Developer Looking for Gold in Brownfields
The shortage of land in prime real estate markets has retail developers turning to “brownfields” for expansion, which is exactly the case for Calabasas Hills, Calif.–based Westrust America Inc.’s latest retail project.
Westrust is developing The Plant, a 650,000-square-foot shopping center on 55 acres of industrial land in San Jose, Calif. It was once occupied by a General Electric Co. motor factory, which until last year produced agricultural pumps and components for nuclear power plants. Because the parcel required environmental remediation, it is considered a brownfield development, a term coined by the Environmental Protection Agency for redeveloped industrial land that contains pollutants or hazardous materials.
It’s usually a big expense to clean up the soil and other areas of an industrial parcel, but Westrust executives, who are teaming with Pacific Coast Capital and Vornado Realty Trust, see this development in their favor.
“The market is strong and underserved. The size is attractive,” said Sean Whiskeman, who is responsible for leasing and marketing at Westrust.
The project broke ground last summer and is set for a late summer/early fall opening this year. Whiskeman said there are ample opportunities for apparel retailers.
“In fact, we’re negotiating with several right now,” he said.
Letters of intent have already been signed with Target, Home Depot, Best Buy and Pet-Smart. Seven other anchor tenants are expected to sign on by the end of the summer, along with 85,000 square feet of inline space for apparel, footwear and other retailers.
The immediate market has solid demographics with average household incomes of nearly $100,000. Shoppers have been traveling to neighboring California cities such as Cupertino and Mountain View, which accounted for an estimated $2 billion in lost tax revenues for the city of San Jose, according to Nanci Klein, project manager for the city’s economic-development department.
“The city is about 24 percent under-retailed right now. We, for so long, had so many manufacturers here, and the focus was on business-to-business. This is a fantastic project because it’s an older, industrial-use parcel being replaced with new jobs.”
Klein said the surrounding residential subdivisions are among the top three or four most desirable places to live in the Silicon Valley.
Westrust is spending a lot of energy on aesthetics for the project. It will salvage GE’s former headquarters building, a historic art deco structure, which will be converted to office and retail space. In addition, the grounds will include a 2,000-squarefoot community center and a town square with a central park.
This $142 million project is near Highway 87 and located at Monterey Highway and Curtner Avenue.
CBRE Consulting in San Francisco estimates the center will generate $243 million in sales in 2008, its first full year of operation.
Westrust was founded in 1992 and has acquired or developed 47 properties in five different states totaling more than $1.19 billion in value.
The concept of turning brownfields into new retail developments has picked up in recent years, with smaller projects built in Anaheim, Calif., and Hawthorne, Calif. —Robert McAllister
