How Many High-Rises Are Actually Rising?
Of the 77 planned for downtown Los Angeles, officials and developers anticipate only a fraction of them being built
By KEELEY WEBSTER
CREJ Staff Writer
If further evidence is needed of Los Angeles' transformation into a more vertical city, look to the number of high-rises planned.
Until a year ago, only three high-rise buildings had been erected in Los Angeles over the past 15 years. But as of Aug. 23, 77 high-rise buildings are proposed, said Andrew Adelman, general manager of the city's Department of Building and Safety.
Typically, a high-rise is classified as anything over seven stories tall, but because the city has received so many proposals for high-rises, only those over 10 stories were included in the count.
The last time Los Angeles saw this many high-rise buildings proposed was during the 1980s office-building boom, but this time around developers are planning mainly residential projects, Adelman said.
Of the 77 possible, Adelman predicted that only 25 projects are a sure bet.
The buildings that he is pretty certain will get built are those that have received a temporary certificate of occupancy, that are under construction or that have so much money committed that something very drastic would have to occur to stop the project.
He includes the projects in plan check as pretty solid, partly because the costs of plan-check fees for a high-rise are so expensive that developers don't start the process lightly. For instance, the plan-check fee on the 24-story Evo project at 1155 Grand Ave. was $401,630.
He thinks another 25 will get built if the economy remains strong and nothing unusual occurs in the international climate. The last 26 buildings proposed he gives 50-50 odds.
"We have only built three high-rises over the last 15 years, of which only one was built by private industry," Adelman said. "If only 25 get built, that is still a tremendous increase in the number of high-rises."
The South Group's 23-story mixed-use Evo with 311 condominiums planned holds one of those 25 certain spots because the developers broke ground in March. It's also part of a trio of new South Park residential towers, which includes Luma and Elleven.
Elleven has only five unsold units in the 176-unit project. The 19-story, 236-unit Luma is slated for build-out in April 2007.
Top-Down Construction
The South Group also worked with the city for several months seeking approval on its plans to do something revolutionary for Los Angeles: construct a top-down high-rise project. Top-down construction allows the developer to begin building the structure at the same time it is digging the foundation in order to speed up the construction time.
The process has been used in urban areas on the East Coast, and The South Group has used top-down construction to erect buildings in Portland, Ore. But Evo will be the first residential building in Los Angeles to use top-down construction.
"Using the top-down method will decrease the overall cost of construction, allow tenants to move into the building earlier, reduce noise pollution and allow us to move on to our next project sooner," said James Atkins, a principal with The South Group.
The first step is to excavate the basement level down about 10 feet. Then three-quarter-inch-think steel sheet metal piles are pushed into the ground around the perimeter using a specialized machine. The plates hold back earth and provide a working area.
Then pillars are pushed into the ground to provide additional support. A platform is constructed, and concrete is poured to form a base to construct the building on.
"The piece of equipment vibrates at a high frequency, so it is literally pushing the pilings into the ground as opposed to a pile driver, which just goes pound, pound, pound," Atkins said.
This process allows excavation and underground parking to be built as the building is being constructed, taking five months off the construction schedule, Atkins said.
In order to make a high-rise building pencil out, developers have to find ways to shorten the interest-carry period, he said. The interest-carry cost for Evo is $1 million a month, so the developer will save $5 million.
Bolstered by Competition
Although completing a project ahead of competitors seems like an obvious edge gained by someone doing top-down, Atkins said that wasn't a consideration. He sees anything that gets completed in downtown not as competition but as adding to the amenities that will make his projects more attractive.
"I would love to see other projects come out of the ground," Atkins said. "This is a city of 15 million people. If the market can't support another 200-unit project, we have other things to worry about."
He sees additional residential as continuing the evolution of downtown. The more residential that is built in downtown, the more alluring the area becomes to retailers. And more retailers locating downtown mean more people interested in living in The South Group's projects, he said.
However, he's not as optimistic as Adelman about predictions for the 77 high-rises planned.
"I would be thrilled if 20 percent broke ground," he said. "There has been a lot of land speculation where people have entitled properties. Financing continues to be a challenge, so I look to the developers who have experience."
Amir Kalantari, a principal with The Kalantari Group, which is developing The Glass Tower, says that, like The South Group, he is banking on being located near the $1 billion Staples Center project, adding to his property's success.
Kalantari took a 10-month hiatus on plans for the 128-unit, 24-story Glass Tower while his company completed 3,000 units the company had under construction in Texas.
"This is the type of project you have to commit 100 percent of your time, energy and resources to," Kalantari said. "I wanted to make sure I could do that."
But Kalantri's project is less certain because initial timelines made construction infeasible. He signed DeStefano + Partners as architects and hopes to break ground on the $75 million project in early 2007 and complete it within 24 months.
However, Kalantri includes himself in Adelman's tally because the site is secured and the project is entitled.
Although Adelman's projections of what will get built are on the conservative side, he thinks investors are viewing downtown Los Angeles as a safe bet. And he doesn't think a slowing housing market will be what causes projects to burn off.
"Housing is a necessity, not a luxury," Adelman said. "I don't think the housing prices in Los Angeles will crash because there is underlying demand."
From his position as head of Building and Safety and as someone who has worked downtown since before its renaissance started, Adelman thinks the growth in downtown will just keep on going.
"It started as rentals, then adaptive-reuse condos. People lined up to buy them, and it pushed the prices up to $300 to $450 a square foot," he said. "As the prices continued to go up, it started to pencil out for new buildings to be built here."
The developers with a track record that Atkins referred to are betting on downtown. Among these are New York-based Related Cos., which is developing the $1 billion Grand Avenue project. Forest City Enterprises has focused primarily on adaptive reuse, doing high-rise residential projects with a retail component. Meruelo Maddux Properties, a developer that owns a sizeable chunk of downtown, has a 34-story, 24-unit condominium project planned for 717 Ninth St. Mereulo's project in plan check is on Adelman's top 25 list. Adelman also has faith in the two towers that Moinian Development plans to develop.
That developer just purchased four acres at Figueroa and 12th streets for $80 million in a venture with Henry Shahery, a partner at Miami-based Cabi Developers, which is a subsidiary of GICSA of Mexico City.
Moinian also hopes to capitalize on its proximity to L.A. Live, the 4 million-square-foot $2.5 billion sports and entertainment district that is being developed across from the Staples Center. L.A. Live will feature a 7,100-seat Nokia Theater for live performances, a 1,000-room convention hotel and a 14-screen Regal Cineplex along with restaurant, residential and office space.
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