LOS ANGELES-Investors at the recent Downtown L.A.: Opportunity Knocks conference at the JW Marriott hotel in Downtown Los Angeles expect to remain bullish on the downtown market in 2014 and 2015. The conference welcomed top-tier real estate investors from every market sector, including Dan Beckerman, CEO of AEG, Wayne Ratkovich, president and CEO of the Ratkovich Co. and Nelson Rising, chairman and CEO of Rising Realty Partners as well as speeches from council member Jose Huizar and Carol E. Schatz, president and CEO of the Downtown Center Improvement District.
The hospitality panel was enthusiastic about the investment prospects downtown. Tourism in the downtown market is increasing everyday, and currently, the area is short by about 4,000 hotel rooms. That will, hopefully, soon be rectified by massive new hotel developments coming online, namely the $1.1 billion Wilshire Grand project. Christopher Martin shared details of the highly anticipated development, which is scheduled to open in December 2016. With 900 guestrooms, the 4-star hotel will rise 18 stories or 1,100 feet into the sky. It will also include class-A office space and a ground-floor convention center.
Of course, multifamily and residential is the star of downtown development. Currently, the submarket has 5,000 market-rate units under construction. Residential panel moderator and Cushman & Wakefield vice chairman Marc Renard declared that over the next seven years downtown will transform into an urban oasis. The panel discussed upcoming notable developments, including the 42-story Frank Gehry-designed hybrid building, which will feature both for-rent apartment units and for-sale condos. The design is a totally new concept on the West Coast. Kennedy Williams principal Kathy Neal was excited as the prospect. She pushed investors and developers to build for-sale properties, which she felt the submarket is severely lacking.
Investors equally expect growth in the retail sector. FIGat7, the Block and the Bringing Back Broadway initiatives have received a lot of success with new shops opening, like Zara and Urban Outfitters. These stores are positioned to experience phenomenal growth. Macy's EVP John Gorham explained that the downtown Macy's, which has been in the same location for 40 years, has had an 8% growth over the last five-year period. Although the same growth might not be possible for smaller retail storefronts, it illustrates the retail potential in the market. Macy's has been so successful that they are adding a 20,000-square-foot space for furniture.
The office panel rounded out the conference. The sector has unfortunately been the slowest to recover. Panelists pointed out that vacancy rates are higher now than they were last year and that overall net absorption is low; however, panelists were still optimistic about the potential opportunities. Martin Caverly, CEO of EVOQ Properties called downtown “the last great place for value add.” The claim is substantiated by the recent activity in the office market: Brookfield Office Properties' acquisition of MPG Trust, Rising Realty's purchase of the Pac Mutual Building and Gensler's move to the downtown market. It is clear that even with some unappealing factors, this is a market where investors want to be.
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Kelsi Maree Borland
