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Downtown Los Angeles's growing office vacancy issue is "a critical economic threat that the City can no longer afford to ignore," the Central City Association warns in a new study released today by its nonprofit arm.
The study from the CCA's Downtown Works found that, without intervention, Downtown Los Angeles alone could see a $69.5B loss in assessed property value in its office market, along with $353M in potential lost property tax revenue for the City and County over the next decade. That would likely have a significant effect on the city's coffers.
The report's authors drew a clear line from the declining assessed values of office buildings in a market with record-high vacancy to serious losses for the city via lost General Fund revenue. The 22% vacancy in Downtown is a historic high and is expected to keep rising, according to the report.
“Downtown LA is hemorrhaging value, and with it, opportunity,” Central City Association President and CEO Nella McOsker said in a statement.
The study, conducted by BAE Urban Economics with Gensler and CBRE, calls for swift action to pave the way for high-vacancy office towers to be transformed into housing over the next 10 years, a move the report indicates could add $12B in assessed property value and generate $2B in new economic activity. It would also create housing that would benefit not just Downtown but the entire city.
Not all buildings with high vacancy are suitable for conversion, the study's authors stated, but CBRE and Gensler helped compile a “targeted conversion” 10-building sample that could yield 3,859 units alone. The report does not name those buildings. McOsker called adaptive reuse "a clear and proven strategy to breathe new life into our city center.”
In 1999, the city passed the Adaptive Reuse Ordinance, which has spurred the conversions of an estimated 12,000 units in the years since and was considered the kick-start to Downtown's rising profile as an "it" neighborhood in the same period.
The report suggested looking at an array of financial incentives, including property tax abatement and fee deferrals, to help repurposing projects pencil out, but it also said further study was needed to identify the best and most effective incentives for Downtown's specific landscape.
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