The surge in El Segundo
El Segundo balances growth with its hometown character to emerge as the South Bay’s most vital city
by Mark McDermott
El Segundo City Manager Greg Carpenter relishes the opportunity to give tours in the town he manages and grew up in. These tours, in Carpenter’s city-issued 2004 Crown Victoria sedan, have been occurring with increasing frequency over the last few years.
As Carpenter steers visitors through his city, he almost invariably hears the same two comments: “I had no idea this was here.” And then, a bit later, “I want to be here.”
El Segundo is experiencing a wave of development, the magnitude of which is unlike anything seen in recent South Bay history. El Segundo has very quickly become the area’s most economically vital city. More than $1 billion in investment, representing eight million square feet of new office, retail, and amenity space, has been recently built or is underway within the the city’s five square miles. The transformation rivals the area’s post World War II aerospace expansion in the middle of the last century.
“It’s an unprecedented level of development and redevelopment,” Carpenter said, while conducting yet another tour recently, this time for a reporter. “We are attracting investors whom we haven’t seen in the past — corporate, commercial real estate people — not that we hadn’t seen them at all, but we are seeing them on a more widespread basis. There are big players from Orange County and Downtown LA. I’ve heard them describe El Segundo as ‘the next smart investment.’ Santa Monica, on the Westside, was the first; it’s become very expensive. Playa Vista was in second; Playa Vista is now at capacity. And we are next — the hot investment from a commercial real estate perspective.”
Carpenter’s tour departs from City Hall on Main Street, the small town’s heart and soul. Main Street seems to have been airlifted from some small Midwestern town; several blocks of the street are blocked off every Thursday afternoon for the city’s farmer’s market. On the north end of the street is the nationally ranked El Segundo High School, a gothic-style campus built in 1927. Its alumni include Body Glove founders Bill and Bob Meistrell, baseball Hall of Famer George Brett and famed “Endless Summer” artist John Van Hamersveld. The school has been a location for films ranging from “Blackboard Jungle” to “Superbad.”
At the south end of the street are two wildly eclectic downtown blocks that house the strikingly modern El Segundo Museum of Art (ESMoA); the beer cognoscenti-beloved El Segundo Brewing Company (whose founder, Rob Croxall, is one of several local entrepreneurs who left a career in aerospace to launch his own business); the Havana Sandwich Company, a genuine Cuban sandwich shop; Rock & Brew, a large indoor/outdoor gastropub co-founded by Kiss lead singer Gene Simmons and now a national franchise; the Tavern On Main neighborhood bar; Ole Smoky, a moonshine company from Tennessee; and Moto Art, a quintessentially El Segundo business — a warehouse that makes high-end functional art/furniture out of old airplane parts.
A block west is the Old Town Music Hall, which shows silent movies accompanied by its owner Bill Field performing on a Mighty Wurlitzer pipe organ, part of the tree-lined Richmond Street, also home to a homey tavern, the Richmond Bar & Grill and the Purple Orchid tiki bar, along with two high-end but decidedly unpretentious restaurants, Deluca Trattoria and Second City Bistro. Down that street is a sprawling antique store and a shop with hand-operated printing presses. Downtown is surrounded by leafy residential streets, part of what has earned the city the nickname “Mayberry” (commemorated by ESBC’s “Mayberry IPA” beer).
There is a reason those who take Carpenter’s tour are a flabbergasted. El Segundo is hidden in plain sight. The city’s four borders conceal its hometown center: the 1,000-acre Chevron refinery (the second built on the West Coast by Standard Oil in 1911, hence the city’s name) along the southern border; two power plants, NRG and Scattergood, along the western border between the city and the beach; LAX to the north; and the LA Air Force Base and the aerospace industry to the east.
Mayberry is in the middle. El Segundo is home to 16,700 residents at night, and 60,000 workers during the day.
A touch of magical realism is in the air. Visitors can’t help wondering if all this really exists or if they are imagining it. El Segundo’s new director of economic development, Barbara Voss, made the unusual move from the much larger Los Angeles Economic Development Corporation (LAEDC) to the municipal level because of the city’s utterly unique dynamic. It’s a small town that Forbes magazine reports has more Fortune 500 companies than any other city in California, except San Francisco. Voss recalled taking the tour with the city manager and falling under a spell.
“I remember feeling like I’d discovered a hidden treasure,” Voss recalled. “These small streets, really traditional homes, nice tree-lined sidewalks, then you go into the modern office buildings and huge aerospace companies…So many little things, like hidden treasures, you find around every corner.”
Birth of the cool
Carpenter’s tour heads east and crosses Sepulveda Boulevard. El Segundo is home to some of the biggest aerospace companies in the world, including Raytheon, Northrop Grumman, and Boeing. But that industry has been on the decline since the 1980s. Carpenter estimates that two-thirds of the city’s aerospace jobs have disappeared over the past three decades, ever since the Cold War’s end and its subsequent “peace dividend” began the downsizing of the U.S. military. This is consistent with state data, which shows the aerospace sector in LA County shrinking from 189,000 jobs in 1991 to 59,000 in 2011.
But much like the El Segundo Blue Butterfly, a species near extinction two decades ago that suddenly reappeared, the city itself is experiencing a new blossoming. Aerospace remains a pillar; the city’s five top employers are aerospace companies. But in the remnants of its once larger glory, a new, more diversified, imagination-based economy has arisen. The “New Creative” industry — the array of technology, media and entertainment firms sometimes referred to as Silicon Beach — has begun migrating from Santa Monica and Culver City. A former Rockwell International campus that was for decades a dirt lot reopened in July as the gleaming new $97 million Elevon at Campus El Segundo. The 15-building, 23-acre development includes 210,000 sq. ft. of “creative office” space and 13,500 sq. ft. of high-end retail and dining. Campus El Segundo itself totals 46 acres, with more office buildings, retail, athletic fields, and a new Hyatt Place Hotel. As the LA Times noted in a page one story when the Elevon project was announced, the project has a “a 21st century look starkly distinct from its baby boom-era neighbors…While most of Southern California’s office market remains stuck in neutral as businesses decline to expand, developers in El Segundo are about to risk millions of dollars…”
In August, another development that cut against the common grain opened, this one at a former Allied Chemical factory site at El Segundo’s gateway to the Beach Cities, on Sepulveda and Rosecrans. The Point is an $80 million, 33 “door” retail and dining “lifestyle center” — the description used for the outdoor shopping centers that have replaced the traditional enclosed shopping mall that defined American suburbs for 60 years.
The term is an oft-abused one, frequently used more for marketing spin than as an accurate description of the largely unrelated collection of retailers that still comprise most shopping centers, whether indoor or, increasingly, outdoor. The Point is different. It has a 44,000 sq. ft. plaza and cars are segregated from the actual development. More to the point, the stores reflect the Beach Cities lifestyle.
Several brands who are very selective about where they locate have arrived at El Segundo’s new gateway. In keeping with the area’s increasingly sophisticated culinary trends, one of the most highly-regarded restaurateurs in the U.S., Sam Fox, has opened two of his restaurants at The Point — North Italia, and, in partnership with Harvard health guru Andrew Weil, True Food Kitchen. In keeping with the area’s burgeoning craft beer scene, the Texas-based Hopdoddy burger and brew pub has opened its first local store, while local restaurateurs and operators of the popular Simmzy’s, the Simms family group, are opening Craft Shack in The Point’s plaza area. On the retail side, Manhattan Beach’s popular downtown kids store, Bella Beach, has opened a larger storefront, built for events as well as retail, as has Michael Stars, the lifestyle clothing line that was founded in Manhattan Beach and has since expanded nationally. Premium denim company Lucky Brand has opened its new flagship store, while several activewear companies — including Athleta and the yoga/swim/mountain climbing clothing line prAna, which only has four other storefronts in the U.S. — will open in October.
The Point, in addition to its very real impact as the city’s new gateway, is also a signifier. An element of cool the likes of which El Segundo could not have fathomed until very recently has officially arrived. Previously, El Segundo businesses often marketed themselves with a Manhattan Beach address, despite their telltale 90245 zip code. Not any more.
Alan Mackenzie, the president of Mar Ventures, which developed Plaza El Segundo and The Edge in 2007 and partnered with longtime El Segundo firm Continental Development in building Elevon, said that the city’s name has acquired a buzz in the regional business community.
“El Segundo was apologizing for itself — all the businesses along Rosecrans would use a Manhattan Beach address, not an El Segundo address,” Mackenzie said. “Now an El Segundo zip code is almost a badge of honor. Not to put down Manhattan Beach, but no one is ashamed of having a location in El Segundo any more. Quite the opposite.”
El Segundo has become the South Bay’s “It” city. It’s arguably the most dynamic small town in America.
Located within two square miles east of Sepulveda, for example, is a manufacturing facility under construction for the clinical-stage biopharmaceutical company Kite Pharma, which many believe offers a genuine hope for curing cancer; the training facility for the LA Kings National Hockey League team, who have twice in recent years brought home the Stanley Cup, as well as the current home of the 16-time NBA champions LA Lakers, who are building a new, 122,000 sq. ft., $80 million headquarters and practice facility across the street from Campus El Segundo; Northrop Grumman’s 1 million sq. ft. manufacturing facility builds the fuselage sections for the Navy’s F/A-18, the fighter-bomber that for three decades has been a symbol of the U.S. military’s capabilities, catapulting from U.S. Navy aircraft carrier decks around the world; and the Aerospace Corporation, a federally funded research center credited with the development of GPS and the space shuttle program which continues to develop cutting edge satellite and space travel technology. Manduka, the most revered yoga mat company in the world, has its headquarters in the newly constructed, five building, 433,000 sq. ft., $115 million Apollo at Rosecrans office complex, which features 15-foot ceilings, balconies, and a pet-friendly ethos. Hello Kitty, the globally popular Japanese, cat-themed stationery and school supply manufacturer, recently moved into a five-story, 115,000 sq. ft. former Raytheon office building that the Bixby Land Company has transformed into hip new indoor/outdoor creative office tower, with a shared ground floor commons that includes a shuffleboard table, a juice/drink bar, and a communal, graffiti-scrawled chalk board.
And with the arrival of The Point and Elevon, El Segundo is now home to what may be both the future of the American retail experience and a new kind of workplace demanded by a Millennial workforce that rejects the traditional cubicle-bound office space.
The Point has already leased 26 of its 33 storefronts (with two more nearing terms) and has attracted droves of customers in its first month. Elevon, which is an unusual business model in that it is essentially spec housing for the new creatives (with buildings and units ranging from 2,000 to 28,000 sq. ft. for sale, not for lease), is already 80 percent sold.
Mayor Suzanne Fuentes, who has lived on the same block for 50 years, marvels at her city’s transformation.
“When I grew up in El Segundo, I rode horses through fields right near there,” Fuentes said. “Never in my wildest dreams did I think we’d have these kinds of businesses in El Segundo. It’s so satisfying.”
Setting the table
El Segundo’s transformation has deep historical roots. The city seal depicts the refinery, a power plant, the ocean, and an airplane flying overhead. The sheet music to a “two step” composed by H.D. Grant in 1914, “El Segundo by the Sea,” was apparently commissioned by the El Segundo Land & Improvement Company and included a proclamation before the chart and lyrics (“El Segundo you brand new town/El Segundo of great renown/Where people flock from snowbound climes/and where the sun shines brightly all the time…”) above a photo of the refinery: “You Will Sing For Joy Later On If You Invest Now at El Segundo…The Standard Oil Pay Roll City…”
The song was a favorite of Bill Fisher’s, the mayor previous to Fuentes, who entertained the notion of using the name El Segundo by the Sea. “Can you imagine?” Fisher said. “Property values would double overnight.”
A combination of planning, vision, happenstance, and the city’s inherently business-friendly ethos set the table for what is occurring today. The city has natural advantages — its proximity to two freeways, the Metro Rail Green Line, and LAX — which throughout its history city leaders have amplified with some of the county’s lowest property and business tax rates.
Carpenter stresses that previous city councils devised and adhered to a General Plan that made sense, in particular keeping residential and industrial areas separate as much as possible.
“One of the benefits of our land use plan is that most of the development activity is happening on the other side of Sepulveda,” Carpenter said. “It doesn’t affect residents at all. And the business community, based on our revenue structure, really provides the revenues that support the services we provide to them and to our residents.”
“If we were to start planning today as a planned community, you couldn’t plan it better,” said Fuentes. “We’d want to keep the residential area just the way it is. It’s charming — everything is close, you can still walk to whatever you need. Then you cross Sepulveda and it’s Fortune 500 land, yet small businesses are still our backbone. I appreciate both the large and small businesses — I have so much gratitude for what both bring to our town.”
An example of how small businesses still permeate the culture of the town are three El Segundo High School Class of 1990 graduates who each founded businesses in town: Tyler Hatzikian, whose Tyler Surfboards is internationally renowned; Rob Croxall, whose El Segundo Brewing Company is at the forefront of the burgeoning craft beer movement; and Mike Keller, whose barbeque spice line, California Rancher, has become nationally distributed. The three businesses are quintessential El Segundo: beer, BBQ, and surf.
“I mean, that sort of sums up the perfect day in El Segundo,” Fuentes said. “Surfing, having a beer, and BBQ. It’s like the ‘Endless Summer’ poster.”
The city also had a coherent vision of itself and stuck to it, at times in ways that were counterintuitive. Alex Rose, senior vice president for Continental Development, recalled that in the early 2000s, the former Rockwell site that later became Campus El Segundo was purchased by FedEx. The company proposed a sorting facility. But the city rejected the plan. Its vision was for a use that offered higher paying jobs. By the time Continental and Mar Ventures bought 25 acres at the site in 2013, the momentum was in play for exactly what the city had hoped for. The developers brought in a pair of prestigious architectural firms, Ehrlich Architects (winner of last year’s coveted national AIA Firm of the Year award) and Ware Malcomb Architects. And with the help of the city, which famously has a one-day permitting process and a very hands-on planning department, the Elevon project was built in 13 months.
“We were able to come in and negotiate a deal ahead of the market. And when we purchased it we knew our plan was going to be basically to do the next version of The Edge, both from an architectural standpoint, as well as from a place-making standpoint,” Rose said. “Where else will you find a series of architecturally distinct buildings that are focused on a greenbelt and a series of amenities, so really more of a campus feel? We were confident nothing with similar makeup existed in the immediate market — if you wanted to invest in a small building for sale, probably on the Westside you were going to be paying a much higher dollar amount than we would be able to deliver, without the campus and the type of amenities that office users are looking for now. We had a bunch of advantages, which of course started with having the right vision for it….and from an economic cycle standpoint, we were developing and selling into an up cycle rather than one precipitously falling off a cliff.”
It’s such unheralded decisions as this by the city — holding out for the kind of development it wanted — that has enabled El Segundo to boast the highest average wage in the South Bay, at $81,621.
El Segundo was awarded the LAEDC’s inaugural “Most Business-Friendly City Award” in 2006. But as the decade wore on, the city found itself in dire economic straits. The recession slashed the city’s budget from $60 million to $50 million and the aerospace sector continued to decline, as did the jobs it offered.
But again, the city did something counterintuitive. In the midst of the recession, with its own workforce slashed by almost a quarter, the city launched an economic development initiative. Bill Fisher, first as councilman and later as mayor, argued passionately that economic downturns were precisely the time to look ahead. “We should be Silicon Beach,” he told his colleagues. His argument was twofold. One, that the city needed to get its story out. “Nobody knows we are here,” he said. And two, that the city needed to work more closely with the private sector to set the table and attract new businesses.
The council agreed, and two things grew directly out of the decision: the revival of the joint private-public Economic Development Advisory Council (EDAC), and the launch of a $450,000 public relations campaign to help attract new business. Chevron contributed $200,000, Continental $15,000, and the city matched with $235,000.
Fisher wouldn’t be around to see the fruits of these actions. He was ousted in the 2014 election, partly because of the manner in which he became mayor. In his fervor to push economic development, Fisher forced out the beloved longtime Councilman Carl Jacobson. But in his year as mayor, he was able to help put in place much that has since come into fruition.
Fisher said he has few regrets. What is occurring in the city now, he said, is its own reward.
“It’s really coming true,” he said. “It’s interesting how all this came about — the recession was a real opportunity to have growth start back up in El Segundo.”
EDAC, meanwhile, has become a model of public-private partnership. At its monthly meetings, the entire council and key business leaders from the community have free-ranging, conversations and jointly court more investment in the city. One recent visitor to the EDAC meeting, the highly regarded French aerospace incubator firm Starburst Accelerator was lured to El Segundo on the spot when Continental Development president Richard Lundquist offered the firm space at Elevon.
EDAC chairman Drew Boyles said that El Segundo has just begun. He recalled a conversation with Aerospace Corporation CEO Wanda Austin in which he speculated that the city could boast at least 800 PhDs in its workforce.
“Wait,” she said. “I have over 800 Phds in my facility alone.”
“So our number was way off,” Boyles said. “There is so much intellectual brainpower in this city, and now you bring in this incubator, Starburst Accelerator, that everyone on the planet wanted to land, that has been so successful already in Paris. That is going to be huge for all the LA area, let alone El Segundo itself. The innovation that will happen here is mind boggling.”