Wal-Mart Stores Inc. has signed a lease to open its first grocery in Los Angeles County and its first store of any kind downtown.

The Bentonville, Ark., retailer, which has been searching for space for months, is taking the ground floor of a senior housing complex just north of the Santa Ana (101) Freeway on the outskirts of Chinatown.

The lease reflects the strategy by the world’s largest retailer to increase its penetration into urban markets by putting in smaller groceries called Neighborhood Markets that are similar to traditional supermarkets.

It also reflects Wal-Mart’s new tactic in California – as reported by the Business Journal in September – to move quickly into already entitled retail spaces for its stores, allowing it to avoid the legal battles and community opposition that have so often stymied Wal-Mart in the state.

That means Wal-Mart must be flexible in its space requirements, often accepting odd sizes. The new Neighborhood Market downtown will be in 33,000 square feet instead of its usual 42,000 square feet.

In addition, the lease at 701 W. Cesar Chavez Ave. is one more indication that downtown has come of age as a residential neighborhood.

“Downtown L.A. is a great example of our new Wal-Mart Neighborhood Market,” said Steven Restivo, a company spokesman. “We want the size and format of our store to reflect the community.”

Wal-Mart is expected to begin renovating the space this summer, but has not released a timeline for the opening. It is being joined downtown by Minneapolis’ Target Corp., which is opening a store this year at the Fig & 7th mall. Similarly, Pleasanton-based Ross Stores Inc. is leasing an old Woolworth location, and brokers say grocers Smart & Final Inc. of Commerce and Fresh & Easy Neighborhood Market Inc., owned by Tesco PLC of Cheshunt, England, are also hunting for space.

Bill Bauman, executive vice president of New York-based brokerage Studley Inc., said downtown’s growing population coupled with the scarcity of national retailers and full-service grocers is attracting national retailers and creating a domino effect.

Downtown was home to nearly 46,000 people last year, up 15 percent from 2008, according to the Downtown Center Business Improvement District.

“Downtown is becoming a little more of an acceptable retail hub,” Bauman said. “With every success and ever retailer that plants a flag down here, it will encourage their competition or other retailers to follow suit.”

The world’s largest retailer opened its first Neighborhood Market, which offer fresh groceries, dry and canned goods, pharmacy drugs and home supplies, in 1998 in Chicago. It has been slowly opening them across the country since then and recently has pursued the strategy more aggressively.

In California, it has announced intentions to open several markets, including in Camarillo, Huntington Beach and San Ramon. Wal-Mart also said it is looking for more locations in Los Angeles County.

Wal-Mart’s strategy also involves moving into existing storefronts, so it doesn’t have to seek discretionary entitlements, a process that opponents usually seize upon to scuttle or delay stores. The tactic is already being put to the test in Burbank, where Wal-Mart bought a 109,000-square-foot building the defunct Great Indoors chain occupied next to the bustling Empire Center mall. It plans to open a supercenter there that would be much smaller than its typical size of 185,000 square feet.

Many Burbank residents are protesting the chain’s efforts to open the store, but city officials said this month that the store met all zoning requirement and there was nothing they could do to stop it.

The company has recently acquired other retail shells, including the site of another vacant Great Indoors store in Irvine and a former Mervyn’s storefront in Torrance. (The very first L.A. Angeles location is in Panorama City and opened in 1998 in a former Broadway department store, but that has been considered a one-off move.)

Wal-Mart operates more than 10,000 stores in 27 countries, including more than 4,400 in the United States. However, it has struggled to get into dense urban markets such as Los Angeles County. Here, in the most populous county in the nation with 9.8 million residents, Wal-Mart has fewer than 30 stores.

Meanwhile, downtown boosters are lauding the lease deal.

Carol Schatz, chief executive of the Central City Association, said that the growing population was likely a key factor in convincing Wal-Mart to move downtown, following Target and a Ralph’s Fresh Fare that opened in 2007.

“It’s been our view that the community is big enough and growing, and there’s ample room for another offering,” she said.

What’s more, the retail space that Wal-Mart is moving into has been hard to fill. It’s been mostly vacant since its construction 20 years ago. The store will occupy the ground floor of the 300-unit Grand Plaza Apartments. About three years ago, a Rio Ranch grocery had agreed to move in but that deal fell through.

The property owner, a company called 601 N. Grand Ave. Partners Ltd., did not return calls for comment.

However, the location would seem ideal for a Wal-Mart. It’s across the street from the upscale Orsini Apartment Homes, a 1,000-unit complex that opened in stages between 2003 and 2007. And its location means that it can draw from Boyle Heights, Silver Lake, Echo Park and other dense communities.

The closest existing Wal-Marts are a 210,000-square-foot supercenter in Rosemead, which opened in 2006 but is some 10 miles away, and a 213,000-square-foot store at the Baldwin Hills Crenshaw Plaza, which opened in 2003.

Wal-Mart’s Restivo said the retailer views the location as an ideal fit.

“(It will) serve as a new option for customers who want access to a broad assortment of affordable groceries, provide the opportunity to revive a long-vacant property in line with our sustainability goals and will deliver an economic boost,” he said.