A venture has broken ground on a first-of-its-kind project that will place apartments on top of a Costco store, reflecting the way developers are converting underutilized sites into housing in supply-strained California.
Developer Thrive Living, in partnership with Los Angeles city officials, is planning to build 800 apartments above the store as part of a mixed-use project being developed on the former site of View Park Community Hospital at 5035 Coliseum St. The project is expected to be the nation’s initial Costco Wholesale store with apartments above its retail space, as Los Angeles looks to add affordable workforce housing.
The complex will replace a former office building "that stopped delivering economic and community benefits years ago," according to a statement from the developer, a national firm specializing in conversions of underused properties into housing in communities facing a shortage of new residences.
"Thrive Living and Costco are breaking ground in more ways than one, with an incredible collaboration that uses our new state laws to transform an underutilized space into a prosperous housing project and retail center," Gov. Gavin Newsom said in a statement.
The Los Angeles apartment vacancy rate remains relatively tight by historical standards at 5.1%, according to CoStar data, and most new units under construction are not geared toward lower-income renters. California, meanwhile, needs to build 180,000 homes annually to meet demand, a far cry from the 80,000 homes built on average each year over the past decade, according to the state housing agency.
The Costco project is also an example of national demand for modern mixed-use structures that combine retail with apartments, officials said, as developers seek to place shoppers and stores in walking distance of each other.
Shoppers and residents
The project, first announced in early 2023, is being developed in the Baldwin Hills neighborhood of South Los Angeles, an area that has long been seeking new affordable housing along with more grocery venues. Based in Los Angeles, Thrive Living plans to make about 180 of the apartments available specifically to low-income households, with the remainder offered as unsubsidized workforce housing.
Amenities are slated to include a fitness center, shared workspaces for residents and study spaces for students, community rooms and a rooftop pool.
Costco's store on the ground floor is expected to include fresh produce and an array of products at lower warehouse prices that the store is known for. The store is also slated to include optical services, a pharmacy and delivery, and could employ up to 400 people.
Construction is slated to take two-and-a-half years.
Los Angeles Mayor Karen Bass said during a groundbreaking event this month that “I used to live just minutes from here, and I know the hundreds of housing units, the thousands of jobs and the new wave of resources that this project will bring to this community has potential to make a generational impact on this neighborhood."
Costco is no stranger to mixed-use developments or even smaller-format stores. A Costco with a fitness center on top is located in the dense Houston neighborhood of Greenway Plaza. Meanwhile, Costco operates a warehouse in a small, roughly 72,000-square-foot space at 5225 Commercial Blvd. in Juneau, Alaska, according to CoStar data.
Though this is the first mixed-use development in the nation to have Costco as the anchor retail tenant, Costcos are often built near residential space, and a Costco at 1200 S. Fern St. in Arlington, Virginia, is surrounded by high-rise apartments.
Retail redevelopments
Newsom set a goal before he was first elected in 2018 to build 3.5 million new homes by 2025, and has since passed a wave of housing-related bills to spur development.
Thrive’s project in Los Angeles is said to be the first in the city to win approvals under the Affordable Housing and High Road Jobs Act, a new state law that supports housing and mixed-use proposals in infill areas currently zoned for office, retail and parking uses.
Other similar mixed-use projects could follow as the city looks to add rental units. A Los Angeles auto dealer in late 2023 filed plans with the city to develop 104 market-rate apartments and 26 affordable units above its Mercedes-Benz showroom in the Encino neighborhood.
Many mixed-use redevelopments that combine housing with retail are taking place at underutilized malls throughout the country, a concept designed to naturally increase foot traffic while creating a new mix of store lineups to vie for space in an already tight U.S. retail market, according to prior CoStar News reporting.
This year, Simon Property Group, the nation's largest mall owner, said it would invest $1.5 billion to diversify and densify its properties, adding 2,000 multifamily units and hotel rooms to its retail centers.
The privately owned Thrive Living, an affiliate of New York-based Magnum Real Estate Group, is focused on workforce housing and previously proposed other projects involving repurposing commercial sites. The developer last year began construction on a 376-unit affordable and workforce housing complex on the former site of an industrial storage facility north of downtown Los Angeles, backed by a $68.5 million construction loan from JPMorgan Chase and slated for completion by December 2024.