Adaptive Reuse Isn't Dead, But It Is More Difficult, Study Finds

Tom Gilmore’s Old Bank District, which includes historic constructions such as the San Fernando Building (shown), was the first project to test the city’s Adaptive Reuse Ordinance. City officials are looking at making some changes to the ordinance to benefit more projects.

The Downtown residential revolution that started in 1999 stemmed from the city’s adaptive reuse ordinance. So many historic properties were turned into housing that, a few years ago, a frequently voiced concern was that there were almost no properties left to convert.

Not so, according to a new report.

 “Learning From Los Angeles,” a report presented Thursday at the Transit Oriented L.A. conference hosted by the local chapter of the Urban Land Institute, said numerous Downtown adaptive reuse opportunities are still available. However, things are in some ways more difficult, and certainly more expensive, then they were when developer Tom Gilmore created the Old Bank District.

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“I don’t think any city has a better collection of historical architecture than Downtown L.A.,” said James Lindberg, planning director of the National Trust for Historic Preservation’s Green Lab, during a Thursday panel discussion. The Trust partnered on the report with the ULI.

In good news for those looking to restore pre-WWII buildings, the report found that demolition in Los Angeles is happening mostly with properties from the 1960s through the 1990s. Unlike in cities such as Chicago or Philadelphia, local demolition rates match up with new construction rates, indicating a strong overall property market, the study said.

The adaptive reuse ordinance was approved by the city in 1999 as an effort to make it easier and less expensive to transform dead office properties into housing. Since then, more than 60 Downtown buildings — the majority of them in the Historic Core — have been turned around, creating more than 14,000 housing units.

While a demand for housing and industrial space in the Central City has fueled new and reuse developments alike, vacancies of office and commercial space remain high. Nearly 7.7 million square feet of vacant office space still exists Downtown, according to the report, along with about 700,000 square feet of empty retail space.

One key corridor is Broadway, where there is an estimated 1 million square feet of vacant space in the upper floors of buildings. Councilman José Huizar’s office for years has been trying, to no avail, to create an ordinance that would facilitate additional turnaround opportunities.

Challenges to future transformations remain, as the report cites hurdles in the property market, financing, technical concerns and regulatory speed bumps.

Values for pre-WWII properties are rising rapidly as supply dwindles, but even post-war buildings have high prices. That’s largely because sellers, having seen several successful conversions around Downtown, are pushing the price beyond what redevelopment budgets allow.

Lenders, meanwhile, can be hesitant to finance reuse projects because of uncertainty about everything from hazardous materials to a longer planning and permitting process, according to the report.

This should change as the current Downtown construction boom continues, says CBRE Executive Vice President Kevin Bender.

“There’s going to be a lot of new interest from institutional investors who are going to look at the market now,” he said.

Technical concerns involve issues such as inadequate parking and building design. For example, some old properties do not have sufficient light or ventilation for residential use.  

The biggest barrier to reuse, however, might be the regulations around redevelopment. The study suggests that the ordinance needs updates, especially as it only allows for residential conversions, not commercial.

Panelists at Transit Oriented L.A. also suggested that the California Environmental Quality Act, which requires review of construction projects, should exempt preexisting buildings. Regulatory processes such as CEQA can delay a project, which could be critical for funding, said Lowe Enterprises Senior Vice President Thomas Wulf.

“You take 18 to 24 months for CEQA, and then another 18 to 24 months for a build — my kids could be through high school by that time,” Wulf said.

eddie@downtownnews.com

Twitter: @eddiekimx

Copyright 2013 Los Angeles Downtown News