The City of Redondo Beach owns the land underneath much of King Harbor and the waterfront area. The restaurants, shops, and marine businesses that operate there do so under long-term ground leases with the city. Several of those leases are now approaching renegotiation, and the outcomes will shape what the Redondo waterfront looks like — and who benefits from it — for the next 20 to 30 years. Here's what's happening.
How waterfront leases work
A ground lease is different from a standard commercial lease. The city owns the land. The tenant builds and maintains the improvements — buildings, parking areas, utilities — at their own expense. In exchange, the tenant pays rent to the city, typically a combination of a base rent and a percentage of gross revenue. When the lease expires, the improvements usually revert to the city.
This arrangement gives the city income from land that might otherwise sit undeveloped, while allowing private operators to run businesses they'd never build if they also had to buy the land at waterfront prices. It's a common structure in harbor areas across California — Santa Monica Pier, Fisherman's Wharf in San Francisco, and the Long Beach waterfront all use variations of this model.
The key tension in any ground lease negotiation is between two legitimate interests. The city wants to maximize public revenue and maintain control over what happens on public land. The tenant wants lease terms long enough and stable enough to justify investing in their business. Get the balance wrong in either direction and you end up with either a neglected waterfront (if tenant terms are too harsh) or a public giveaway (if terms are too generous).
What's on the table in 2026
Multiple leases in the harbor area are either expired, expiring, or operating on holdover terms. The specific parcels and tenants vary, but the general situation is that a generation of lease agreements signed in the 1990s and 2000s is reaching its end. This creates a window — a relatively rare one — for the city to rethink terms, rents, and expectations for the entire waterfront.
The renegotiation process involves city staff (primarily the City Manager's office and the Community Development department), outside real estate consultants retained by the city, and the tenants themselves. Proposed terms come to the council for approval. The council has the authority to approve, modify, or reject any lease deal.
Several factors make this round of negotiations particularly significant:
Deferred maintenance. Some waterfront properties have aging infrastructure that needs substantial investment. Who pays for that — the city or the tenant — is a central negotiating point. Tenants on short or expiring leases have little incentive to invest in improvements they might not benefit from. Longer lease terms, on the other hand, give tenants reason to spend on upgrades.
Market conditions. The South Bay hospitality and dining market has changed significantly since the last round of leases was signed. Post-pandemic dining patterns, the rise of experiential retail, and increased tourism interest driven by the 2028 Olympics all affect what the waterfront could be worth to the right operators.
Public access. The California Coastal Commission has jurisdiction over development in the coastal zone, and any significant changes to waterfront uses may require Coastal Commission review. Public access to the waterfront is both a legal requirement and a community expectation. Lease terms that restrict public access or privatize public-facing spaces would face significant regulatory and political pushback.
The revenue picture
Waterfront lease revenue is a meaningful part of the city's income, though not a dominant one. Collectively, harbor-area ground leases generate several million dollars per year for the city. The exact amount depends on the mix of base rents and percentage rents — when waterfront businesses do well, the city's percentage rent income rises with them.
The renegotiation is an opportunity to update rental rates to reflect current market conditions. Some existing leases have base rents that were set decades ago and have not been adjusted to match the growth in property values and commercial rents in the South Bay. A fair-market reappraisal could meaningfully increase the city's revenue from these properties.
At the same time, the city has an interest in keeping the waterfront active and attractive. Pushing rents so high that tenants can't operate profitably would be counterproductive — empty storefronts generate zero revenue and degrade the harbor's appeal. The goal is a rate that reflects the value of the location while allowing businesses to thrive.
What to watch for
As lease negotiations progress, here are the key questions to track:
Lease duration.Longer leases (20–30 years) give tenants investment certainty but lock the city into terms that may become unfavorable. Shorter leases (10–15 years) give the city more frequent opportunities to adjust but may discourage tenant investment. The sweet spot depends on the specific property and the tenant's capital investment plan.
Rent structure. Look for whether deals include meaningful percentage rent provisions that let the city share in upside when businesses perform well. A lease with a low base rent and no percentage rent is a red flag. A lease with a fair base rent plus 5–8% of gross revenue above a threshold is more aligned with public interest.
Improvement requirements. Are tenants required to invest a specific dollar amount in property improvements? Are there deadlines? Are there consequences for non-compliance? These provisions determine whether the waterfront gets better or continues to age.
Transparency.Lease negotiations sometimes happen behind closed doors under the real estate exception to the Brown Act. That's legally permissible, but the final terms must be voted on in open session. Residents should expect the council to explain the reasoning behind the deals they approve and to make the full lease documents available for public review before the vote.
The waterfront is Redondo Beach's signature public asset. How the city manages these leases will determine whether King Harbor becomes a thriving, well-maintained destination or continues to feel like it's waiting for something better. We'll be covering the negotiations as they develop.