The Next Biggest Thing for Downtown Is...
Key players in Downtown's revitalization stopped by Bisnow's Evolution of Downtown Summit on Friday at the LA Marriott LA Live. Just when we thought things were going well, we learn we're not different than Anchorage, Alaska.
Sklar Kirsh founding partner Andrew Kirsh, our moderator, kicked off the program with some interesting stats. The median age of Downtown's 52,400 residents is 34 and the median household income is nearly $100k. But what's really interesting is that 44% work somewhere else. "They're choosing to live Downtown for what Downtown has to offer." (Or they just want to get as far away from their co-workers as possible.) There's still a lot of room for growth, he adds; the number of residents in Downtown LA is the same or less than Anchorage, Alaska.
The Ratkovich Co CEO Wayne Ratkovich says "There's a history of people coming to Downtown," and we're coming back to the idea that the region wants a centerpoint. The Bloc, his company's redevelopment of Macy's Plaza, will be one of the few truly mixed-use projects in LA: a 495-room Sheraton hotel upgraded to four-star status; 400k SF of retail, now open to the street and including some entirely new tenants; 757k SF office building rehab; and 2,000 cars all on one parcel. (That's pretty much every asset class. Throw in a fan, and we'll count it as cold-storage industrial.)
EVP Bert Dezzutti explained Brookfield Office Properties' acquisition of the MPG assets: The company operates in a limited number of cities that offer future office-using job growth, and a similar cycle has occurred in these cities. Adaptive reuse has been the catalyst, resulting in increased housing density, which then drives retail and entertainment; at the tail end, the office building industry gets going. Downtown LA is in the early stages of that recovery, but "we're beginning to see job growth."
OUE's CEO of Americas business Richard Stockton says part of the firm's plan for the US Bank Tower is to introduce change and make it more exciting. (Take the recent opening of an event space on the 71st floor.) The purchase allows the Singapore-based company to start a US platform across a number of asset classes: hotel, shopping centers, and residential, in addition to office.
CEO Martin Caverly says EVOQ Properties is transforming Alameda Square into a fashion innovation campus. If you draw a circle around the project, he says, there are 17 well-known brands selling everything from $50 t-shirts to $500 jeans. (To save money, we'll just buy a second shirt and wrap it around our waist.) Weighing in on the traditional office vs creative space debate, Martin says the worst thing you can do in a Class-A tower is rip out your ceiling tiles. Eventually, creative tenants mature and "they want to get away from the guy with the skateboard."
CBRE SVP John Zanetos talked about TED: a new breed of tenant (tech, entertainment, design) coming into Downtown, driven by residential development. He sees rent growth in historic product—Alameda Square rents have more than quadrupled over the past five years—and migration from other submarkets. According to John, both traditional high-rise and creative office tenants are drawn to urban centers where they can have a phenomenal neighborhood experience. "That’s what’s going to help continue the office demand."
Bert says that when Brookfield was redeveloping Figat7th, its first thesis was that food follows fashion. Instead, the reverse happened. Food has become a cultural driver, thanks to Food Network and social media. Wayne notes that by 2024, 70% of the workforce will be Millennials. Other useful catalysts: transportation and better quality hotel stock. Martin asks why we have so much trouble getting subways built, noting a subway from Downtown to Century City would help fill in the Wilshire Corridor.