For Cleantech Companies, Land Is a Problem

Fred Walti is among a group of area advocates trying to make Downtown a better place for future clean technology companies.

DOWNTOWN LOS ANGELES - City officials and business leaders for years have been pushing the idea to transform the eastern edge of Downtown into a hub for green jobs and clean technology companies.

But there’s a problem. Today, if someone wanted to bring a manufacturing operation to the area to build, say, extra efficient batteries, it would be nearly impossible to find space.

The vacancy rate among the industrial properties in and around the Arts District has long hovered at about 2%. The tight market stems in part from the robust cold storage, produce and garment-related businesses that have long anchored the area.

There is, however, a significant stock of old warehouses and factory buildings that haven’t seen heavy manufacturing operations in decades. Instead, they are used for storage or shipping and receiving — operations that involve relatively few jobs.

Local leaders believe those buildings are ideal candidates for green or tech-related companies. Bringing those century-old industrial edifices up to current codes, however, looms over property owners like a dollar sign-shaped storm cloud.

“That’s the biggest challenge,” said Erik Johnson, president and CEO of Greneker Solutions, which makes mannequins out of soy-based urethane in a facility near Soto Street and Olympic Boulevard.

In 2010, Greneker was looking to start a new business manufacturing countertops out of recycled materials. They planned to invest about $1 million in a facility. They found candidates in empty or underused industrial buildings in Downtown, but none made financial sense, Johnson recently told 14th District City Councilman José Huizar and a room of developers.

“The sheer labor and cost it would take to go ahead and repurpose those buildings, to bring them up to current codes and adaptability to the type of machinery we were looking at, didn’t make sense,” Johnson said during an afternoon meeting at the Los Angeles Cleantech Incubator, a city-funded Arts District entity that aims to nurture fledgling companies. “I ended up doing it in Ohio.”

The Downtown meeting may have spurred what Johnson and other area business leaders believe could be a solution — an adaptive reuse ordinance for industrial properties. The term comes from the 1999 law that made it easier and less expensive for developers to turn old commercial buildings into housing. It directly led to the Historic Core residential boom.

Estela Lopez, executive director of the Central City East Association, which manages the two business improvement districts in the area, said she has floated the industrial adaptive reuse idea for years.

“We need something that will invigorate and inspire people to do something with the industrial land on the east side of Downtown,” Lopez said. “It would breathe new life into these buildings that have been sitting vacant or underused and were constructed for the type of industrial use that is no longer a reality and that are not coming back.”

No Easy Fix

Huizar, who has pushed for an adaptive reuse policy that would facilitate upgrades to office space on upper levels of buildings on Broadway, supports the idea. He said after the meeting that he has directed staff to study how to approach the development of such a policy. The ordinances typically take years to put together.

“People have recognized the huge success of the adaptive reuse ordinance for residential — that’s why so many people have come to live Downtown now,” Huizar said. “I’ve already been looking at this for commercial, so why not look at it for industrial?”

Like the residential adaptive reuse ordinance, a policy to create new industrial uses in old buildings would in theory reduce red tape, ease strict code regulations and lower costs. However, it’s not necessarily a simple fix.

For example, industrial property owners looking to upgrade their buildings for modern needs could be stymied by having to meet current parking requirements, said Brad Cox, senior managing director of Trammell Crow, which is in the early stage of planning a $40 million industrial facility near Washington Boulevard and the Los Angeles River imagined as a hub for cleantech companies.

Many of the old industrial properties in and around the Arts District are built up against a neighboring structure. That leaves little room to satisfy the modern parking requirements that would be triggered by an upgrade. A new ordinance would have to minimize parking requirements, and it might have to coincide with a separate push for more mass transit infrastructure in the area, Cox said.

The land use challenges facing the Cleantech Corridor are likely to get attention at City Hall in the future, if only because the city has already invested in the cleantech vision, though not always with success. It took four years and several botched deals before the now defunct Community Redevelopment Agency finally sold to Trammell Crow the site where the company plans to develop its cleantech hub.

The Department of Water and Power paid $11.1 million in 2010 to buy the Hewitt Street property in the Arts District where the city plans to build the La Kretz Innovation Campus. The facility will house DWP innovation labs and the Los Angeles Cleantech Incubator. LACI, which is slated to open by fall 2013, would lease space to up to 50 entrepreneurs.

The effort, which was launched with CRA funds, needs to raise $1 million in the next 18 months to cover its operating costs before the La Kretz campus is up and running, said LACI director Fred Walti.

In the best case scenario, LACI’s companies in training would graduate to a space of their own in the Cleantech Corridor, which is loosely defined as clustered along the Los Angeles River between Chinatown and the 10 Freeway.

As it stands, there is currently not really anywhere in Downtown for a LACI alum to go.

Contact Ryan Vaillancourt at

©Los Angeles Downtown News.