Costco, a retail chain known for cavernous buildings full of stacked goods, is working on a deal in Los Angeles that would put apartments full of potential customers on top of a planned store.
The Issaquah, Washington-based company is slated to be the ground-floor retail tenant in a redevelopment of a 5-acre commercial site into 800 apartments at 5035 Coliseum St. in the L.A. neighborhood of Baldwin Hills. That's according to developer Thrive Living, an affiliate of New York-based Magnum Real Estate Group, which put out a statement and renderings of the project earlier this month.
The developer is seeking approvals from the city of Los Angeles to build the project in the dense neighborhood southwest of downtown L.A. That said, the deal may have national retail implications for Costco, a retailer that's typically known for its massive parking lots and stand-alone stores.
A Thrive Living representative declined to comment on the size of the Costco, but said that there will be two subterranean levels and some surface-level parking. A Costco representative did not respond to a request to comment from CoStar News.
Gabe Kadosh, a vice president of Colliers in Los Angeles, said it appears Costco may be testing the concept within an apartment development. Kadosh, who has worked with major multifamily developers, said it's not typical for the superstore to be a ground-floor retail tenant and that he and other real estate professionals have been talking about it in recent days. Costco is a highly desirable tenant because of its popularity, which in turn increases property values and drives traffic and demand to other nearby real estate.
"It's certainly fascinating and something that people are going to be watching," Kadosh said. "Developers are going to be paying attention."
Mixed-Use Areas
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.
While a Costco with apartment units on top of its stores appears to be unusual, Costcos are often built near residential space, and a Costco at 1200 S. Fern St. in Arlington, Virginia, is surrounded by high-rise apartments.
The superstore chain operates 847 warehouses globally with an average size of 146,000 square feet, according to its website. The Costco will be the company's first in south Los Angeles. The superstore, which offers bulk items, groceries, a pharmacy and more, plans to create 400 new jobs at its future Baldwin Hills location.
Meanwhile, Thrive Living aims for roughly 23% of the units, or about 184 apartments, to be set aside for low-income households at the future Costco mixed-use development.
Los Angeles Mayor Karen Bass "has declared a housing emergency in Los Angeles, and we’re answering the call," Jordan Brill, partner of Magnum Real Estate Group, said in the statement. "Our company is focused on addressing the severe housing affordability crisis in Los Angeles, while also attracting retailers willing to make long-term commitments and deliver community-serving products and services that enrich the living experience for our residents and neighbors."
A roughly 55,000-square-foot office now sits on the 5035 Coliseum St. site, according to CoStar data. The property sold in September 2019 to an entity related to Los Angeles-based housing developer Universal Standard Housing for $18.2 million. Universal Standard Housing is no longer part of the project, a Thrive Living spokesperson told CoStar News in an email. The entity that owns the property now lists its address as the same address as Magnum Real Estate Group in New York, according to state of California records.
The Inglewood/South L.A. retail market, which includes the redevelopment site, has an average rent of $26.83 per square foot, below the greater L.A. average of $35.31 per square foot, according to CoStar data. The market's average vacancy is 3.6%, below the Los Angeles average of 5%.
The greater Inglewood apartment market, which includes the redevelopment site, has 4.4% vacancy, above the greater L.A. average of 4%, according to CoStar data. The market's average asking rent is $1,650 per month, well below the greater L.A. average of $2,191 per month.