DTLA HAS $3B IN ONGOING NEW CONSTRUCTION PROJECTS%>
Published on Tuesday, February 23, 2021
The market’s large construction pipeline signals developer commitment to city living. %>
Downtown Los Angeles has $3 billion in new construction projects currently under development, according to a report from the DCBID. The strong activity is a sign that developers are committed to city living, despite some outward migration from big cities last year.
Ongoing projects include Related Company’s $1 billion mixed-use project The Grand, luxury high-rise apartment towers from Brookfield Properties and Mitsui Fudosan and signature hotels from Lightstone Group and CitizenM. In addition, there were five new ground breakings in 2020.
“There was an underlying motivation particularly among real estate companies,” Nick Griffin, executive director at the DCBID, tells GlobeSt.com. “They really said that this is a challenge and they would take a hit now but come out of this crisis, but that they would come out of this stronger. There is every indication that we are going to have a roaring economic recovery. Once the vaccine kicks in, there is every indication that the economy is going to boom. I think that a lot of the real estate companies are going to look at that and are preparing to catch the tailwinds when we come out of this.”
This recession is unfolding very differently from the 2008 financial crisis when construction came to a halt and many developers were forced to sell distressed developments. “In that crisis, you not only had a debt crisis but also a demand crisis where the whole economy had taken a hit,” says Griffin. “This time, there is actually a lot of pent-up demand. The amount of money in savings that is just sitting and waiting to be unleashed is pretty stunning. Everyone in the real estate business seems to be talking about it. There is more savings in households and in companies than people know what to do with. All people want to do is go to a restaurant or go on a trip. I think it is going to be totally the opposite of coming out of the 2008 recession.”
However, the big question mark in this downturn was migration. During the early days of the pandemic, people fled major metros in favor of small cities and suburban markets. But, Griffin expects those trends will be temporary. “People are going to come pouring back into city centers,” he says. “People have a very short memory, and the minute they get their masks off and don’t have to social distance, I think people are going to want to be in an active city doing stuff. I think the demand side of it is going to mean that the real estate interest on all fronts is going to be ready.”
Another sign DTLA will have a bright future: the mix of developments. The current pipeline has everything from apartments to retail and hotels—and even new office projects. This is a positive sign for a swift rebound. “I am bullish on the office sector. While there is going to be change because crises have a way of shaking things up, I think the office sector will adapt and there will be some combination of work-from-home and flex time,” says Griffin. “I don’t in anyway see the demise of offices. I think office will be strong by the end of the year. And, those adaptations may bring other opportunities, too.”