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Developers Tend Toward Trendy Retailers To Bring In Customers, Other Tenants

With its green moss archway and hip décor, GiorgiPorgi in downtown Los Angeles has become one of the many trendy must-visit coffee shops in the area.

A year after opening next to Little Tokyo, the small coffee shop on Third Street has been receiving offers from developers to either relocate or open a second location in their development. 

GiorgiPorgi coffee shop in downtown Los Angeles

"We’re in negotiations with a couple of places now but nothing definite,” GiorgiPorgi co-owner Giorgia Cirillo said.

Trying to lure startups, unique retail stores, chefs or “cool” businesses with a strong following is part of a growing trend among developers pivoting away from traditional retailers, according to retail panelists at Bisnow's recent SoCal CRE Leadership Conference at 1 California Plaza in downtown Los Angeles.

Macy’s, Sears and other department chain stores have become déclassé and are fighting for survival in a much more competitive marketplace. At least three Sears department stores in the Los Angeles area — Hollywood, Santa Monica and Boyle Heights — have plans to undergo some type of mixed-use redevelopment.

“The news flash is those properties have been dying for years,” Merlone Geier Partners Executive Managing Director Scott McPherson said.

“Anyone who thinks Sears is going to have a surge or Kmart, or JC Penney, they are the walking dead — at least in our opinion,” said McPherson, whose Merlone Geier Partners is developing a former Macy’s site in North Hollywood into a mixed-use lifestyle center, NoHo West.

Merlone Geier Partners Executive Managing Director Scott McPherson, The Runyon Group principal David Fishbein, C+C Ventures founder Clare DeBriere and StoreMatch co-founder Jon Sulley

The Runyon Group principal David Fishbein said many of those retail areas that once anchored department stores have become difficult to market.

Fishbein, whose firm is rebranding the Woodland Hills Village Plaza Shopping Center as the Valley Country Mart, said giving customers a service-oriented product or experience has become the name of the game.

“A lot of these large national chains and brands for decades that have been successful are now having to completely reinvent themselves,” Fishbein said. “If they aren’t, they just aren’t going to make it.”

“The winning projects right now are ones that focus on the more interesting chefs, the more interesting retailers and services that create this kind of experiential destination,” Fishbein said.

Bisnow's Kevin Morgenstern, Merlone Geier Partners Executive Managing Director Scott McPherson and The Runyon Group principal David Fishbein

But how do you lure those businesses? By offering concessions or discounts, C+C Ventures founder Clare DeBriere said.

“Certain tenants that are huge draws you need to make concessions for,” she said. “Because if you get those tenants, you’ll get all the other ones that will pay a higher rent to be next to those very special places.”

GiorgiPorgi's Cirillo said she is surprised by the amount of attention her coffee shop has received from customers and developers.

She makes it a point to talk to her customers as she pours their coffee into custom-made ceramic cups.

"We do a different type of service here," she said. "We like to figure out how our customers are feeling and what they like. It’s a conversational process rather than systematic.”