LOS ANGELES | Downtown Project Rundown 6.0

[CaliNative]

Anyone have any idea when Onni will start construction on Times Mirror? Is it next up after 1000 Hill? Can they do both projects at the same time? Cranes, work crews and building materials must be available now, since construction is slowing down. Ideal time to start both. How tall and how many floors will 1000 Hill be? Whatever people say about Onni project designs, good or otherwise, they build and get things done. They are a big positive for DTLA development imho.

Beaudry (Brookfield) turned out well in my opinion. Almost 700' as advertised. Pelli's 777 Fig. a bit taller, and is still visible. The dark Beaudry tower and the white 777 complement eachother on the skyline.

Hopefully the new mayor will make solving the homeless mess her top priority. It will make the city and DTLA more livable. Maybe she can get some big federal money to get things rolling.

Hope everybody had a nice Thankgiving.

[BrandonJXN]

Originally Posted by Zapatan

No, it's a nice filler but I'd rather see more 800-900+ towers.

Give me three 600 foot tall buildings over one 800 foot tall building any day of the week.

[hughfb3]

Originally Posted by CaliNative

Anyone have any idea when Onni will start construction on Times Mirror? Is it next up after 1000 Hill? Can they do both projects at the same time?

Onni seems to have a formula. Judging by their process with 825 S Hill and the Hope+Flower double towers… they started with the taller 825 S Hill and once it was topped out and cladding began, they started construction on the shorter but larger 2 tower Hope+Flower complex. Both were being constructed at the same time but staggered to time release on the market

My guess… 1000 Hill and Times Mirror will… MIRROR these projects. I would say once 1000 Hill is topped out, demolition of the parking garage and office building will begin

[LAnative61]

[QUOTE=CaliNative;9800285]Anyone have any idea when Onni will start construction on Times Mirror? Is it next up after 1000 Hill? Can they do both projects at the same time? Cranes, work crews and building materials must be available now, since construction is slowing down. Ideal time to start both. How tall and how many floors will 1000 Hill be? Whatever people say about Onni project designs, good or otherwise, they build and get things done. They are a big positive for DTLA development imho.

Beaudry (Brookfield) turned out well in my opinion. Almost 700' as advertised. Pelli's 777 Fig. a bit taller, and is still visible. The dark Beaudry tower and the white 777 complement eachother on the skyline.

Hopefully the new mayor will make solving the homeless mess her top priority. It will make the city and DTLA more livable. Maybe she can get some big federal money to get things rolling.

Hope everybody had a nice Thankgiving.[/QUOT

I have no idea about the current timeline, but Onni seems like a safer bet to keep things going forward. Hopefully, the current project will be fully built to plan without the shrinking in height and size we've seen in other recent projects

[headcheckjj]

Originally Posted by Zapatan

Love it. Glad we at least we have 1000 Hill to look forward to now that these (Beaudry + Mistui) are basically done.

Is it safe to assume that 1045 S. Olive Street is dead? That would be so sad.

1045 S. Olive is dead? Did I miss something?

[nmkef]

idk about dead, but it was approved by city planning in May 2021 with no movement since. No submissions for any sort of plan/permit on LADBS either.

[Illithid Dude]

I'm sure these proposals are just biding their time. Some of y'all didn't live through the great construction drought of 2008 - 2014 and it shows. Remember Glass Tower? It took 15 years but we finally got it built. While I'm sure some of these projects are dead, many others are just dormant, waiting for the market to become prime for a resurgence.

[ChelseaFC]

Moxy hotel slated to open in early 2023, will include 13 restaurants, bars, clubs

https://whatnowlosangeles.com/moxy-h...ars-and-clubs/

[Zapatan]

Originally Posted by nmkef

idk about dead, but it was approved by city planning in May 2021 with no movement since. No submissions for any sort of plan/permit on LADBS either.

I suppose that's not too long ago, but is that period of dormancy normal for a project in LA?

[BrandonJXN]

Originally Posted by Illithid Dude

I'm sure these proposals are just biding their time. Some of y'all didn't live through the great construction drought of 2008 - 2014 and it shows. Remember Glass Tower? It took 15 years but we finally got it built. While I'm sure some of these projects are dead, many others are just dormant, waiting for the market to become prime for a resurgence.

I'm still waiting for Zen to break ground.

But seriously, LA's glacial building approval process notwithstanding, I would say that the residential demand in DTLA is still high enough to warrant new construction. All this speculation of buildings being canceled is exactly that. It's the end of the year so it would make more sense to wait until the new year for anything to happen. Plus, a good rule of thumb is to always add 6 months to a year whenever a project says 'Breaking ground in the summer of 20xx'.

Plus, unless the developer says so, assume that a building is always in the proposed state.

[Easy]

Originally Posted by Zapatan

I suppose that's not too long ago, but is that period of dormancy normal for a project in LA?

Yes, LA projects tend to take longer than project progression in places like outside of California. I don’t think that any of us know how the worldwide pandemic impacted schedules other than many were delayed. Many are probably also being reconsidered. Each developer has their own goals, criteria and schedule so there probably isn’t any rule of thumb.

[Easy]

Originally Posted by BrandonJXN

I'm still waiting for Zen to break ground.

But seriously, LA's glacial building approval process notwithstanding, I would say that the residential demand in DTLA is still high enough to warrant new construction. All this speculation of buildings being canceled is exactly that. It's the end of the year so it would make more sense to wait until the new year for anything to happen. Plus, a good rule of thumb is to always add 6 months to a year whenever a project says 'Breaking ground in the summer of 20xx'.

Plus, unless the developer says so, assume that a building is always in the proposed state.

Fwiw it’s still prominent on their company website.

[LAisthePlace]

Originally Posted by Illithid Dude

I'm sure these proposals are just biding their time. Some of y'all didn't live through the great construction drought of 2008 - 2014 and it shows. Remember Glass Tower? It took 15 years but we finally got it built. While I'm sure some of these projects are dead, many others are just dormant, waiting for the market to become prime for a resurgence.

The headwinds, at least on the residential side, seems mostly interest rates + supply chain challenges vs. demand as occupancy rates in Downtown Los Angeles remain extremely strong.

[scania]

Originally Posted by ChelseaFC

Moxy hotel slated to open in early 2023, will include 13 restaurants, bars, clubs

https://whatnowlosangeles.com/moxy-h...ars-and-clubs/

This is great! I didn’t realize there would be so much activity in businesses coming to DTLA. This will draw even more people to that area of DTLA.

[citywatch]

Onni's crane for their apt tower at Olympic & Hill St is captured in this drive by...

https://youtu.be/57EEKBkoOG4?t=1782

Cities have a more popular vibe when there are lots of ppl out & about. Even a compton or the area around the Watts towers will have a different quality when lots of ppl are strolling around. Busy sidewalks or crowded town squares are fairly common in most of the major cities of the US & world...even the less famous ones too.

I recall reading yrs ago about VIPs from Russia...then the Soviet Union.... visiting dtla & looking down from the bonaventure hotel...or one of the major bldgs in dt. They commented on how few ppl were out & about. LA's history of busy thoroughfares is centered on its fwys. But the sidewalks of dtla...around Broadway or 7th St...over 80 yrs ago were very busy. I read that the sidewalks of Broadway were the busiest on the west coast.

The lesson in what has happened since then is that when cities or neighborhoods don't stay competitive, they lose...& may never recover or take decades to recover. The ppl at LA city hall & elsewhere in LA...& dt...had better never forget that.

[caligrad]

I wouldn't say the Crescent Heights 1045 Olive tower is dead. In true LA fashion there's a chance we'll see one more redesign before it dies. With Majority of the world being reopened post pandemic, I think we've all forgotten how the supply chain is still a mess and getting messier with Chinas zero covid policy wreaking havoc on even the smallest of things. My building manager ordered new Mailboxes for the building since the last ones were broken into...... They've been backordered and reordered for 2 months now for lack of parts. I can only imagine construction is having a hard time with machinery, tools, supplies and etc. as well.

[scania]

You make some great and solid points…one thing that I’ll add is that from NYC, Chicago, Atlanta, etc. all of these cities get proposals that are sometimes downsized. I’ve a condo that I still rent out in Atlanta, the two towers were initially supposed to have been 40 stories each. When they were built it was only 20 stories each. It’s by no means a LA thing…this is everywhere.

[zonedgreg]

I'm a developer. Getting a construction loan and a takeout perm loan is really hard right now - tough to pencil deals out when there's negative leverage (interest rates higher than cap rates). Lenders are stress testing everything - and it's even more complicated with a massive high rise like 1045 s olive. It's not that there's no liquidity to put to work like '08-'09.. there's plenty of money to go around, it's about the cost side of the deal mixing with the falling rents around the nation.

Pinning down where construction costs will be in a year's time for breaking ground (if you have the approvals today like 1045 S Olive or Olympic Tower or Olympia or Times Mirror Square or Tribune Tower) is tough too. Deflation is starting to show in construction costs but not as much as people would like and with covid messes still going on in China, you just have to stress test every little assumption possible which makes the deal less likely.

However, deflation of construction costs will come no matter what because we're at the point where contractors and subcontractors are looking 6 months down the road and noticing they don't have any work lined up so they'll lower their prices eventually.

Now is the time where developers are likely submitting proposals, teeing things up for approval as quickly as possible in preparation for maybe 2-3 years down the road when construction costs decrease, interest rates decrease, rents stabilize and increase and doing deals is much easier. Then I bet we'll see a flurry of high rise construction.

[202_Cyclist]

Originally Posted by zonedgreg

I'm a developer. Getting a construction loan and a takeout perm loan is really hard right now - tough to pencil deals out when there's negative leverage (interest rates higher than cap rates). Lenders are stress testing everything - and it's even more complicated with a massive high rise like 1045 s olive. It's not that there's no liquidity to put to work like '08-'09.. there's plenty of money to go around, it's about the cost side of the deal mixing with the falling rents around the nation.

Pinning down where construction costs will be in a year's time for breaking ground (if you have the approvals today like 1045 S Olive or Olympic Tower or Olympia or Times Mirror Square or Tribune Tower) is tough too. Deflation is starting to show in construction costs but not as much as people would like and with covid messes still going on in China, you just have to stress test every little assumption possible which makes the deal less likely.

However, deflation of construction costs will come no matter what because we're at the point where contractors and subcontractors are looking 6 months down the road and noticing they don't have any work lined up so they'll lower their prices eventually.

Now is the time where developers are likely submitting proposals, teeing things up for approval as quickly as possible in preparation for maybe 2-3 years down the road when construction costs decrease, interest rates decrease, rents stabilize and increase and doing deals is much easier. Then I bet we'll see a flurry of high rise construction.

Thank you for providing this insight. The WSJ had an article a few weeks ago noting this dynamic. The combination of higher interest rates and higher buildings costs, combined with continued weak rents in many cities is making it difficult for new office developments to be financially feasible.

I am not a developer but I own stock in many of the REITS mentioned in this article, so I hope their financial situation improves. I don't think teleworking will be permanent and I expect a lot more employees to be back in the office within the next 1 - 2 years.

Top Office Developers Hit the Pause Button on New Projects
https://www.wsj.com/articles/top-off...ts-11667862881

[citywatch]

Originally Posted by 202_Cyclist

Thank you for providing this insight.

Top Office Developers Hit the Pause Button on New Projects
https://www.wsj.com/articles/top-off...ts-11667862881

I too appreciate that zonedgreg gives details on what's going on. I think too many fans of highrise devlpt....esp in dtla....ignore that the pieces of the puzzle need to fit together. Or they hope that new devlpt is a matter of "build it & they will come".

Forgetting the history of dtla since the 1940s, if not longer, sets up a person for disappointment...discounting the law of economics sets up a person for a lot of 'how come?!' That's even truer if a person believes every new proj in dt should include ground floor retail....as though customers for such spaces will magically appear. Or that dtla's weakness in leasing office space for decades or negative news about dt going back to the 1950s, including the recent incident of a boy being stabbed at Fig at 7th, won't scare off potential investors.

This is the telling quote in the article you linked to. Dtla hasn't easily filled commercial space as it should have for over 30 yrs, whereas West LA, such as around century city, has. That's one reason why a new office tower is going up in CC, while existing office space in dtla goes begging. DTLA doens't have things like Conde Nast, etc. Economics, ppl.

This strategy has worked for some developers in past downturns. The Durst Organization in New York famously built a 52-story tower in Times Square during the recession of the early 1990s without preleasing and signed Condé Nast Publications before it was completed. 

But high interest rates and rising building costs in the current market have put a new wrinkle in this strategy. Even if developers are able to attract tenants to their new buildings, they might not be able to get the rents they need for their investments to pay off, some analysts say. 

“History shows there is likely to be good demand for new and high-quality office space,” said Danny Ismail, a senior analyst at real estate analytics firm Green Street. “But will demand be there at the rents needed to justify those developments?”

The long unfinished Oceanwide proj on Fig is a daily reminder of how economics are at the root of most things....affected by LA city hall & other influencers in the city.


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