Adaptability Key in Crowded L.A. Shopping Market.

AT what point does the market become saturated with Starbucks, Gaps, Borders and all the other national chains that seem to dot every urban and suburban block?

There is no obvious answer, but in the context of the many projects being planned or under construction, it's a question that keeps popping up -- especially among developers who want to make sure they're not left holding the bag if shoppers tune out.

"If you look at the new concepts in the marketplace, there really aren't a lot of new uses nor a lot of creative retail," said Pat Hurst, principal at Economic Development Systems in Redondo Beach.

Even so, retail development persists. Los Angeles County added 1.3 million square feet of new retail space in 1997 and 1998, according to Grubb & Ellis Co. In addition, 4.5 million square feet of additional retail is under construction and another 8.9 million square feet is planned for the future.

"You could definitely draw some conclusions that there is overbuilding in retail, but what distorts that figure is the functionality of obsolete retail," said Bob Champion, president of Champion Development in West Los Angeles. "There is lots of retail, but it's not adding to the existing stock. It's replacing functionally obsolete stock."

One example, Champion said, is his recently completed Brentwood Place shopping center on Wilshire Boulevard. The 200,000-square-foot center replaced a liquor store, a falafel stand, a newsstand and a motel. In their place are a Sav-on, Ross, Starbucks and Jamba Juice. The site is 94 percent leased and was 50 percent pre-leased before construction began.

"Many of these spaces on Wilshire Boulevard have no parking, so an existing tenant there may move to my space, which provides such amenities as structured parking," he said.

Indeed, developers are coming up with more sophisticated tenant mixes. TrizecHahn Development Corp. is including a fitness club and movie cineplex at its Paseo Colorado project, a proposed 649,000-square-foot center in Pasadena. (The project was approved by the Pasadena City Council last week.)

Developers traditionally have avoided signing two high-volume tenants like a fitness club and multiplex at the same facility because of potential parking conflicts. But they are now embracing such mixes, realizing that the traffic volumes, while high, occur at different times. (For example, gym users tend to be morning customers while theater-goers arrive in the evenings.)

"You've got a diversity of uses in one project so that if retail does go in the tank, you're not sitting there with a project that's null and void," Hurst said. "Rather, if you provide amenities and services that people can use, you're creating a mini-downtown to bring people back consistently, especially the local shopper."

The quality of tenants also is key to ensuring a project's success, said David Malmuth, senior vice president with TrizecHahn, which broke ground on its huge Hollywood & Highland project in October 1998.

"Every developer fights this battle," Malmuth said. "It's a challenging balancing act. We want great names that people recognize because it builds credibility in the project, but we also want those tenants that they haven't heard of."

Likewise, retailers are taking precautions by introducing alternate concepts. Saks Fifth Avenue has been opening "Main Street" stores in venues other than malls, occupying smaller spaces of around 50,000 square feet and targeting younger clientele that may not shop at its traditional 200,000-square-foot centers. Locally, Saks has opened smaller-concept stores in Pasadena and Palos Verdes.

Crate & Barrel opened its first furniture store in California in August, adding 25,000 square feet to its existing 10,000 square feet of accessories. Banana Republic's three-story store on the Third Street Promenade in Santa Monica devotes a lower level to home furnishings. Even Starbucks is testing new dining concepts.

"We're looking to evolve and try new things and watch the Starbucks brand grow," said Steve Gamalon, director of Southwest development for the coffee chain.

Perhaps the biggest factor leading to retail innovation is the Internet.

That added risk has retailers seeking shorter-term leases, which gives them additional flexibility in adapting the size of their chains and locations of their outlets. Gone are the 20-year leases that most retailers and restaurants readily signed in decades past.

"Developers are providing more options in terms of lease flexibility, but they're also demanding more," said John Golisch, retail partner at Arthur Andersen LLP. "They want their tenants to be responsible for subleasing the site should it go dark. With a wave of company mergers, it's hard to gauge who will still be around in the future."