Los Angeles County Assessor Jeffrey Prang and his staff were concerned about Downtown Los Angeles’ future during the COVID-19 pandemic.
Restaurants and retail also shuttered, which left development and Downtown at a standstill. Office space emptied, as workers set up shop in their homes.
“We were concerned it would have a permanent impact on office space and potentially downward pressure on property values as vacancy numbers have increased,” Prang said.
The predictions were wrong.
“A lot of our sense of an apocalyptic real estate industry doesn’t seem like it’s panning out,” Prang said.
Overall, the county has experienced a 3.7% increase in assessed values compared to last year.
“The fact that we have a net-positive growth of property values for the 11th consecutive year, is really something remarkable,” Prang said.
“Commercial tenants are returning in larger percentages than we expected. That should ensure the growth of the office space rental market in Downtown.”
The first quarter office vacancy rate was 18.8% in 2021, a slight increase from the previous quarter, he said. That compares to a year ago when it was 16.6%.
“It’s not a dramatic increase, but the metropolitan average is 13.7%,” he said. “The vacancy rate has been higher than the rest of the county on average for the last three to four years.
“Office rents are down 2.5%, compared to the same time a year ago.”
Supportive housing development has been robust. The nonprofit The Weingart Center provides individuals with the basic tools to stabilize their lives, secure income and find permanent housing.
Programs and services are housed in the 11-story former El Rey Hotel at Sixth and San Pedro streets. On July 6, it broke ground for its permanent supportive housing development.
The 51-unit, five-story development will provide housing and supportive services for seniors and senior veterans experiencing homelessness.
“We’ll have some relief for the homeless crisis,” Prang said. “They’re using attractive designs and balconies. It will change the way people think of supportive housing.
“In the old days, it was seen as low quality and conspicuously affordable. It’s changed.”
South Park has a plethora of boutique hotels, some of which were coming online just before the pandemic.
A YWCA in the 1960s, The Downtown LA Proper Hotel is across the street from the Herald Examiner Building. The 148-room hotel opened five years after starting construction.
“Hotels are opening and we’re seeing a recovery in the hotel market. I should note, though, the pandemic probably impacted hotel and hospitality more severe than any other property type in the country,” Prang said.
“We’re reaching out to hotel owners, asking if they are in need of temporary property tax relief.”
Prang said he and his staff are watching large developments like the three-towered Oceanwide Plaza, across the street from the Staples Center and the Los Angeles Convention Center. Corporate stopped construction two to three years ago.
“There were scandals in city hall, leaving a lot of potential growth of assessed value on the area,” he said.
“There was a pause during the pandemic, but all indications seem to show it’s picking up. We were curious whether or not that would happen. We do ask ourselves if the growth of residential tenants will continue Downtown. Overall, there’s reason for optimism. The investment in commercial, nonprofits, hospitality and residential should encourage investors to stay the course.”
Replacing a parking lot at First and Grand is The Grand, which, Prang said, is “going up quickly.”
It will feature chef-driven restaurants, a movie theater, a 20-story, 309-room luxury hotel that’s been in the planning for more than 10 years.
“The hotel on the county lot is an anchor that will continue to drive investments along Grand Avenue,” said Prang, who was elected in 2014, and re-elected in 2018. “We need an extra-large measuring tape to do appraisals on the property.”