Is Costco’s Apartment-Warehouse Combo a Good Idea?

Costco has broken ground on a new development in Baldwin Village, South Los Angeles, which will become the first Costco to include residential apartments above its warehouse.

Developed by Thrive Living, the project will feature 800 rental units, with 184 (23%) designated for low-income households, while the rest will serve as "non-subsidized affordable and workforce housing." According to the company, the development is designed to accommodate families, seniors, and other residents, enabling them to "move laterally from within the community." With a layout of 25% retail and 75% housing, it qualifies for city incentives under the Transit Oriented Communities program.

Located at 5035 Coliseum, this mixed-use development will offer not just typical Costco services but also optical services, a pharmacy, and delivery options. The retailer also intends to "deliver a state-of-the-art store featuring fresh produce [and] healthy food options for residents."

This development aims to address the housing affordability crisis in Los Angeles, creating around 400 jobs and providing essential services to the community. The project is the first to proceed under California's AB 2011 law, promoting mixed-use developments with affordable housing, as reported by NBC4 LA. Thrive Living plans to use modular design to keep housing costs low while the quality remains high. This includes adding amenities like secure parking, courtyards, a gym, urban gardens, and a rooftop pool.

Plans for this hybrid residential Costco began taking shape last year, according to the LA Times, and now construction has officially begun. Per NBC4 LA, Mayor Karen Bass and other city leaders gathered with project officials for a ceremonial groundbreaking at the site last Wednesday morning.

"Mayor Bass has declared a housing emergency in Los Angeles, and we’re answering the call. Our company is focused on addressing the severe housing affordability crisis in Los Angeles, while also attracting retailers willing to make long-term commitments and deliver community-serving products and services that enrich the living experience for our residents and neighbors."

Jordan Brill, a representative for Thrive Living, via Thrive Living

Joe Rouzan, president of the Vermont Slauson Economic Development Corp, told the LA Times that the Baldwin Village area is a food desert, and he believes that "Costco would offer residents more options and would be a job generator. He’s also confident the developer’s vision has already signaled something that other big-box stores have not emphasized in the past — adding affordable housing."

For Costco, the benefits are obvious. Investing in a mixed-use apartment building with retail space offers key advantages for retailers, as per CHRE:

1. Increased foot traffic: Retail spaces benefit from direct access to residents, ensuring a steady stream of customers.
2. Enhanced property value: Retail outlets can boost property value, as mixed-use developments typically appreciate faster than traditional residential buildings.
3. Diversified revenue streams: Combining residential and commercial units creates multiple income sources, with higher rental rates for retail spaces.
4. Lower investment risk: The mix of tenants spreads risk, providing a more stable investment, while promoting walkability and sustainable living.

Opinions on the new Costco apartment warehouse are already being discussed on social media. A post on Reddit sparked mixed reactions, with some users viewing it as an advantage, while others were opposed to the idea.

For those in favor of the new apartments above Costco, one commenter described how they lived in a similar setup of residential and retail that they enjoyed. The setup did not cause much noise for them, and they liked the convenience of having a retail store within such a short walking distance.

Another user compared it with a Costco in downtown Vancouver located next to a sports stadium. The user emphasized the positive aspect of its proximity and how "tens of thousands of people are able to walk to/from Costco. You just use a trolley/cart to carry your groceries or bigger items. It’s underneath a development with 3/4 high rises and right next to Yaletown (an urban residential neighborhood with about 40-50 thousand residents living in high rises)."

Those who are not too keen on the idea noted how hectic Costco parking lots are, with crowds of people and shopping carts being left near cars, possibly causing scratches and dents to vehicles. Others also think there would be too much noise and stress from the Costco apartment setup, with many pointing out the potential difficulty in finding parking as residents and guests.

Finally, one user dubbed the new Costco residential warehouse apartments the "Kirkland Towers."