DOWNTOWN LOS ANGELES - The surge of investment in Downtown in the last couple years has reminded many people of the pre-recession era. Then, as now, big-budget housing and other projects are announced seemingly weekly. Once again, construction cranes speckle the sky.
There is a big difference, however, between the current boom and the one that peaked around 2006. Whereas the first wave of housing was powered by local developers often on a piecemeal basis, today the residential and mixed-use projects (and sometimes mega-projects) increasingly come from deep-pocketed institutional investors. What’s more, many of those pouring money into Downtown hail from Asia.
Consider some of the biggest recent developments: The sites of Figueroa Central and Metropolis, two mixed-use mega-projects near L.A. Live, were bought late last year by Beijing-based Oceanwide Real Estate Group and Shanghai-based Greenland Group, respectively. The $1 billion Wilshire Grand tower comes from South Korean conglomerate Hanjin International. Singapore-based Overseas Union Enterprise bought U.S. Bank Tower last year.
While the Asian buying spree gets many of the headlines, developers from around the United States, including from New York, Chicago, Houston, Atlanta and Cleveland, are looking to cash in on Downtown. Even large Los Angeles-based developers such as Evoq Properties have been backed by out-of-town institutional funds from New York and elsewhere, said Evoq CEO Martin Caverly.
“Downtown L.A. was not a favored place for big institutional funding,” Caverly said. “Now it is. This isn’t flash-in-the-pan stuff, either. When you have these players making these kinds of bets, it’s because they see long-term, sustainable success.”
The biggest beyond-L.A. investment is anchored in housing. More than 5,000 apartments are being built in Downtown, and more than 3,000 additional units have been approved by the city, according to real estate sales and research firm Polaris Pacific.
Vancouver-based Onni Group has broken ground or submitted plans for more than 1,000 units throughout Downtown, all in mid- and high-rise structures. Carmel Partners is deep into construction on a low-rise 700-apartment building with a Whole Foods market at Eighth Street and Grand Avenue, and the San Francisco-based developer recently revealed plans for a 27-story, 363-unit tower nearby at Eighth and Olive streets. New York-based Related Cos. is constructing a 19-story apartment building on Bunker Hill adjacent to the upcoming Broad museum, and is aiming for a 2015 groundbreaking on the recently revived, $650 million, Frank Gehry-designed mixed-use project The Grand across the street from Walt Disney Concert Hall.
Experts say that these developers are not being speculative or over-optimistic about the demand for new housing. Many ambitious residential projects were downgraded or cut altogether during the recession, and that sense of caution still lingers with lenders — partly why so few condominiums are being built despite the overall boom, according to Thomas Bohlinger, an executive vice president at brokerage firm CBRE.
