As ULI opened its 2017 Fall Meeting in Los Angeles, Robert Lowe, chairman and founder of Lowe Enterprises and the conference’s cochair, told attendees that the Los Angeles of today is much different than the L.A. that hosted ULI six years ago. Central Los Angeles is one of the hottest markets in the United States, with prices soaring, international capital flowing to projects, and more than a dozen developments under construction downtown.
The city once known for suburban sprawl has become a test case for new urban development, panelists agreed.
“We’ve taken what we’ve learned in L.A. and adapted it to other cities,” including projects in London and Berlin, Ted Tanner, senior vice president of real estate for AEG, told the audience.
Moderated by Gensler regional managing principal Robert Jernigan, the panel brought together three of the most influential developers in the growth of Los Angeles: Wayne Ratkovich, president and chief executive officer of the Ratkovich Company, along with Lowe and Tanner.
“We’re on a roll now,” said Ratkovich, who is cochair of the conference. In July, Los Angeles was named host city of the 2028 Olympic Games.
But the panel also sounded a few cautionary notes. With so many residential towers in development, there is a real concern that the market will soon be oversaturated with luxury condominiums, panelists agreed.
“I think there is going to be an oversupply that will take a few years to absorb at the higher end,” Lowe said.
For AEG, which developed L.A. Live, the entertainment center, there is apprehension that the new projects will not generate the foot traffic necessary to support the new businesses moving into the area, Tanner said.
“It’s pretty scary in terms of the oversupply,” Tanner said. “The big fear is that [the new condos] will sit mostly empty.”
But most of the general session focused on the L.A. success story, and the three developers on the panel who were instrumental in the redevelopment. They provided insights into their strategies.
Ratkovich has focused on buying “properties nobody wants,” including Howard Hughes’s old hangar for the Spruce Goose aircraft. Google is transforming the structure into a regional headquarters. Ratkovich said he likes to focus on historic buildings. “Instead of opposing historic designation, we embraced it,” Ratkovich said. “We used it as a marketing tool.”
Lowe is focused on mixed-use developments, once a rarity in urban Los Angeles. All the company’s projects are tied to transit, including Ivy Station, a $300 million, 5.2-acre (2 ha) infill project in Culver City. Los Angeles has several “nodes of opportunity” for mixed-use developments that connect to the city’s fast-growing public transit system, he said.
“We try to follow demand as a first rule,” Lowe said. “It is clear the younger age group is looking for the lifestyle they find in mixed-use developments.”
Lowe is also active in L.A.’s downtown and arts district, where both residential and commercial projects are starting to command some of the highest rents in the city. His company is developing a “funky” office project in the arts district that will look like an old building on the inside, he said.
But there is no doubt that the development cycle is entering a new phase, developers said. The high prices and competition are making it harder to find opportunities downtown, said Ratkovich, who noted that some of the capital flowing into the market is not following the “normal disciplines of the marketplace.”
In many ways, Los Angeles is testing ground for solutions to issues facing cities around the world. In a city ruled by the automobile, the advent of autonomous cars and ride sharing has L.A. developers and planners pushing for new approaches to parking in the car-dominated city.
“Parking demand seems to be decreasing,” Tanner said. “People are finding other ways to get around.”
Parking garages can be designed for more flexibility, allowing for conversion to new uses in the future, panelists agreed. The building community can play a key role in changing the transportation habits in the city, they said.
“Developers can significantly change how people will move around the city,” Lowe noted.
Jernigan also raised the issue of the homeless, a problem that has plagued Los Angeles for decades.
“We have to tackle the issues that make it more difficult to build housing in southern California,” Lowe said.
Builders also need new ideas from the design community, Ratkovich said. “We need design help to figure out how to house people in an efficient way.”
All the panelists remained bullish on Los Angeles and the forces driving the city’s growth. The city is continuing to evolve, they emphasized.
“I think we’re going to see a better housing and work balance downtown,” Tanner said.