At a time when many retailers are cutting back – or going out of business entirely -- Costco has the opposite problem.
I've been to Costcos on weekend afternoons when they were so busy, you'd think they were giving away their inventories. Even getting a frozen yoghurt took 15 minutes. Costco membership inspires feeling of pride on par with sports teams. That translated into $176 billion in revenue last year in the United States.
So it's no wonder that Costco wants to build more stores, which already number over 800 nationwide (compare that with over 4,100 Walmarts). The trouble is, fervor alone cannot shoehorn a warehouse of 150,000 square feet into urban Los Angeles. Even where there's space, the zoning is often unkind.
That's why Costco is getting into the urban infill housing business.
Everything about housing development is antithetical to Costco's business model. Costco is in the business of building the same big-box store – with the same gigantic parking lot – pretty much anywhere. Urban infill housing is costly, complicated, and customized.
But some people will do anything for an entitlement.
That’s why Costco’s proposal to develop a roughly 800-unit apartment complex in South Los Angeles is a Trojan Horse that will also not-so-secretly facilitate the development of the chain's 17th Los Angeles County store. It will be built on the site of a shuttered medical center a few miles west of the USC campus, near a stop on L.A. Metro's Expo Line.
Rather than wade through the tedious, costly, and uncertain process that would it need to gain approval for a traditional standalone store, Costco and its development partner Thrive Living taking advantage of AB 2011, which exempts multifamily housing projects on commercially zoned property from CEQA review, plus density bonuses provided by Los Angeles’s Transit Oriented Communities program (TOC).
The density bonuses, which require 184 of the residential units to be affordable, raise the allowable number of units on the site from 593 to 918. It’s an elegant alignment of interests for both parties: Thrive gets a deep-pocketed partner with whom to build housing, and Costco gets to open its doors, stock its shelves, and begin generating revenue without suffering through environmental review and inevitable lawsuits. That’s no small matter when the average Costco store takes in $252 million per year.
(The project was proposed over a year ago, and underwent site plan review [PDF] in February, but recently gained attention thanks to an X/Twitter post by L.A.-area housing advocate Joe Cohen.)
Even if it loses money on the housing (which isn't likely, especially if it's paying for the land anyway), Costco will surely make up for it in the pallets of protein powder and cases of canola oil that it's going to sell.
The poison pill in AB 2011, which has rendered the law nearly useless, is that it requires developers to pay construction workers “prevailing wage” for onsite labor -- which generally equates with high-cost unionized workers. But Costco and Thrive have a solution for that: modular construction. By using mass-produced elements, Costco will minimize the use of on-site labor. It's savvy move for a company that knows how to buy in bulk.
The end result may be the type of mixed-use development that, while achingly pragmatic, would give even the most sanguine New Urbanist a heart attack. From the renderings, it will not be a human-scale, finely detailed series of storefronts and front doors. It will, rather, be an enormous box hemmed in by slightly smaller boxes (Cohen likened the design to that of a prison – apparently coining the term “Costco Prison” – but he walked back that assessment in the face of a Tweetstorm of flack). And, in a rarity for Costco, much of the parking will be underground.
In fact, parking is where this project gets really interesting. Based on TOC guidelines, the project is required to provide at least 1,141 parking spaces, for residential and commercial combined. But, based on AB 2097 – which prevents the city from imposing any parking requirement within a half-mile of a transit stop – that requirement drops to exactly zero. In fact, the developers are choosing to provide 1,515 spaces. This seemingly sensible investment contradicts the worst fears of pro-parking folks: zero parking minimums does not necessarily mean zero parking. Developers may be frugal, but they’re not insane. (Ponder, for a moment, what zero parking would look like at a Costco.)
Frankensteinian as its form may be, it’ll be an apt representation of the regulatory tangle that, for better or worse, provided the necessary lightning bolt.
Housing advocates probably won't worry about the aesthetics anyway. Eight hundred units is a lot, even in Los Angeles. And it will include 184 units of sorely needed affordable housing. Even so, it'll be a stark contrast to its neighbor, which happens to be Village Green, an Ebenezer Howard-style development from the 1940s that's on the National Historic Register. With laws, trees, and graciously spaced-out apartment blocks, Village Green represents high-density, affordable housing of a vastly different era.
The Village Green trend didn't last. But, it's likely that the Costco Living trend is just starting.
Big boxes aren't just stores. They are, by definition, real estate plays. Between the demand for housing, the urbanist antipathy for wasted space, new state laws friendly to mixed-use and adaptive reuse, and other local regulations akin to Los Angeles’s TOC (e.g. the Bay Area’s own TOC program), more such developments seem inevitable -- it would be financially irresponsible of the Costcos, Targets, and Walmarts of the world not to pursue them. The South L.A. Costco is just the prototype.
On the one hand, I’m sure few urban planners want big box stores to dominate American retail even more thoroughly than they already have. On the other hand, it's possible that we've already lost the war against big boxes. And, their incursion into urban areas is only going to accelerate; greenfield sites on the urban fringe are simply too far from population centers to be feasible. If we can get some housing as part of the peace treaty, so much the better.
Now, it's true that residents of those 800 apartments -- some of which will be small studios and one-bedrooms -- probably aren't Costco's target customers. Then again, once they try the frozen yogurt, they might be hooked.
Resources
Los Angeles Dept. of City Planning CUP Site Plan Review, February 2, 2024 (PDF download)
Rendering by AO Architects.
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