Developers: Are They Over Doing It?

Just recently have I entered the blogosphere, but what I have found on real estate development has truly kept me intrigued. There is so much always happening in this field that it makes it enjoyable to search through blogs that offer up interesting insight on what is currently going on and soon to be underway. In my last post I talked about how the city has decided not to allow for the rezoning of industrial land for residential use. So I thought it was only fitting to talk about two projects in the Los Angeles area for residential use that have been under some debate lately. The first post "Westside Condo Project Promises More Gridlock, Disparity," is published by RedFin Los Angeles real estate agent Cindy Allen. Her post brings up the issue of plugging in more high rise luxurious condos in Century City and whether the market can withstand these super expensive buildings. The Second post "Conquest Banned For Even Thinking About USC Housing," was published by Dakota Smith the editor of Curbed LA. In this post she talks about the ruling by the courts to not allow Conquest housing to monopolize housing around the USC campus and allow for the University Gateway Project to move forward (a Conquest advertisement to the left). As one can see, there are projects going up all over Los Angeles meeting different types of needs for living, but there is always debate and issues revolving around every development. In the first post there will be additional talk about whether the market will continue to slow down. Where as in the second post, questions have been addressed about monopolizing the market so that other developers are unable to come into the area. Both are very prevalent issues and interlocking in many cases. I have offered my comments on each of these blogs below, as well as on the individual's blog.

"Westside Condo Project Promises More Gridlock, Disparity"
Comment:
First off, I would like to thank you for your interesting insight on this proposed project in Century City. As you stated, a 45-story 177-unit building in Century City that has been designed by French architect Jean Nouvel does not seem like the best option at this time (the shiny inserted building at the right). In my opinion, with slumping markets and the already over priced homes in Beverly Hills, I do not feel that "one of the most expensive residential buildings in the west" makes sense. The developers claim it will attract the European and Asian elite along with the rich Westside mansion owners to sell and move into a one of a kind building. Yes, maybe you will get a few ultra rich people to give up their mansions to live in a prestigious 30 million dollar condo, but I would not push the envelope. I agree with your assessment that this could potentially over build the market for the need of high end condos. Especially with the other nearby proposed projects of a 252-condo development on Wilshire Boulevard in Beverly Hills and the other two projects that make up almost 800-condos in Century City that have been proposed. With the amount these investors have paid for the land which seems to be between 400 and 500 million for each site, what will happen if they cannot find enough people to buy the condos? This could potentially add to the already huge problem with the market, creating a lot of losses. Do you see all these projects going forward in the near future or do you feel some of the investors will realize that there is just not enough market for these types of huge condo buildings at this time? I am all for development and luxurious condos but right now it seems like this could be a bad move on the developers part to believe that he can fill 30 million dollar condos with such an ease. Like you have suggested, I guess time will only tell.

"Conquest Banned For Even Thinking about USC Housing"
Comment:
Being a student at USC, I would like to thank you for your knowledge on the issue surrounding USC housing and Conquest. You have made it apparent to me that Conquest housing will no longer be able to hold a monopoly on current limited market of housing around the USC campus. As you state "A settlement reached today permanently prohibits Conquest Student Housing from interfering with housing projects near USC". This is a very big deal because the prices for apartments around USC are pretty absurd to have to be paying as a poor college student. As a student, I am paying 1,200 dollars a month not including gas or electricity. Allowing for these other projects to come into the areas, such as the Urban Partners project with USC to build the University Gateway, will help lower surrounding prices of apartments. It has not been a secret that Conquest has kind of taken over and kept other developers from being able to enter the area. You have made it clear that all law suits have been dropped by both sides, but if Conquest makes any missteps the Court has the power to impose sanctions. I was not aware that the Gateway Project is going to house 1,600 students and now I understand why Conquest was trying to interfere and litigate the development. Do you think that Conquest will continue to try and use unlawful actions to stop other developments from coming in or do you think that they will allow for things to take their course? It is understandable that they want to keep profit margin high, but to abuse the power is just not right. Along with that, do you think that prices for rent of apartments will change for the better or worse with the development of new buildings? Hopefully, as you state, the Gateway project is the first of many projects to help revitalize the area surrounding the USC campus.

Industrial Land: To Convert or Not To Convert

Recently the industrial sectors of downtown Los Angeles have come under fire from the Mayor and City Council. Some industrial landowners have asked for the opportunity to rezone and sell their land to developers for residential use. The issue at hand is that the City Council with the backing of the mayor have denied this grant to most developers because of the potential job losses that would occur. Although it may be more profitable for industrial landowners to sell off their land to residential developers, it is not in the best interest of Los Angeles due to potential job loss.

On January third of this year the Los Angeles City Planning Department released a memorandum regarding their intentions and how they plan to pursue the industrial situation in the Los Angeles community. The result which denied the request for the rezoning in Employment Protection Districts was met with much animosity by local residential developers. The plan that has been developed by Gail Goldberg (pictured at the right) who is the Los Angeles City Planning Director and Cecilia V. Estolano who is the Chief Executive Officer of Community Redevelopment Agency demonstrates how to approach this issue in the next twenty-four months as well as in the long term. This issue will have a significant impact on whether or not the Los Angeles economy will continue to grow and thrive in the years to come.

There are major consequences that could arise from the conversion of this industrial land to residential use. According to Goldberg, in the last twenty-five years there have been a million new residents to California but we have lost over 57,000 jobs. This brings up a very important question of whether or not the city should sacrifice additional vibrant industrial land that could help fix this job loss or should they allow the building of residential areas. Obviously, this is not an easy question to answer but the Los Angeles City Council has taken the direction that it will only create a bigger problem for people trying to find jobs. According to Goldberg, twenty percent of the industrial land already has been compromised and will not be able to be salvaged for industrial use. Looking at it from that perspective illustrates the need to fight off the big player developers trying to work their way farther into this industrial area. Supporters of the conversion to residential land believe that the city is only doing this to keep their sales tax revenue from disappearing. Although this may play a part in the final decision, it is not a main contributer. Goldberg makes it very clear that industrial jobs versus service jobs creates a situation that keep people in the middle class. The difference in wages is twenty-nine thousand for retail jobs versus the forty-seven thousand a year for the manufacturing jobs that are available right now.

This impact would create a huge problem for the middle class and people trying to jump into the middle class. The memorandum has set out strict guidelines for the short term and long term goals for the city of Los Angeles. They want to give the opportunity to more industrial companies to move into vacant areas and to redevelop these areas in hope and promise of additional jobs and the increase of the middle class. Truly if you look at the statistics that Goldberg presents this is the only viable option and direction for Los Angeles to take, otherwise it could potentially create a large recession within the city (Downtown Los Angeles to the right). According to the Redevelopment Agency, these developers were asking for nineteen thousand acres to be rezoned which is about eight percent of the city.

Although many people do not agree with the Mayors' and the City Councils' decision, it is difficult to overlook the burden that this rezoning could potentially have on the economy. Just because powerful real estate developers see the opportunity for big bucks in developing land for residential use does not mean it is the best answer or in the best interest of the rest of the people in the city. For example New York and Chicago have kept strong industrial sectors and continue to thrive and are good role models for cities such as Los Angeles that are redeveloping their strategy. On the other hand, cities such as San Francisco have allowed the industrial land to be turned into residential housing, creating a lack of middle class jobs and an area only the rich can afford to live in. Los Angeles previously looked at each individual situation on a case by case basis but now the potential impact is too large. This new approach which has a two year assessment, surely is only the beginning for the potential increase and improvement which will occur by adding more industry to the Los Angeles area and which in turn will help it thrive.

The strategic long and short term plan allows for the necessary improvements and investment into the industrial market. The City Council listened to arguments from both sides and made the decision in the best interest of the entire city and not just wealthy developers. Now all that needs to be done is for the plan to be followed through and implemented which should help regain and surpass the previous loss of jobs over the last twenty-five years.