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Amid a housing crunch, empty offices in downtown Los Angeles appeal – Jobsmaa.com

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The gleaming office towers of the downtown Los Angeles skyline hide a hard truth — most of the space is vacant.

After the pandemic raised workplace regulations and evaporated demand for office space, downtown landlords watched in frustration as the value of their office buildings plummeted. More than a few have faced foreclosures, with owners anxious to lure tenants back into their buildings or find another use for the millions of unused square feet.

The surge in office lease signings has led some to believe the office rental market has bottomed out, but landlords and developers like Garrett Lee believe there's a more reliable path forward than trying to lure tenants back: turning offices into apartments.

This idea took on new urgency this month Wildfires destroyed thousands of homes Los Angeles' Pacific Palisades neighborhood and Altadena, a community in the city's northern foothills, exacerbate the region's chronic housing shortage. Downtown Los Angeles is zoned for dense residential development in County.

“We have an unprecedented need for housing right now,” Lee said. “It takes more effort than ever to build housing in all unit types and rent levels.”

Lee is president of Jamison Properties, which converts mid-rise, older LA office buildings into apartment buildings. Now, Jamieson is plowing new ground with a gleaming 32-story office tower built on the edge of downtown in 1987.

Efforts to create a second act for disused office towers that were the pinnacle of prestige a generation ago are part of a larger drama playing out in a financial center that has lost its luster in the post-pandemic years. Restaurants and stores are struggling to get many workers out, while rising homelessness and a sense that sidewalks aren't safe have led some office tenants to leave.

“Downtown is torn between disbelievers and downtown believers who say it's gone downhill and not coming back,” Lee said. “We see a big divide between the two.”

While many of the city's pre-World War II office buildings have already been converted to apartments or hotels, the eye-catching skyscrapers built in the late 1980s and early 1990s remain mostly offices. 1055 W. 7th St. The successful makeover of Jamison's LA Care tower in , is an example of repurposing major office towers that were built relatively recently and designed to house corporate businesses for decades.

The city is close to adopting a new building code that will make it easier for developers to get permits to convert offices built after 1975. The previous code led to changes that focused on buildings built before that year, when construction standards were lower. Boom in office, apartment, condo and hotel conversions in the early 2000s.

Jamison 1055 W. Lee said he's close to getting city approval to replace 7th St. with “very minimal structural renovations,” which would reduce construction costs by about 10% and save a lot of time compared to Midcentury Office's previous conversions. Buildings require significant upgrades to meet city seismic codes.

Another game changer for developers is the ability to convert some office buildings to residential use without going through a full structural remodel, Lee said. Rent-paying office tenants may be left vacant for renovations when they convert vacant floors into apartments.

“You can skip a floor or go around them,” he said of office tenants. “It really opens up things to replace 30-year-old buildings,” such as those that dominate the downtown skyline.

Lee opened this year at 1055 W. 7th St. He plans to start work on it, which will be converted into 686 apartments. New office towers are “night and day” more attractive to convert to housing than midcentury buildings of the 1950s and '60s, he said, and command higher rents.

“The bones are really great,” he said, noting the floor-to-ceiling windows and panoramic views. Much of the mechanical, electrical and plumbing system could be reused “as it is still adequate for today's standards”.

However, floor by floor, the buildings take on a more complete look.

“We completely gutted the interiors,” Lee said, removing the walls, lighting and plumbing that served the office occupants. Once the floors are stripped down to concrete, developers are ready to redevelop them into apartments.

A view of the Wedbush Center in Los Angeles.

Wedbush Securities is moving from its downtown Los Angeles offices in the Wedbush Center to smaller quarters in Pasadena after 24 years.

(Michael Blackshire/Los Angeles Times)

1055 W. 7th St. There is room to create amenities such as a gym and co-working space, so tenants have a place to do their work outside of their apartments. Other tenant attractions will probably include a theater, golf simulator, karaoke room and card room — amenities that Jamison added in earlier changes to Koreatown.

Jamieson has tentative plans to convert another downtown office building into housing, the 10-story World Trade Center at Figueroa and Third streets, which dates back to 1975. It's unclear how many other office buildings are good candidates for residential conversion, but there are a lot. Space going unused – CBRE estimates that the central business district accounts for about a third of downtown's 32.4 million square feet in 70 buildings. This is more than three times the amount considered a healthy balance between tenant and landlord interests. When considering leased but unoccupied “shadow” office space, overall availability is nearly 37%.

Downtown apartment market Came out of recovery from infection Even as the office market falters. The neighborhood has about 90,000 residents, a slightly larger population than Santa Monica or Santa Barbara, said Jessica Lal, president of real estate brokerage CBRE's downtown office. They live in 47,000 dwellings, most of which are apartments rented at market rates.

Adding more residents through renovations and new buildings will help restore a sense of life to the Financial District.

Before the pandemic, downtown's sidewalks were often crowded with office workers. There were homeless people, but a sense of order prevailed in the busy blocks where thousands were employed by law firms, financial institutions and other white-collar firms.

said office investor John Cisco, who has worked in the real estate business downtown since the 1980s.

The drop in foot traffic, caused by workers staying home and working remotely during the pandemic, is a drain on vibrancy and sense of safety in the financial district, driving down office leases and hindering the neighborhood's revitalization, Sisco said.

The 32-story office building overlooks the freeway in downtown Los Angeles.

A 32-story office building in the 1000 block of West 7th Street will be converted into 686 apartments.

(William Liang/For The Times)

“Homelessness is out of control,” he said. “People don't feel safe coming to the city, and you lose all momentum related to the desire to live here.”

The changing nature of downtown is one of the reasons Wedbush Securities is moving to Pasadena's Lake Avenue, which has “completely recovered from the epidemic,” said President Gary Wedbush.

Wetbush Announced in October Behind the Wedbush Center, an office building facing the Harbor Freeway, Pasadena is home to smaller offices that now accommodate employees who work remotely more hours.

A retreat in leases has contributed to plummeting office building values ​​and sales of prime skyscrapers at deep discounts. Among them was the 55-story Gas Company Tower Sold last year $200 million for Los Angeles County, far less than the estimated $632 million in 2020.

Building apartments in struggling office buildings is considered environmentally preferable and can be much cheaper than building new apartments or condos, but most landlords believe the office rental market has bottomed out and could rebound this year.

Leases for more than 600,000 square feet of office space were signed in the fourth quarter ended December 21, up 21.7% from the previous quarter. More than half of that involved renewals of existing leases, with some companies expanding their offices while others contracted.

Those gains are just a small step back from the building boom of the 1980s and early '90s for a downtown burdened by an excess of office space.

An office building with the letters USC above

A 32-story office building in the 1100 block of South Olive Street, where Olympic organizer LA28 leased 160,000 square feet.

(William Liang/For The Times)

LA28, the largest office lease in all of Los Angeles, paid in the fourth quarter to host the 2028 Summer Olympic and Paralympic Games in Los Angeles. CBRE said LA28 leased 160,000 square feet in the USC Tower on Olive Street, a few blocks from the Los Angeles Convention Center, Crypto.com Arena and LA Live. LA28 is expected to move from Westwood later this year.

Other new leases downtown are in the works, said CBRE broker John Sanetos. Leasing upside in other cities is promising for Los Angeles, he said.

“What we're experiencing in Downtown L.A. is similar to what's happening in Seattle, San Francisco and other cities that historically tend to recover before Los Angeles in real estate cycles,” Zanetos said. “We saw their urban centers come back in the third or fourth quarter, and we think that bodes well for Los Angeles.”

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