The lack of new supply means that, when a shovel does hit the ground, the retail industry pays attention. Because new ground-up development is happening in Southern California. Even large projects are fi nding homes in the Southland. Mike Hieshima, senior vice president and principal at SRS Real Estate Partners, knows that’s something worth noting. “The basis for the excitement is the re-emergence of large-scale groundup development,” he says. “It has been nearly a decade since we have experienced it.” Hieshima points to two projects. One is City Lights, a 350,000-squarefoot, open-air retail center being constructed on the former East Hills Mall site in Bakersfi eld. It is scheduled for completion in spring 2027 and is expected to include 22 major retail tenants, as well as nine pad buildings.

The other project, the Shops at the Triangle in Murrieta, will be even larger at completion. Planned on roughly 64 acres between interstates 15 and 215, Phase I will include about 279,500 square feet of retail and commercial space on 36.5 acres, with around 25 buildings. To be sure, neither project was a quick response to current demand. Hieshima notes both had been in the works for years, with high-credit retailers committed long before the projects were able to move forward. “Financing and costs were the signifi cant restrictors,” he says. “I feel a main driver was developer and merchant cooperation to meet fi nancial hurdles and patience to wait for the market to improve.” That patience can be particularly necessary for large projects. After all, there’s a glut of work to be done before a developer even knows when — or whether — the build will make sense. “The recipe for successful retail development remains consistent over time: patient, if not cooperative, landowners and sellers knowledgeable about the challenges of ground-up development in any market, particularly during current conditions,” says Philip Voorhees, partner at Bison Partners in Irvine. Strong tenant relationships can also lead to substantial pre-leasing, he adds.

“Most retail construction is tenant driven,” Voorhees continues. Speaking of tenants, Eastvale recently landed a big one. Walmart opened a 170,995-squarefoot Supercenter there in January. “What makes this project particularly noteworthy is that it represents Walmart’s first ground-up store construction in California in 15 years,”

says Alexander Fung, deputy city manager. Situated on 25 acres at Limonite and Archibald avenues, the Supercenter was significant for other reasons as well. “It addresses a long-standing retail need in Eastvale,” Fung adds. A recent market analysis found more than $252 million in annual general merchandise leakage as Eastvale residents traveled elsewhere for many everyday purchases. “The addition of the Walmart Superstore helps retain a portion of that spending locally,” he continues.

“Walmart’s investment sends a strong signal…that retailers are increasingly following population growth and locating in high-growth suburban communities where consumer demand is outpacing the available retail supply.”

Of course, Eastvale isn’t the only high-growth suburban community. Chino and Ontario Ranch are adding rooftops as well. Taken together, the three areas are expected to deliver more than 50,000 new housing units in the coming years, Fung notes. That type of growth is already fostering additional retail development. Read points to Wood Investments Companies’ the Ranch at Model Colony in Ontario as one example of the larger, grocery-anchored centers that are still moving forward. He notes that the large-scale projects penciling today tend to share a few recognizable characteristics. Most lead with necessity-based retail, then round out the mix with soft goods, fitness, food and beverage, wellness, medical and service uses.

“Follow the population and the rooftops, and that’s where you will generally see the most ground-up retail development activity,”

he adds. That same thesis is supporting Canopy at Great Park in Irvine. The roughly 11.5-acre grocery-anchored project by Almquist Development will be situated within the Great Park master-planned community. The 90,000-square-foot center is set to include T&T Supermarket, In-N-Out, Philz Coffee, and additional restaurant and retail tenants. Don MacLellan, managing principal of Faris Lee Investments, believes projects like Canopy have an advantage.

“This experiential destination will be the first of its kind in this neighborhood,” he says. “The ground-up developments are occurring in areas that are void of needed retail — either grocery-anchored in new housing developments or areas that have high barriers to entry.”

Then there’s the retail projects that aren’t following rooftops, but being planned alongside them. Cotino, the first Storyliving by Disney community in the U.S., is being developed on 618 acres in Rancho Mirage. Plans call for 1,932 residences, up to 175,000 combined square feet of office, restaurant and neighborhood commercial space, 400 hotel rooms, and a 24-acre lagoon with beachfront recreation, waterfront retail and restaurants. Sean Smith, director of economic development for Greater Palm Springs, says that public-facing commercial component is what makes Cotino particularly noteworthy. “Traditionally, residentially planned communities do not include a commercial component,” he explains. “If they do, it’s usually reserved for neighborhood-servicing commercial.” This gives Cotino’s retailers and restaurants an added bonus, as they won’t have to depend solely on the residents living within the community.

“The significant public-facing commercial element is unique,” Smith continues. “The project adds a substantial number of residents and lends itself well to attracting visitors, which will certainly support on-site commercial. The master-planned community is a model for providing placemaking through active lifestyle and experiential opportunities.” Moreno Valley is also planning retail alongside housing and other uses in two large master-planned projects. Aquabella will feature up to 15,000 multifamily units, a mixed-use commercial component, a 300-room hotel, 80 acres of parks, a 40-acre lake and a lakefront promenade. The recently approved Moreno Valley Town Center will add about 167,000 square feet of retail, restaurants and gathering spaces alongside up to 600 homes and nearly five acres of parkland.

Those future residents aren’t being asked to create the market on their own. More than 2.4 million people already live within 20 miles of Moreno Valley, while another 7,100-plus residential units are in the city’s pipeline. Large expansions by Kaiser Permanente and Riverside University Health System are also expected to add jobs and daytime traffic, notes Adrienne Wonzo, the city’s senior management analyst for economic development.

“What makes these projects compelling is that the customer base is already here,” she explains. “These projects allow businesses to enter an established market while positioning them for the city’s next phase of growth.” Not every mixed-use retail project is unfolding on hundreds of acres. In established infill markets, developers are working with much tighter footprints — and still getting projects done. Take Downtown Burbank, for one. The recently completed First Street Village combines 275 residential units with about 12,000 square feet of fully leased ground-floor retail. Tenants include Hardcore Fitness, High Intensity Pilates, Reve Café, and Flow Wine and Coffee. Patrick Prescott, community development director for the City of Burbank, believes the additional housing component gives retailers something particularly valuable in a downtown setting. “New residential development creates an immediate customer base for retailers while also increasing activity throughout the day and into the evening,” he says.

First Street Village is part of a broader residential push in Burbank. Together, First Street Village and INTRO Burbank have added more than 800 housing units to a downtown that already benefits from a sizable employment base and regional visitor traffic. The result? Additional opportunities for retailers to capture the same customer more than once. “A customer may come for a movie, stay for dinner, visit an entertainment concept and then stop for dessert or shopping,” Prescott says. “That type of cross-shopping and cross-entertainment traffic is increasingly valuable to landlords and retailers alike.” As exciting as a new mixed-use environment can be, these large-scale, multi-faceted projects aren’t without their challenges. “The residential/mixed-use solution seems to have cooled significantly as costs and interest rates made many unbuildable,” Hieshima notes. Then there’s the missteps that can come from designing and tenanting mixed-use projects.

“The retail projects we see the biggest issues with are those that are part of mixed-use projects where the retail is positioned on the ground floor beneath residential or where parking is limited or inconvenient,” Read adds. “These components are generally built on spec as a necessity for the larger mixed-use and residential project, do not lease as well as traditional retail projects and, therefore, don’t appeal as well to investors and developers, so cap rates are higher.” Speculative construction is a tough sell beyond mixed-use as well, Voorhees notes. “There is almost no speculative development underway for retail,” he says, citing the usual culprits of high construction costs, elevated interest rates and general uncertainty. “They necessitate substantial preleasing to kick off new ground-up projects,” he continues. When ground-up development doesn’t pencil, attention turns to SoCal’s existing retail stock.

Rethinking Existing Retail

With so many hurdles attached to new construction right now, it’s little surprise that owners are taking a harder look at what’s already there. “These factors have contributed to more redevelopment or repositioning of existing retail properties instead of ground-up development, which has benefi ted much of the existing retail property supply’s fundamentals,” Read says. Retail availability nationally remains strong and stable, with a 4.9 percent vacancy rate in the second quarter of 2026 and rents increasing to $24.79 per square foot annually, according to CBRE. This, of course, brings its own set of challenges. “While these tight fundamentals are positive for the retail property market, they make it even more diffi cult for developers to fi nd existing retail properties to redevelop or reposition,” Read continues. But as we already know, diffi cult is not impossible. Redevelopment activity is moving forward across Southern California, from vacant big boxes and older neighborhood centers to aging malls and established destinations. A common redevelopment opportunity involves the real estate left behind when a major user closes. “There will always be opportunities for infi ll development in dense, established trade areas, particularly where older properties have reached a natural point for redevelopment,” says Patrick Wood, CEO and president of Wood Investments Companies. He would know. Wood Investments recently demolished the former Regency Theatres building at Plaza de Perris in Perris and replaced it with a 149,655-square-foot Target. The nearly 300,000-square-foot center is also anchored by Burlington, Food 4 Less, Ross, Planet Fitness and Five Below. “Store closures have created opportunities for expanding retailers to secure exceptional real estate that rarely becomes available — strong locations previously occupied by operators that are no longer in the market,” Wood continues.

Read is seeing that opportunity play out in former big-box space as well. He points to Red Mountain Group’s acquisition of former Big Lots properties. This includes locations that were re-tenanted with Ross Dress for Less in Highland and Savers in Lakewood. “For existing property repositions, developers generally lead with an anchor or box reposition, preferably as a single-tenant execution to keep costs down but potentially as a multi-tenant execution depending on the size of the box,” he says. “Both executions are driven by meeting demand from the replacement tenant market.” To be sure, there is replacement demand. You know what they say, when one retailer closes, another one opens…
“We continue to see grocers like Sprouts and Trader Joe’s eager to backfi ll vacant box space in better demographic trade areas,” Voorhees says. “In terms of non-grocery, Floor & Décor, Burlington and the TJX brands remain on the move.” Bison recently put that demand to work by backfi lling a former Rite Aid in Bishop with Marshalls, a TJX brand. “While Bishop is a small trade area, the dearth of soft goods retail in the vicinity makes this Marshalls store wildly successful,” Voorhees adds.

Still, not every box represents a successful redevelopment opportunity simply because it’s empty. Even with existing buildings, spec seems to represent a difficult value proposition. “Some may consider buying existing vacant buildings ‘on spec’ if the basis is low enough and the replacement tenant pool deep enough, with rents that justify the costs, risks and returns, but the property must fit the mold of active tenants in the market,” Read says. “Otherwise, you might have a vacant building for an extended period.” That same demand-first approach applies when the redevelopment involves more than a single vacant box, like the former Mission Valley Mall in San Diego. The asset is undergoing a $290 million transformation into the Valley, a walkable outdoor mixed-use development that will add 650 residences. The new retail lineup includes North Italia, Pacific Catch, California’s first DICK’S House of Sports and Round1. MacLellan notes projects like the Valley generally start with something worth saving. “They all involve high-income infill Southern California trade areas,” he says. Another redevelopment project that involved a high-income infill trade area is Campo on 17th in Tustin. Burnham-Ward Properties recently acquired Enderle Center, a legacy retail property it plans to begin reimagining this fall. The mixed-use redevelopment will include 60,000 square feet of retail and 100 for-sale townhomes with residential partner Intracorp. Plans call for retail to remain the dominant use, along with a new town green, landscaping and common areas with firepits. Campo is also an example of housing doing more than simply adding another customer base. “In certain cases of redevelopment, the added residential component allows a developer to justify the construction costs of new retail,” MacLellan notes. A similar strategy is planned at Westminster Mall. Shopoff Realty’s Bolsa Pacific redevelopment is set to include about 210,000 square feet of retail, 2,500 residential units and 120 hotel rooms. “For more infill and urban sites, where there’s existing density and limited sites available for large-scale development, retail projects will likely be repositions of existing properties, and potentially with a residential and mixed-use component, due to the need for more housing,” Read says.

Just as every vacant box won’t be a smashing success by merely adding a new tenant, slapping some rooftops near retail won’t necessarily make every repositioning a profitable endeavor. Bastian Peters, managing director and co-head of retail at Stockdale Capital Partners, recommends that owners first determine why the property needs to be repositioned. Is the issue the property itself? Or is it what’s happening within it? “We think the redevelopment strategy should work from the outside in: start with the customer and the market, then determine what the property needs to become to serve them,” he says. The Oaks in Thousand Oaks illustrates that point. Stockdale acquired the 1.2-million-square-foot regional mall from Macerich for $157 million in late 2024. Rather than pursue a wholesale redevelopment, the firm is repositioning the existing property through common-area improvements, new programming, expanded dining and entertainment and changes to the tenant mix. “You can change a lot about a shopping center relatively quickly — you can re-merchandise it, improve the architecture, upgrade landscaping and common areas or introduce new uses — but you can’t easily change the demographics surrounding it,” Peters says. Once those demographics and the broader market check out, owners still have to decide how much change is actually justified. “Not every shopping center needs a massive mixed-use redevelopment,” Peters continues. “If the market is strong and the existing physical asset works, re-merchandising may create significantly more value than undertaking an expensive construction program.” That could mean bringing in stronger restaurants, entertainment, wellness or daily needs uses, then supporting that new mix with a few targeted improvements to landscaping, gathering areas, façades, signage or programming. The strategy may also include rebranding when a center’s existing identity no longer reflects its consumer, tenant mix or role within the community. “Creating a new identity and positioning for the center gives you a framework for the broader redevelopment — informing everything from merchandising and design to programming and the types of tenants you pursue,” Peters notes. “The physical redevelopment and the brand repositioning need to work together to change how consumers and retailers perceive the asset.” Wood also sees value in smaller moves. “Adding features such as drive-thrus, pickup windows and improved access can significantly increase a site’s appeal to today’s tenants, expand the potential tenant pool and ultimately drive higher rents and property values,” he says. Naturally, knowing where to spend goes hand in hand with knowing where not to spend. “Improvements unlikely to recoup their cost would be, for example, building out a space’s interior for a tenant the owner would like or believes could be a ‘good fit,’” he adds. Some older properties are also struggling to meet current tenant requirements. Wood sees QSRs and coffee users, for example, increasingly wanting greater stacking capacity and double drive-thru lanes, while larger format retailers may require multiple loading docks. “Many existing sites simply were not designed to accommodate these types of operational requirements,” he adds. There’s older properties that are running into functional obsolescence as tenant requirements evolve, and then there’s others that have the location, traffic and customer base. They just need to remain relevant. Enter Seaport Village. The Port of San Diego-owned waterfront destination attracts more than 3 million visitors annually, but its tenant mix continues to evolve. Recent additions include Shorebird, Zytoun Gourmet Mediterranean, Ringer’s Roller Rink and Miss Match Boutique, while Gladstone’s and Cork & Batter are in development. “This continued investment is significant because it keeps Seaport Village competitive as one of San Diego’s premier waterfront destinations,” says Anthony Gordon, vice president of real estate at the Port of San Diego. The port is also undertaking a larger revitalization at the nearby Coronado Ferry Landing, a 38,000-square-foot specialty retail center that sits on a 13-acre bayfront site. A June agreement paved the way for more than $19 million in planned investment in buildings, utilities, plazas, landscaping, parking, ferry infrastructure and future tenant improvements. “Both projects benefit from established waterfront locations, existing visitor-ship and opportunities to reinvest in existing projects,” Gordon adds. “Consumers are looking for experiences that extend beyond traditional shopping, and operators continue to invest in locations that attract both locals and visitors.”

Clearing the Path A developer can have the right site, tenant mix and financing — and still not have a project. This is California, after all, where entitlement timelines, infrastructure needs and community concerns can determine whether a plan ever makes it to the construction phase. MacLellan believes the latter is often one of the biggest challenges for developers. “There is always concern from neighborhoods regarding parking and increased traffic, so if a developer can address those issues upfront, then the likelihood of city council approval is widely increased,” he says. MacLellan also recommends building some room into the pro forma for changes in construction costs and timing. That way, an unexpected increase or delay doesn’t throw the project — or a key tenant opening — off track.

Many Southern California cities are also trying to remove some of that uncertainty before construction begins. Aquabella and Moreno Valley Town Center are still in pre-construction, but both projects have already received their major land-use approvals. “One of the biggest lessons is the value of establishing certainty early,” Wonzo says. “Clear land-use planning and approved entitlements give developers and tenants greater confidence in their investment decisions.” The city’s Business Concierge program provides businesses with a direct contact for permitting and coordination across city departments. Time is a priority for Burbank as well. “The length of the entitlement and permitting process can further compound costs and affect a project’s overall feasibility,” Prescott adds. That’s why Burbank is updating specific plans for Downtown Burbank, as well as the Media and Airport districts, with the goal of providing clearer, more objective development standards. Its Business Concierge also helps tenants and owners with permitting and entitlements. One recent opening illustrates why timing matters. “Van Leeuwen Ice Cream was able to move into Downtown Burbank on an accelerated timeline, with the city actively assisting the landlord and tenant in navigating the process,” Prescott adds. “The store opened in time to capture the summer ice cream season, demonstrating how responsive public-sector support can directly influence a retailer’s decision and timing.” A city’s role can become even more important for larger developments. That new Walmart Supercenter sits at one of Eastvale’s busiest intersections. As such, the project team had to address traffic circulation, access and utility capacity while accounting for more residential growth throughout the surrounding area. City staff coordinated reviews across departments throughout planning, entitlement, permitting and construction. All that work doesn’t start when a retailer shows interest in a site or city, however. It begins way before. “Long-range planning and infrastructure need to be well invested before major projects are proposed,” Fung explains. “Communities that proactively plan for growth are better positioned to attract quality investment when opportunities arise.” That narrative is also playing out farther north in Manteca, where two grocery-anchored projects are opening in phases. Manteca Crossing is a 15-acre center adjacent to Great Wolf Lodge and Big League Dreams. Much of the center is already open, with Food 4 Less under construction as the anchor. Marketplace at Main is a 116,000-square-foot center anchored by a new 52,000-square-foot Save Mart, with another 64,000 square feet of retail and dining space.

The projects are serving a market with more than 12,000 residential units in the development pipeline. For Vanessa Carrera, deputy director of economic development for the City of Manteca, managing all that growth includes a major focus on infrastructure. “We work closely with the development community so that infrastructure improvements occur alongside development,” she says. The city has used Measure Q funding for infrastructure investments and continues to work with developers on roads and utilities as projects advance. Some cities are going even further when the revitalization of an entire district is at stake. Such is the case with Downtown Indio, where more than $200 million in public and private investment is driving new restaurants, coffee shops, entertainment, housing and infrastructure. “The city has worked to reduce barriers, create greater certainty for developers, invest in existing properties and position land for private investment, all of which have helped build momentum in Downtown Indio,” Smith adds. Indio owns some downtown commercial properties, allowing it to curate the tenant mix while offering flexible lease terms and tenant improvement allowances. When construction costs spiked, Indio instituted a Development Impact Fee Deferral Program that helped two market-rate apartment projects begin construction. Its Building Beautification Program also provides grants of up to $50,000 for façade and property improvements, while the Downtown Specific Plan allows developers to build up to four stories without a special zoning approval, or up to six stories when a community benefit is provided. The city is also acquiring and assembling parcels for future private development. Cities may utilize different tools to get projects moving, but Fung sees a common denominator in the ones that actually do. “Strong market fundamentals alone are not enough,” he says. “Retailers and developers want to invest in communities where local governments are responsive, predictable and solution driven.”

(Read entire article here)