California Apparel News

The Inland Empire is going luxe.

With expensive homes, new open-air lifestyle shopping centers and consumer spending that’s outperforming Orange County’s, the region is starting to see some top-line growth.

The scorching population increases and rising land values in Riverside and San Bernardino counties, once considered havens for outlet malls and regional shopping centers, have been creating new opportunities for the apparel industry. Specialty retailers such as Sephora, Coach, Williams-Sonoma and White House have trickled into the region. For the first time, the Inland Empire market is outpacing Orange County in retail sales. The region projects $35.7 billion, compared with Orange County’s $35.3 billion for 2004, based on figures from the California Board of Equalization.

The recently opened 1.2-million-square-foot Victoria Gardens open-air shopping center in Rancho Cucamonga, Calif., has also sparked a new wave of upscale chains.

“For years, the knock on the Inland Empire was that it was considered a place to find affordable housing. With the success of Victoria Gardens, we are expecting a dam to break here,” said economist John Husing of Redlands, Calif.–based Economic & Politics Inc.

Million-dollar homes

Husing said upscale shopping centers such as The Promenade in Temecula and Canyon Crossings, which is under construction in Riverside, Calif., are helping to dispel the Inland area’s image as a low-end market. While the region is still mostly family-oriented and middle class, household incomes are growing.

Husing said there are more younger, well-paid executives, managers and “techies” living inland and commuting to Los Angeles and Orange counties. “There’s more value in real estate here,” he said.

Inland Empire housing prices, while still considered affordable compared with Orange County’s, are also reflecting topend growth in demographics. New homes priced in the high $100,000s were available here only five or six years ago. Now $400,000 homes are more the norm, and the region is seeing luxury builders, including Taylor Woodrow of England and Toll Bros. of Pennsylvania, building homes priced up to $1 million. Those builders, who have projects on the Newport Coast and in other luxury communities, would not touch the Inland Empire five or six years ago.

The area is definitely on a roll, noted Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “There’s still an untapped retail market. Nordstrom doesn’t really have a presence there yet. Employment [in the area] is pretty good,” he said.

But rising land values, bringing in higher-end businesses, have posed challenges for manufacturers looking for warehouse and distribution space. As prices have climbed, more companies have had to search farther north, toward Redlands, Calif., Kyser said. More professional businesses have taken up residence in the west end of the region.

Modern industrial space

Still, the land is more affordable than in Los Angeles. Chain retailers such as Ross Stores Inc. have built giant distribution centers in the area. Ross completed its 1.3-million-squarefoot center in Perris, Calif., last year, relocating from Newark, Calif., in Northern California.

Ross spokesperson Katie Loughnot said the move was based on land prices and logistics. “It’s a good location because it’s on the train routes from the ports and because 25 percent of our store base is located in the Southwest,” she said.

Wisconsin retailer Kohl’s Corp. is building a similar facility in the region.

The Inland Empire’s modern warehouses, featuring stateof- the-art loading docks equipped for cargo containers and computerized scanning, have also been a draw.

Kyser said county officials are considering building a highspeed freight line exclusively for cargo container shipments, which would run from the ports to the Inland Empire. The line, he said, would be aimed at speeding up deliveries and relieving truck traffic and smog on highways.

The Inland Empire’s open spaces also led Sears, Roebuck and Co. to build its first California Sears Grand store in Rancho Cucamonga. The 180,000-square-foot store, which opened in November, features Sears’ typical soft and hard goods as well as grocery items for a one-stop shopping concept.

The region’s large Latino population matches well with the retailer’s customer base, said Sears spokesperson Lisa Gibbons.

Destination shopping centers

Victoria Gardens, which opened in November, is the Inland Empire’s first lifestyle center. Developed by Cleveland-based Forest City Enterprises and Lewis Retail Centers, the outdoor shopping district features about 120 stores set in a plan inspired by old California towns.

“The open-air ambience afforded by the project’s mainstreet design will promote greater pedestrian use reminiscent of traditional downtown shopping,” said developer Randall Lewis, who helped design the project with Forest City.

Lewis said the center was designed to be a destination shopping center that would draw customers well beyond the immediate vicinity.

Husing said the success has been greater than expected. Waits on busy nights at the center’s Yard House restaurant have been as long as two hours, he said.

The forecast is for growth to continue.

Riverside and San Bernardino counties will lead industrial development over the next two years, more than any region in Southern California, and rents for office properties are also expected to rise for at least the next two years, according to the “Casden Real Estate Economics Forecast” from the Lusk Center for Real Estate at the University of Southern California. The report also stated that some 50,000 housing permits and 40,000 jobs will be added to the region in 2005.