beach is transformingvacant or underutilized office buildings intomixed-use developments consisting of multi-family units and ground-floor retail. A proj-ect currently underway is the transformationof City Hall East, a vacant office building,

into a mixed-use residential andretail project called Edison Lofts.Construction manager Jan vanDijs, principal of JR Van Dijs,Inc., said that the interior demoli-tion is complete and constructionstarts this week.Also since the adaptive reuse

ordinance passed, two similarprojects have been submitted tothe city for approval, both in his-toric buildings. Owner LevyAffiliated brought local designerStudio One Eleven on to createplans for converting the OceanCenter Building at 110 W. OceanBlvd. into 84 residential unitswith ground-floor retail. Anunnamed developer has plans toconvert the Security Pacif ic

National Bank at 110 N. Pine Ave. into 123 multi-fam-ily units. The ground floor and basement of that build-ing are home to The Federal Bar and its entertainmentvenue, the Underground. “Particularly in the downtown when you take an

obsolete building and you convert it to residential, youare adding more discretionary dollars to the downtown,which in turn supports businesses,” Bodek said of howthese projects benefit the area. “And so we do see thatas being important to the economy and to the overalltransformation of the downtown.”Kraig Kojian, president and CEO of Downtown Long

Beach Associates, also said that adaptive reuse projectsultimately benefit the entire downtown area. “I thinkwhat adaptive reuse does, especially with the ordinancethat we just passed, [is] it allows the types of buildingsthat may lay vacant for a long period of time to havegreater use and certainly build a stronger market, bothresidential as well as ground-floor [retail],” he said. Adaptive reuse has helped to breathe new life into his-

toric buildings in the downtown area, including one ofthe oldest buildings in Long Beach, the Psychic Temple,named for the cult-like group it housed early in the 20thcentury. The Psychic Temple, located at 244 E.Broadway, is currently under construction as it is con-verted into creative office space. Its tenant and investor,advertising firm interTrend, is scheduled to move in dur-ing the third quarter of this year, according to RichardLewis, project manager with developer JR Van Dijs.“The Psychic Temple [is] a great example of adaptive

reuse,” Lowenthal said. “You have a building that wasleft for dead five years ago. It was really contributing to

blight on that street,” she recalled. The building’snew façade was unveiled a few weeks ago, reveal-ing an updated frontage that pays homage to thebuilding’s original design. “The façade is gor-geous,” Lewis said about the improvement.Lewis also pointed out that adaptive reuse proj-

ects are environmentally friendly because, as heexplained, “You’re not sending the whole build-ing into the landfill.”Bodek said that preserving downtown’s historic

buildings is also important for preserving peo-ple’s memories of Long Beach as well as theirown personal histories. “Long Beach has a his-tory and its history is reflected in the grid of thedowntown, the evolution of the buildings. Youcan see the era of a building just by looking at itsarchitecture,” she reflected. Both she andLowenthal hope the Edison Theatre, just acrossthe street from the Psychic Temple on Broadway,may be the next adaptive reuse project inDowntown Long Beach. �

Cover Story

Adaptive Reuse Projects Help Revitalize Downtown Long Beach

Plans are being prepared to convert the historic 110 W. Ocean Boulevard building at PineAvenue and Ocean Boulevard into 84 residential units and ground floor retail. (Photographby the Business Journal’s Thomas McConville)

Top: Richard Lewis, controller and project manager with locally-basedconstruction and real estate development company JR Van Dijs, checksout the progress his company’s team is making on the Psychic Templeat 244 E. Broadway in Downtown Long Beach. Above: Interior con-struction reveals the layers and levels of the 109-year-old building,which is being converted into creative office space. (Photographs by theBusiness Journal’s Thomas McConville)



from other retail companies that could takeup the remaining space, according toRussell, who manages the property’s leas-ing. While Russell had some difficulty gar-nering interest in remaining retail space atthe courthouse in previous months, the dayafter the stores opened a national yogurtchain and a “very well regarded localrestaurant owner” both expressed interestin touring the property, he said.Aguirre, Lieppman and Russell all

pointed out that Bixby Knolls is alsobecoming a more popular retail corridorin Long Beach, with MetropolitanFurniture having moved in at 4310Atlantic Ave. in early April. Although thecompany’s relocation created a vacancy inDowntown Long Beach at the corner of3rd Street and Long Beach Boulevard, Lee& Associates is positioning the unoccu-pied property for multiple tenants with thehelp of Jan Van Dijs, a real estate devel-oper who specializes in adaptive reuseprojects. Two tenants are already lined upfor the property – a local juice companyand another retailer yet to be announced –demonstrating that demand in the down-town area is picking up.Although increased demand for retail

exists in some areas, Russell speculatedthat vacancy rates remained relativelyunchanged from the start of the year,when CoStar Group reported that theoverall vacancy rate of the South Bay wasabout 4.3 percent. A recently released firstquarter report from CoStar cited thevacancy rate of Downtown Long Beachretail properties at 4.2 percent, while the

vacancy rate of the suburban Long Beachmarket was 4.6 percent. Areas of the city where retail continues

to have higher vacancy rates are typicallythose with lower socioeconomic demo-graphics, such as Cambodia Town andNorth Long Beach, Lieppman said.Rental rates, however, appear to be

holding steady, Russell said, noting thateven in Belmont Shore, where demandfor retail is high, lease rates do not seemto be dramatically increasing. To illus-trate his point, Russell noted that BJ’sRestaurant and Brewhouse on 2nd Streetwas recently listed for lease with ratesadvertised as “negotiable.”Sales prices, on the other hand, appear to

be increasing, Russell and Friedlander bothagreed. Demand to buy is strong due to lowinterest rates, Friedlander said. “What ishelping the market is the low cost of capi-tal. Interest rates are historically low,” hesaid. The average interest rate on a loan fora multi-tenant shopping center is about 4.5percent, he explained. �

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demand. That’s leading to multiple offersand is causing homes in the desirable low-to mid-price range to sell at or above askingprice, according to local real estate agents.“The single-family market in Long

Beach has been extremely strong; however,we have an extreme lack of inventory,”Tammy Newland, owner of Keller WilliamsRealty Los Alamitos, told the BusinessJournal. An average inventory is enoughavailable homes to last for six months givencurrent demand, according to Jerry LeGris,co-manager of Berkshire HathawayHomeServices California Properties.Although inventory has increased since

last year, most of the homes that make upthat additional inventory are not in themost desired price range, Geoff McIntosh,owner of Main Street Realtors in LongBeach, pointed out. “It is easing up, but thepart of the inventory that really seems to beeasing is the high end. In the low-end andmiddle market, there is still very littleavailable,” he observed. “The median price is up 38 percent from

last year and 10 percent since January,”Newland said of homes in Long Beach.The current median price of homes on the

market in Long Beach is $395,000, accord-ing to her estimates. Zillow.com, a realestate website, cites the current medianprice of homes in Long Beach as $397,500,while the median selling price is $415,000.The most desirable price range is

between $300,000 and $550,000, McIntoshsaid. “At my office meeting yesterday wehad a pretty lengthy discussion on the num-ber of multiple offers that people are seeingon things in the $400,000, $500,000 oreven low $600,000s.” Newland said that the competition

driven by low inventory is causingdemand to increase for higher pricedhomes as people struggle to find homesin the mid-range price point. LeGris has observed a similarly com-

petitive atmosphere among Long Beachbuyers. “There are a lot of buyers outthere – and a lot of qualified buyers – butthey can’t get a property because they arecompeting,” he said. As a result, homespriced below $700,000 “are selling for100 percent of value or possibly evenmore,” Newland said. Even areas with higher-priced homes,

which have more inventory and are less in

demand, are seeing price increases. In theBelmont Shore and Belmont Heights areas,for instance, home prices have appreciated15 percent since January, Newland said.

The average number of days homes siton the market varies by price range. Onaverage, homes in Long Beach are lastingabout 43 days on the market, McIntoshsaid. “But that’s dramatically impacted byprice range,” he noted. “Things in thelower to median price ranges are [lasting]much less than 40 days on market, andthings in the higher price ranges are over40 days on market.”With competition driving up home

prices, investors and flippers are backingoff from the local market, Newland,LeGris and McIntosh all observed. “Withso much pressure on the inventory in thatsweet spot below median market, peopleare frequently willing to pay so much forthe property as-is that there is no marginof profit for a flipper to buy it, redo it andthen try and resell it,” McIntosh said.

Multi-Family DevelopmentsFlourish Downtown, Investors Still Hot To Buy

Following the passage of a cityordinance that encourages adap-

tive reuse development through projectguidelines and loosened restrictions,plans have been submitted to the city totransform historic office buildings inDowntown Long Beach into multi-fam-ily units.Plans to convert office space at the

Ocean Center building at 110 W. OceanBlvd. and the Security Pacific NationalBank Building at Pine Avenue and 1stStreet into about 84 and 124 multi-familyunits, respectively, have been submittedto the city, according to Amy Bodek,director of Long Beach DevelopmentServices. “Those [projects] have been talked

about for years but I think we are actuallyon the cusp of seeing them come tofruition,” Bodek said of adapting thebuildings for multi-family residential use. The adaptive reuse plans for the proper-

ties are currently undergoing conceptualsite plan reviews, Bodek said. The OceanCenter building, owned by LevyAffiliated, was originally proposed as anadaptive reuse project about six yearsago. Studio One Eleven is on board forthe building’s redesign. The developer for


Staff Writer

Lengthy changes to the Davis-Stirling Common InterestDevelopment Act, a portion of the California Civil Code

related to homeowners associations (HOA), took effect inJanuary of this year. Rachel Lucas, managing director of HOAservices for locally-based Pabst, Kinney & Associates, Inc.,explained that overall, these changes simply provide more detailupon existing laws to help reduce confusion among HOAs. “Everyone kind of panicked because it went from being

about 1,300 laws to 6,000 laws, but really all that happenedwas that they took each one of those laws and they elaboratedon them,” Lucas said of California Assembly Bill 805, whichwas passed in 2012 and just took effect. “I do think as a wholethat the new laws actually helped a lot, because what they didis provide further clarification of items that were a gray areaand were causing a lot of problems within HOAs because . . .the civil code was kind of vague,” she explained.Conflict of interest, a key area of the civil code, was clarified

by stating that a member of an HOA who is involved in a votableitem should not vote on that matter. Another key change is that

HOAs are now required to include an open forum period on everyHOA agenda, Lucas noted.HOA agendas may also be more accessible now that the civil

code clearly delineates where they must be posted, Lucas said.“[The bill] laid it out and said you have to post it in a commonarea, or if you have TV broadcasting you can do it that way now.That did help,” she explained.Another important revision to the civil code is an overview

of everything HOAs must include in annual disclosures, whichare HOA budget and policy documents. The disclosures mustalso be annually mailed to residents to ensure HOA membersare aware of the policies. While mailing the disclosures may result in increased HOA

fees due to postage and printing costs, doing so helps to ensurethat residents cannot claim ignorance if they violate HOA policy,Lucas explained. The mailers also must state where agendas areposted and how to contact the HOA.Ultimately, Lucas believed that the changes to the civil code

benefit HOAs. She said, “I think it improved overall the com-munication between the board, the homeowners and the man-agement companies. It provided clarification rather than creat-ing more confusion.” �

Pabst, Kinney & Associates Explains Changes To HOA Civil Code

George Pabst, presi-dent of Pabst-Kinney& Associates, Inc., alocal real estate bro-kerage and propertymanagement firm,and Pabst Kinney’sManaging Directorof HomeownersAssociation (HOA)Services RachelLucas pay a visit toone of the LongBeach HOA commu-nities their companyworks with, BixbyRiviera, located at6380 Riviera Cir.(Photograph by theBusiness Journal’sThomas McConville)

This three bedroom home at 2288 Stearnlee Ave., listed at $549,900, represents the price point ofLong Beach homes that is most in demand and shortest in supply, according to Tammy Newland, ownerof Keller Williams Realty Los Alamitos, pictured. Keller Williams’ Joe Sopo is the property’s listing agent.(Photograph by the Business Journal’s Thomas McConville)



the Security Pacif ic National BankBuilding property has yet to be named.Other multi-family developments con-

tinue to drive construction and planningactivity in Downtown Long Beach. TheCurrent, the first of two planned towers ofthe Shoreline Gateway complex at 707 E.Ocean Blvd., broke ground last month. The17-story, 223-unit rental tower’s comple-tion is slated for 2016, after which a second35-story tower is to be built.Other multi-family projects underway in

downtown include the adaptive reuse ofCity Hall East into 156 units called EdisonLofts, a 222-unit complex at 245 W.Broadway and the 129-unit Urban Villagedevelopment at 1085 Long Beach Blvd.Urban Village is progressing quickly andshould be completed by August rather thanOctober, as originally planned, accordingto Coldwell Banker Commercial BLAIRWESTMAC Vice President Brian Russell,who is looking for retail tenants to occupythe ground floor.Investor activity continues to be strong

among the existing supply of multi-familyhousing in Long Beach, local real estateagents observed. “I would say the BelmontShore and Belmont Heights submarket isextremely hot right now,” Robert Stepp,owner of multi-family real estate firmStepp Commercial, told the BusinessJournal. The East Village Arts District isalso “really hot,” Stepp said. “East Arts hasgot a lot of momentum right now, and it’san area we’re recommending a lot ofinvestors take a look at,” he added. In termsof buildings that are appealing to buyers,

1980s-built structures continue to be themost popular, Stepp said. Steve Bogoyevac, vice president of

multi-family investments for Marcus &Millichap, said that buyer demand is drivenby “incredibly attractive interest rates forfinancing multi-family properties.” Headded, “It’s crazy. You can’t keep up withthe number of buyers out there.”Stepp estimated that inventory of multi-

family properties for sale is currently lowerthan at the start of the year, when an aver-age of 45 to 60 properties were on the mar-ket. Now, he calculated that about 10 per-cent fewer listings are available. While Bogoyevac also observed “a lack

of supply of properties to purchase,” hesaid inventory of multi-family propertieshas increased somewhat in the past 30days. He speculated that because saleprices of multi-family properties have risenby about five percent since the start of theyear, owners of those properties are moreencouraged to sell. “It’s a pretty upwardlymoving market still,” Bogoyevac said.The demand to buy is so high that

Bogoyevac is starting to see “off-markettransactions,” meaning that investors areapproaching owners of unlisted buildingswith offers. The vacancy rate of multi-family units in

the Long Beach area remains low at aboutthree percent, Stepp estimated. “Rents arerobust,” he added, explaining that manyowners are renovating their properties and“testing out the market” with increasedrental rates. Bogoyevac has observed thesame trend. �

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