"Some properties that contain environmental contaminants now make sense to clean up," says Kent Phillips, president of Storm Properties Inc. and Storm Western Development. "In the past, these properties would just encapsulate waste and no one would do anything with them. But it now makes sense to environmentally clean these properties up and make them assets."

Being vacant land that's practically there for the taking, many developers have gotten creative with these brownfields. The 157-acre former Cal Compact landfill site was described by the Department of Toxic Substances Control as "a landfill that accepted municipal solid waste and specified industrial waste" from 1959 to 1965, after which time the site became inactive.

Fast forward 42 years and this same site, which was commonly referred to as a "dump," is now the future home of the Carson Marketplace. Though the estimated cost of the land's redevelopment is approximately $115 million, when all is said and done an underserved city will have a center—which will also reside on the landfill's neighboring 11-acre lot—that will boast 1.3 million sf of retail, 1,200 housing units and a 200-room hotel.

Despite the land's "dumpy" reputation, development partners Hopkins Real Estate Group and LNR Property Corp., along with Carson residents and the Planning Center's Colin Drukker, who worked on the project, see it as anything but.

"When you get places like Carson that have a release of a large area of land and a populous that hasn't been served by retail, the project's going to do very well," says the Costa Mesa-based senior planner. "When you speak to residents who have seen the site plan they're perfectly happy. And it doesn't hurt that [the Marketplace] looks fairly similar to the Long Beach Towne Center, which does tremendously well."

Carson's not the only place turning lemons into lemonade. El Segundo is also priming one of its major intersections for retail. The new Plaza El Segundo, a local joint venture of El Segundo-based Continental Development Corp., Manhattan Beach-based Comstock, Crosser & Associates and Torrance-based Mar Ventures, is the first phase of the 108-acre project on the northeast corner of Sepulveda Boulevard and Rosecrans Avenue. The 37-acre Plaza, which is anchored by such tenants as Best Buy, Borders and Linens-N-Things, has opened many stores since its Thanksgiving inception, with 16 more stores, including Banana Republic, BCBG Max Azria and bebe, scheduled for spring or summer openings. The project's 71 remaining acres, however, may take some time to develop due to the decades of wear and tear that much of the land endured when it housed chemical manufacturing and industrial companies. Despite the extensive clean-up efforts that the site's soil and groundwater will undergo, those involved in the process are nevertheless optimistic that these recently untouched acres will eventually hold a large shopping center that is similar to Plaza El Segundo.

Product Placement

Most developers, cities and residents are grateful to see any kind of development pop up on an old, polluted industrial site. What many South Bay developers don't agree with, however, is taking perfectly good industrial land and rezoning it.

"South Bay, in the '50s and through the '70s, was really a hotbed for manufacturing," Phillips explains. "But as manufacturing has moved offshore and out of state, it's left these manufacturing facilities that can be redeveloped into industrial warehouse-type spaces…but [a lot of] approvals are going to residential, multifamily or retail because they generate a lot of money."

Despite the residential and monetary attractions, there is a huge downside, industrial experts argue, to the continuous depletion of South Bay's industrial base.

"South Bay is a very, very strong industrial market," Phillips notes. "In the past year or so the vacancy rate of industrial buildings is below 2%. Right now, it feels like the current rate is 0%."

Rudy Lara, a principal and executive vice president with GVA DAUM Commercial Real Estate Services, agrees that taking land so close to major water and airways from an already stretched industrial sector isn't the best thing for South Bay. "South Bay is driven by the port business and industrial and R&D," he says.

So what happens, from an industrial standpoint, when this space gets taken away and turned into housing or retail?

"You lose jobs," Phillips says. "You can't keep businesses here. People have to realize you can't keep putting up townhomes and apartments just because it creates higher value."

If South Bay continues to lose developable industrial space, especially space within close proximity to the ports, the impact it would have on local jobs and businesses would be palpable. The "International Trade Trends and Impacts" study for Southern California, which is conducted by the World Trade Center Association, cites five reasons for why the Los Angeles/Long Beach port complex is such an international trade hotspot. Among the reasons given were: the large population/customer base in Southern California; the region's large business base of more than 468,000; and the concentration of manufacturing firms in the region, including a workforce that is 916,000 people strong. The demand from the ports on South Bay and the surrounding region is predicted to increase as popularity grows. And grown it has. According to the study, in 2005 alone (the most current data available) the volume of business at the Los Angeles-Long Beach ports increased significantly. The ports' total tonnage increased 5.2% to 195,880,897 tons of cargo, while the amount of trucks and autos used to transport the cargo from the ports increased 3.6%, adding 176,021 transportation vehicles to our California highways.

Lighten the Load

Aside from curtailing job and business loss, there are other measures being taken to ensure that the extra strain on the area isn't so widely felt.

"Clear heights have gotten larger to accommodate for larger loads and, as the cost of land and buildings go up, more dock loading zones have been put in," Phillips says. "Where we would've put in four [docks] before, we're now putting in eight or 12. There's also less office space, as facilities get more automated and use more forklifts, so that allows for more warehouse space and distribution facilities."

Phillips also notes that some industrial developers are taking a cue from the vertical movement and looking into two-story facilities.

Another way in which trade and transportation are trying to lesson the burden is by cutting pollution. The Union Pacific Railroad announced in late March its plan to modernize its 20-year-old Intermodal Container Transfer Facility (ICTF) in Los Angeles into "the most environmentally modern and most efficient rail port in North America." According to the Union Pacific, upon completion of the $300-million modernization the ICTF will not only double its capacity and wherewithal to support the growth predicted for port container traffic, but reduce emissions from its facility's operations as well.

LAX is also going green within its $723.5-million renovation of the Tom Bradley International Terminal (TBIT), the airport's first project to incorporate LEED development standards. Upon completion in March 2010, TBIT will be receiving, among other upgrades and renovations, new heating, ventilation and air conditioning systems, more efficient electrical and lighting systems and new plumbing systems that will increase water conservation. The project's design will also incorporate sustainable building materials and finishes, as well as recycle or salvage more than 75% of the construction and demolition waste.

Local Companies Do Their Part

Green building isn't just popular among major trade and transportation providers and water cooler chat. Many South Bay-based companies are putting their money where their mouths are. One significant green project to emerge in the community is from Toyota. On Earth Day 2003, Toyota opened its doors to the (at the time) largest green-building complex in the United States. Composed of five three-story, Gold-certified buildings totaling 625,000 sf, Toyota's Torrance-based headquarters didn't stop there.

"For the standard of care and practice to change within the building industry we knew it would take a major corporation like Toyota to demonstrate that you can be profitable and build green and still be aligned with corporate strategies," says Sanford Smith, Toyota's corporate manager of real estate and facilities.

Aside from its 2003 renovation that included using materials with recycled content; installing high-efficiency insulation and thermally insulated glass, purchasing one of the largest commercial solar electric systems in North America, and using recycled water for cooling, landscaping and restroom flushing, Toyota has also created a Think Green! program. The program, which earned them a Waste Reduction Awards Program of the Year award in February, allowed Toyota to achieve a high recycling rate and zero waste to landfill.

The company is also making an example of itself by opening its doors to competitors, allowing them to pick the brain of one of the largest car manufacturers in the world.

For those who don't want to make the trip to Torrance, LPA, the Irvine-based architecture firm that designed Toyota's green headquarters, offers some free advice. "When you start a project early and involve [LEED certification] it's much easier to achieve than when you layer green building on a project," says Steven Kendrick, an LPA principal.

In 2007, South Bay seems to have turned a new leaf with the way it utilizes and leverages its planes, ports and plants. All three used to be somewhat of a sore, though profit-producing, spot for the area, often resulting in pollution, noise and ruined land. What once was is no more, however. The area has taken great strides to become more environmentally friendly, proving that in terms of desirability, sustainability and feasibility, South Bay is moving in the right direction.

Long Beach's Longevity

Long Beach has experienced its share of significant market activity as well. In March, the city experienced one of its largest office sales in history, the nearly $149-million sale of One World Trade Center. The 573,000-sf office complex was acquired from G REIT by an investment fund of Legacy Partners, a Northern California-based firm who has taken interest in the Long Beach market for more than two years. Craig Meyer, senior vice president of Jones Lang LaSalle, believes that new retail and housing opportunities have made Downtown Long Beach and properties like the 27-story class A office tower attractive.

"Downtown Long Beach seems to be maturing," he notes. "There is high-quality space, ocean views, a growing amenity base and housing that is very desirable. It's very easy to see why Legacy Partners saw [One World Trade Center] as a good investment."

O&S Holdings thinks it has also found a good investment in Long Beach. The Santa Monica-based firm has submitted a $41-million bid to acquire the company that oversees the lease of the Queen Mary and its surrounding waterfront property. O&S, being the initial bidder, will need to be outbid by at least $2.5 million in order for another company to take the lead on the acquisition of the Queen Mary's 66-year lease, 40 additional mixed-use acres and water rights.

This property became available in March 2005 when the property's current owner, Queen's Seaport Development Inc., filed for bankruptcy protection after the City of Long Beach claimed Queen's had received inappropriate rental credits that resulted in millions of dollars in back rent to the city. The property was appraised at more than $48 million in July 2006.

One reason why O&S may see the Queen Mary package as a good investment is the development potential that resides within it. Aside from retaining the 54 years left on the Queen Mary lease, with the possibility of an extension, the winning bidder will also obtain the opportunity to develop a mixed-use waterfront development that could include retail, restaurant, hospitality, office, entertainment and marine components.

Having so much development potential within a Southern California downtown like Long Beach could create a lot of promise, Meyer says.

"Long Beach's future, for the next 18 months, looks great," he says. "There's little new construction and continued demand for space. We've seen pretty aggressive growth rates in rents."

Expert Analysis

Whether retail, industrial or housing, experts from all product types seem to have strong opinions on where the South Bay market is and where it's going.

"The challenges are basically because of the price of land. It's affecting retailers. National retailers are fine and are entering the South Bay market. The beach cities are doing fine too. Anything having to do with a lifestyle-type center is doing well, but it's the mom-and-pops that are getting hit. They can't afford to pay these higher rents and it's going to be really difficult on them."

— Tom Torabi, SVP and Principal, Lee & Associates

"So many cities want so much retail because they want tax dollars. Without offending one particular city in South Bay, all of them have probably overbuilt. I don't know if there are any cities that have an appropriate amount of retail to make sure they're successful. In the inland cities you see a sea of red for commercially zoned land, a large percentage of which is probably underperforming."

— Colin Drukker, Senior Planner, The Planning Center

"The challenge is maintaining the depth in the leasing market. South Bay has been sporadic over the years. The average tenant size tends to be a little bit larger right now. Some years though, it's feast or famine. South Bay has always been a big discount compared to West LA, which is now $4.50 to $5 a square foot."

— Craig Meyer, SVP, Jones Lang LaSalle

"This market's been a surprise, in one sense, because of the escalating price of sales properties. What some of these properties are achieving at a sales basis. It has been going up and, at some point it may level off, but it's surprising how much demand the land is receiving from a purchase standpoint. We're witnessing this market continue to grow and grow despite speculation it will level off. The market's resiliency, as it relates to the shortage and pricing factors, is a bit surprising. It doesn't appear that any unforeseen economic or worldwide pressures will change that."

— Rudy Lara, EVP and Principal, GVA DAUM