LA Developers See Big Opportunity In City's Pending Conversion Reform

An expected change to the city’s adaptive reuse rules could clear the way for converting a broader pool of the city’s buildings into housing, a privilege that has historically been reserved for older buildings in select neighborhoods.

With more areas of the city poised to unlock these benefits, developers and architects say the reform is a critical element if Los Angeles wants to meet high state-mandated housing targets. 

“It’s going to open the door to a lot of opportunities to build more housing throughout the city, so it’s a big deal,” Jamison Properties President Garrett Lee said. 

The citywide expansion would open the entire city to adaptive reuse benefits that were previously confined to a small group of neighborhoods, including Downtown, Koreatown and Hollywood. 

It would make these projects by-right, saving time for developers and theoretically reducing carrying costs. It also expands the pool by lowering the eligibility age of buildings to 15 years on a rolling basis, where previous reuse rules required buildings to be from the mid-1970s or older. 

All these changes are still pending. The ordinance has been preliminarily approved, but the city attorney’s office is reviewing the ordinance’s verbiage and will send it back to the full city council for a vote when the review is complete. That is expected to happen within the next few months, according to the planning department. 

Los Angeles already leads the state in proposed office-to-residential conversions in 2024 with an 80% increase year-over-year, according to a new report. Still, with a yearslong housing crisis and shifting needs around office space, conversions are needed around the city.

This broadening of the rules presents exciting opportunities, Omgivning founder and principal Karin Liljegren said. 

The architect has done most of her work in adaptive reuse over the last 25 years, specializing in Downtown Los Angeles. 

“It created 14,000 units and it was super successful, but it was with a relatively similar building type,” Liljegren said of the city's original adaptive reuse ordinance. When this citywide ordinance goes into effect, “This really kind of opens it up to many, many other different types of buildings.”

Those who have played within the existing tight boundaries of adaptive reuse are excited. Jamison is on its tenth adaptive reuse project, the conversion of a 13-story, 233K SF Koreatown office building on Wilshire Boulevard into 236 multifamily units and 15K SF of street-level retail. 

So far, the company has looked to its own existing office building stock to find conversion material, but Lee said that when the entire city is open for adaptive reuse, it would likely lead Jamison to branch out and potentially acquire an office to convert it. 

What Jamison looks for in a potential conversion is a formula inherent in its Koreatown sites: transit-close, high walkability and close to neighborhood amenities in an urban core area. The company also looks to areas that could both use more rental housing and have excess office space.

Other developers have cited a dense urban environment with a great pedestrian scene and amenities nearby, preferably in walking distance, as the ideal location for an adaptive reuse project. An office located a 20-minute walk from the nearest neighborhood-serving amenity probably isn’t an ideal candidate for conversion to housing.

These indicators could push them toward Miracle Mile or Mid-Wilshire, Lee said, especially with the extension of the Purple Line subway that would connect Koreatown to Westwood. 

Others are expecting certain sizes or vintages of offices, rather than specific neighborhoods, to become favorable for residential conversions. 

“They're kind of tired. They're from the '80s, '70s, early '90s, but they're reasonably compliant,” Liljegren said. “Those are really good building types.” 

Smaller office properties too, rather than the high-rise conversions that many might envision as prime candidates, seem better positioned for conversion because of their size. These properties might also have a parking lot, which is another perk for a housing conversion. 

Liljegren and KTGY principal Mark Oberholzer anticipate seeing smaller projects flourish.

Oberholzer imagined mid-rise underutilized buildings having a heyday as conversion material, especially as office occupiers flock to Class-A office space and the other types struggle to stay full. Oberholzer pointed to new office projects such as Lendlease’s La Cienega project, which will bring more than 250K SF of brand new office space to a site just off the E Line light rail. 

“I think the ordinance itself is really going to encourage the conversion of mid-rise office buildings because I think those are likely candidates,” Oberholzer said. “They're also programmatically the right size.” 

What the ordinance doesn’t contain are financial incentives to make conversions happen. The cost of converting buildings to housing, especially offices, is often cited as a key reason why these projects aren’t more popular. Developers and architects point to the expense of making seismic improvements and bringing properties up to code for fire and life safety regulations as a significant chunk of the pie on these projects. 

Jamison’s Lee said that in the current market, with costs so high for ground-up construction, the benefits of starting with an existing building make adaptive reuse a more attractive option. 

Asked if these regulations alone will seriously grease the wheels of production on adaptive reuse projects and result in a boom of conversions, Liljegren hesitated. 

She’d like to see financial incentives such as tax abatements “or just literally giving cash” to boost these projects, citing concerns around high and potentially rising construction costs. Without them, she worries that only certain buildings in distress or with prices otherwise lowered will be converted. Still, she emphasized that this expansion is going to deliver a critical boost to office-to-residential conversions in the city. 

“This is going to move the needle, for sure,” Liljegren said. “And I think it's very important that we get that out there: This is going to move the needle.” 

CORRECTION, MARCH 5, 1:38 P.M. PT: A previous version of this story misspelled architect Mark Oberholzer's last name. The story has been updated.