For many southern Californians the American Dream has moved east. That is, to the Inland Empire, the only place left in the region where first-time homebuyers can still afford a single-family home.

What historically has been a logistics distribution hub for goods moving through the region's ports, the Inland Empire, which encompasses a two-county region larger than seven U.S. states, has long been perceived as a blue-collar bedroom community. But since the late 1990s, middle-class families have been moving here, as home prices escalated in Los Angeles and Orange Counties.

According to DataQuick Information Systems, the median home price in San Bernadino County was $320,000 and in Riverside County $380,000 in contrast with $520,000 for Los Angeles County, $555,000 for San Diego County and $646,000 for Orange County.

As a result, the region is adding more than 100,000 people annually and the population of the is expected to reach 4.8 million by 2010, up from 3.2 million in 2000.

Now, the region is creating its own well-paying jobs to boot rather than serving as a commuter community. Professionals are moving in and living and working here, and million-dollar homes are rising alongside upscale retail and high-rise office buildings. In fact, half of the new jobs created in California last year were in the Inland Empire — 50,000 in all.

The Inland Empire has become southern California's growth engine because of available land and more affordable homes compared to coastal communities, notes Jeff Moore, senior managing director for CB Richard Ellis's Ontario office. “People living in the Inland Empire are young professionals with families who are tired of commuting, so employers are now going to them because of the quality of worker and retention,” he says.

The region's demographics have changed so dramatically that cities, such as Rancho Cucamonga, Corona and Chino Hills, now enjoy higher overall median household incomes than Beverly Hills, says Brad Umansky, senior vice president for the Irvine, Calif.-based brokerage firm Sperry Van Ness, noting that developers are having no problem signing on upscale retailers for space in new projects. As a result, retail rents are up to $38.00 per square foot for well-located newer projects, up from $24.00 per square foot in 2003. Retail properties are also trading at lower cap rates, as low as 6 percent in 2005, down from 10 percent in 2001.

The value of “first”

Usually retail follows rooftops, but not in the case of Rancho Cucamonga, the first community to benefit from its increasingly affluent demographics. Forest City Enterprises began Victoria Gardens, a 1.3-million-square-foot open-air regional shopping center with housing, civic and office space, before a strong consumer base existed, transforming the former bedroom community into a “real town.” A joint project between Forest City and locally based Lewis Investment Company, the 247-acre project serves as the community's town center, with a community library, city hall and performing arts center and offers a mix of upscale retail shops, dining choices and entertainment options.

“We began planning the project in '97,” says Brian Jones, president of the California division of Forest City. “At the time, everyone was terribly nervous. The area was clearly taking off, but we didn't see the rooftops. … But the Inland Empire caught up before we finished.”

Housing grew faster than the team could get the retail in place. “What we ended up doing was far in excess of what had been predicted,” Jones says.

“The greatest barrier to development was lack of public infrastructure to make it happen,” says Linda Daniels, director of redevelopment for Rancho Cucamonga, noting that historically the city was formed out of three nondescript communities. “When Victoria Gardens became a real project it tied into the housing market that collectively got together (developers) and put in the needed infrastructure.”

Ontario also experienced tremendous developer cooperation in developing infrastructure at New Model Colony, which will add 350,000 people to the city's population, according to Mary Jane Olhasso, director of economic development for Ontario. She notes that the city manager was able to negotiate a cash deal with the developer consortium led by Lewis Homes, which protected the city's bond capacity.

Opus West Corp. is doing another town center project 14 miles south of Rancho Cucamonga in downtown Chino Hills, which also lacks a sense of place, notes Matt Lander, the company's senior manager for real estate development. The Shoppes at Chino Hills is being built on a park, and includes 350,000 square feet of upscale retail, a police station, a library and a civic center, surrounded by 50,000 square feet of office space and 200 residential units.

Memphis-based Poag & McEwen is building The Promenade Shoppes at Dos Lagos in partnership with local developer Ali Sahabi, who is building the master-planned community of Dos Lagos. The 534-acre project includes the town center, with 575,000 square feet of upscale national retail, restaurants and entertainment, over 650 residential units and a 300,000-square-foot office building.

Noting that the city recently built a new City Hall, Josh Poag says, “We hope to function as the central business district and serve the middle of the Inland Empire by providing a great place to congregate, shop, go to a movie.”

Makeover for old downtowns

Meanwhile, San Bernardino, Riverside, Ontario and Fontana are redeveloping their central business districts in partnership with different developers. The goal is to reinject life into staid downtown districts with a mix of housing, retail, dining and entertainment.

San Bernardino's downtown redevelopment is underway with restoration of the California Theater of Performing Arts. The city also plans to build a transit-oriented development around the historic Santa Fe Depot rail station.

The city wants to create a downtown neighborhood and 600 live-work lofts are underway. Additionally, the old downtown mall will be replaced with a lifestyle retail district developed in a public-private partnership between LNR Property Corp. and the city, with LNR developing, leasing and managing retail space and the city public building and managing public facilities, including parking and parks and providing security and maintenance.

The City of Riverside also plans a mix of housing and retail in its downtown to create a 24-7 market. The city is renovating the historic Fox Theatre, a performing arts center, and has partnered with California-based Metro Pacific Properties to build a four-block mixed-use development with 400 condos, 200 live-work units, 60,000 square feet of retail and a business-class hotel.

General Growth Properties is adding a lifestyle retail component to the city's 1.1-million-square-foot Tyler Galleria. The 200,000-square-foot outdoor extension will feature upscale lifestyle tenants and a 16-screen AMC theater. The 1950s Riverside Plaza, which began as an outdoor shopping venue but later added a roof to compete with the Galleria has been reinvented as a 500,000-square-foot version of its former self, with lifestyle retailers, mix of restaurants and a 16-screen Regal Theater.

Ontario, meanwhile, has partnered with Los Angeles-based J.H. Snyder Co. to do a downtown mixed-use project with 760 residential units and 62,000 square feet of retail, which includes restaurants and neighborhood services. Not far away, San Diego-based Oliver McMillan is redeveloping the historic Gausti Winery north of Ontario International Airport into a mixed-use development.

Additionally, Sacramento-based Panattoni Development Company is developing a 93-acre urban village, Piemonte at Ontario Center, which will be anchored by Target and an 11,000-seat multipurpose arena that will serve as home to hockey, basketball and arena football teams, as well as host headliner events. The mixed-use project includes, 400,000 square feet of retail, 550,000 square feet of office space, 806 condominiums, 769 apartments and a 200-room business-class hotel and restaurant.

Fontana has also chosen to manage development of a proposed lifestyle-type promenade on 125 acres along the 210 Freeway, which will include 700 residential units and 47 acres of commercial space. The city is also currently restoring an historic art deco theater in downtown, finishing up a fourth affordable senior housing project, and is building a $70-million library and resource center. Additionally, the local Caffee Junior College campus is expanding to service 15,000 students instead of 5,000.

The city wants to get going on the promenade, but Wal-Mart owns 22 acres in the middle of the site, and the city is having a difficult time getting the retailer to move. The city plans to build a roundabout and bridge with retail shops on the Wal-Mart site. “We want people to come here and spend time, like in Valencia Town Center,” says Don Williams, director of community development for Fontana. “We need Wal-Mart to move. A theater needs to be on this site” he adds, noting that Wal-Mart can be successful in another location.

Today, the Inland Empire resembles Orange County 30 years ago, when developers were building master-planned communities to accommodate the influx of families looking for their piece of the American Dream. “It's going through the first phase of what Orange County went through and will become a subregion of Los Angeles.” Jones says.

The region has come a long way, Olhasso says, but some developers still don't get it. “We're still battling the misperception of low-income, low-educational attainment, which is not true. We have very high hopes for the future.”