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The most prominent developers in Los Angeles’ downtown got together this week for the Central City Association’s tenth annual look at the real estate market. Tom Gilmore, who was early in renovating old buildings starting with his Old Bank District apartments downtown in 1998, tried to put the current market in perspective.
When Gilmore first started, he said the urban core of America’s second largest city was “kind of crappy. It wasn’t much of a downtown.” There were 2,300 apartments with an average rent of $1.35 per square foot per month. Today he said there are 8,200 apartments renting for $2.80 per square foot, “In a market that wasn’t supposed to go anywhere.” He said the number of condos has exploded from 829 to 4,800. Average condo sale prices went from $154,000 to $553,000.
He said, condo prices have been coming down recently, but less so downtown than in some other markets. The real estate industry “is not trading on a stock exchange,” Gilmore said. “You have to look at the market over ten years, at the broad trends.”
That’s certainly the view of Ted Tanner, he of the Anschutz Entertainment Group (AEG). AEG built the Staples Center, where the Lakers play, ten years ago and recently opened the Nokia Theater for concerts. Tanner said the company is building a “content campus” over the next two years, with an ESPN broadcast studio and a museum dedicated to the Grammy Awards, which he believes will draw 400,000 people a year to downtown.
Tom Cody, developer with the South Group, which has built condos right across from Staples Center, noted that one his company’s projects sold out in seven hours, 191 units, when the market was hot in late 2005. Now he says, “People aren’t so eager to buy in a pre-sale.” The number of buyers who can afford prices of $600 a square foot for condos is “down dramatically.”
Bill Witte, developer with the Related Cos., has been trying to get a $2 billion, Frank Gehry-designed mega project off the ground. Financing has been an issue; as has local opposition to city contributions. Witte, who is based in Orange County, south of Los Angeles, noted that there are several other prominent builders in other parts of the city and state who have major projects stalled. “In Orange County, the land of eternal sunshine and money, I have a lot of homebuilder friends on suicide watch,” he said.
Mark Tarczynski, of CB Richard Ellis, said downtown condo prices had fallen from a peak of $581 per square foot to $469 recently. Still, he said, for a market with 500,000 people working everyday, there are less than 15,000 homes.