The pandemic-induced changes in the Los Angeles commercial real estate market have been a long time coming, as discussed during the discussion the May 11th Commercial Observer Forum on the future of LA real estate.
Trends emerging across the City of Angels include a lack of affordable housing, the migration of residents to California coastal cities, the shrinking retail and office space, and increased demand for entertainment.
“As we‘I’ve always said the pandemic accelerated trends that were already in the works,” said Jamie Lee, CEO of Jamison Realty Inc., during the forum‘s opening panel, “Boom or Bust: Pursuit of LA‘s market growth from pre- to post-COVID and beyond.” Moderated by the CO reporter Greg Kornfeld, this panel was also there Richard Vogel, Senior Vice President of Related companies;; Kyle Jenkins, Vice President of Lion;; and Tunua thrash ntuk, Managing director for LISC LA.
“In 2000 the average square meter per worker was around 300 square meters, in 2010 it was 151 square meters per employee.” Lee added. “And now it is‘is probably 80.”
Panellists cited this exponential decline in office space, as well as a similar decline in tangential asset classes, as likely a long-lasting by-product of the pandemic: working from home.
“I think we‘We are again underestimating the impact this potential hybrid work from home model could have on all of our asset classes that we have‘am currently working on” Vogel said, referring to the transportation, travel and hospitality industries as just a few of the sectors hit by empty offices. “We rely heavily on the office crowd to fill our restaurants and retail stores.”
Vogel predicted that working from home will have a huge impact on the post-pandemic LA market, but expected a full recovery for the hospitality and food service industries – – the timeline, for which, however, is still indeterminate.
Then he addressed the real estate crisis as another trend that depends on supply and demand. “The only way to solve the housing problem is to build more housing of all types: affordable, manpower, to luxury,” he stated.
But building during the pandemic has proven to be a challenge. Jenkins said the biggest battle his company is facing right now is cost, as timber prices have increased 300 percent. The reasons for this increase are complicated, as factors such as limited access to Canadian timber land and higher timber tariffs contribute to sky-high prices. It remains uncertain how and when these material costs will decrease and the future of building accessibility is in the air.
Both affordable housing and homelessness were the main problems of the pandemic. Thrash-Ntuk mentioned the need to reuse and rededicate empty rooms through relief measures such as Project Roomkey and Project Homekey. These initiatives offer short-term solutions to revitalize closed hotels and retail spaces to shelter those in need. While stressing that these initiatives are not long term, Thrash-Ntuk stressed how important they are for temporary relief.
Thrash-Ntuk expanded their analysis of the aid packages to examine state and local laws targeting landlords. Governor Gavin Newsom currently has plans Getting 80 percent of the lost funds back to the landlord, even though the ultimate goal is to make 100 percent of those payments. Paying back to landlords and keeping the tenants in their houses helps to reduce the value in individual parts of the city and to stabilize the market.
Yet despite these efforts, the battle for affordable housing is widespread and the pandemic has caused Los Angeles residents to migrate to coastal cities.
“At some point it becomes difficult to attract talent for the city if we don’t have affordable housing,” said Dale Holzer, CEO at Gray stone, during another panel entitled, “Apartment building investment and development trends designed to welcome a new wave of talent.”
Also top-class real estate centers – – Beverly Hills, Hollywood, Koreatown – – have experienced a commercial decline, and this far-reaching effect makes progress difficult. During the pandemic, many LA residents saw leases terminate and move to the city‘s outskirts. Chris Nickerson, Headmistress Kain International, believes this move is beneficial overall; the scatter “helps relieve some of the pressure on the congested areas of LA,” he said.
This panel– – which was moderated by Marcela Sapone, CEO and co-founder of Alfred, and also presented Joshua Samaha, deputy director of Hannover Real Estate Investors LLC – – assessed additional housing units (or ADUs) as a post-pandemic expansion option. Panellists called for adaptive housing reuse that would allow homeowners to add units to their homes. ADU legislation in 2009 set the framework for expansion at the micro level, and in 2021 the decision to expand is expected to skyrocket.
Beyond single occupancy, Nickerson sees a shift in certain amenities: outdoor spaces, balconies, pet accommodations, and co-working studios.
In a fireplace chat with CO‘s Cathy Cunningham, Hessam Nadji, President and Chief Executive Officer of Marcus & Millichap, compared to Los Angeles‘ current market with the one after the 2008 financial crisis. It took 13 months for the 2008 TARP stimulus response to be implemented “on the order of 6 percent of GDP”. However, the response to the pandemic took seven weeks, “and the scale of the response was close to 25-30 percent of GDP”.
“Optimism about the economy is 100 percent tied to solving the health crisis,” said Nadji. “At the same time, the cash injection has played a very important safety net in restoring jobs and returning businesses to an expansion mode.”
Nadji predicted that the wave of impending economic growth and job opportunities will create a demand for more space that could even seep onto office buildings. That change won‘This won’t happen overnight, but he assumes that the demand for offices will increase sharply over the next three years.
One change he hopes never will be a return to business before the pandemic. Regarding his own company, Hassem said: “We want to leave our comfort zone. It would be a missed opportunity now that we are back to normal‘learned so much.”
The last panel – “Incoming entertainment: stadiums, studios and streaming wars, oh my!” – – CO. put Moderator Sarika Ganger in dialogue with Kim Brewer, Senior Vice President, West Coast Development Unibail-Rodamco-Westfield; Jesse Göpel, CEO at Square mile capital; and Eric Randolph, Senior Design Manager and Global Practice Area Resilience Leader for Sports Gensler Sport.
The panelists discussed the increasing demand for entertainment, the focus on digital media and fast consumption. That demand was there before COVID-19, but the pandemic saw a surge in media consumption that is not expected to slow anytime soon.
However, due to the size and scope of entertainment projects, entertainment companies had to look outside of the city of Los Angelesfaced with logistical difficulties.
“It‘s hard-to-find scale features,” said Göpel. “Now we‘You can see that more and more projects are popping up outside of this zone.”
Goepel noted that moving out of town is the last resort given the industry Unions are centralized in Hollywood. As a result, the entertainment industry must either adapt to make creative use of existing spaces or modernize to create the necessary infrastructure.
This lack of accessible facilities extends to sports arenas as well. “Scale is always a great challenge for stadiums and training facilities,” said Randolph. “That becomes a really limiting factor in LA, where there just aren’t that many websites available.”
Even if the spots are available, attracting visitors to a post-pandemic world poses its own challenges. Entertainment has been mostly at home for over a year, Randolph now believes “The challenge is to compete with the big screen TV. You have to give people a reason to get out of the house, get off the couch, and actually go to the event.”
As an incentive for the visitors, he outlined experiences that go beyond the sporting event. Food stalls and pre-game and post-game options are some of the amenities Randolph hopes will bring in more visitors.
Despite the relative unpredictability of LA’s future‘s entertainment, business and housing markets, the panelists agreed in the city‘s resilience.
“Never shut out Southern California” Said Nadij and pointed to Los Angeles‘ economic diversity, educational institutions and quality of life. “If you look at history, we have always overcome these challenging times.”