Downtown LA Will Bounce Back Slowly And Inevitably, Experts Say

As the coronavirus pandemic prevents workers from returning to their offices in Downtown Los Angeles, the effects from the loss of foot traffic continues to challenge businesses, posing questions of what the future holds for the neighborhood.

“Of all the neighborhoods in LA, Downtown LA was hardest hit, but it’s obvious why,” said Kennedy Wilson Vice President Justin Weiss, referring to the absence of office workers. 

Weiss spoke at a recent Bisnow webinar discussing the future of Downtown Los Angeles, along with Brookfield Properties Senior Vice President of Leasing, Western Region John Barganski; Skanska Executive Vice President for Commercial Development Los Angeles Clare De Briere; Downtown Los Angeles Proper Hotel General Manager Stephane Lacroix; and Claridge Properties CEO Ricardo Pagan. 

Retail activity is definitely slow, but leasing is happening, Weiss said. He has a dozen leases in the works currently and he sees interest returning for the area in the long term, but says that getting through the present is key. 

Landlord Brookfield, which is the largest owner of Downtown LA Class-A high-rise space, has over 10M SF of office space in its Western Region portfolio. While about 80% to 85% is leased, the space is experiencing physical occupancy of about 10% to 15%, Barganski said.

“The last year has been spent investing huge sums of capital and human capital to change how those workplaces interact with our users,” Barganski said.

All those investments have been mirrored by additional investments by tenants, who are also doing what they can to address new safety concerns and remake the workplace. Once vaccinations reach more of the population and schools reopen, “I think people will return [to the office], but what they’ll return to will be different on the inside,” Barganski said. 

Even restaurants, which struggled with changing public health rules throughout the last year, are continuing to open and need space in the middle of a pandemic. Across the city, the demand for second-generation restaurant spaces that have already been built-out and don’t require a huge investment to get up and running are sought after, Weiss said. 

Weiss anticipated that these types of space would be the first to lease up in the downtown area, followed by first-generation spaces that haven’t previously housed a restaurant but whose owners might be more inclined to be flexible on rents. “But it’s going to be slow,” Weiss cautioned. 

For projects that hadn’t yet opened or were in development, operators and developers used the time to refine. 

“It has hit the reset button for us,” Lacroix said, speaking of the pandemic. Hospitality can be focused on transient, group and corporate customers, but the absence of types of customers has “allowed for us to think about how we really connect on a deeper level with our LA community, whether it’s the pockets in Echo Park, Pasadena, Silverlake, Highland Park — all those cool communities where we see 85% to 90% of our business being driving business,” Lacroix said.  

The Downtown Los Angeles Proper is scheduled to open this June at 11th Street and Broadway, in a building that dates to the 1920s and served as a hotel, a YMCA and a private club during its long life. 

The timeline for Claridge Properties’ massive Angels Landing on Fourth and Hill streets had not been thrown off too dramatically by the pandemic, Pagan said. The $2B Angels Landing project would bring two luxury hotels, more than 400 for-sale and for-rent residential units, and over 36K SF of commercial space to the site that’s now an undeveloped hillside and former park. The project might be delayed about a year and a half, Pagan said, but that was something Pagan attributed to “political headwinds” and not to the pandemic. As of September, developers were still anticipating that the project would be open for the 2028 Olympics, which LA is scheduled to host.

Even with the acknowledged hurdles to Downtown LA’s recovery, all panelists remained bullish on the neighborhood’s future and imminent recovery. 

Once vaccines are widely administered and people are comfortable being near each other again, “central business districts and urban cities will be key and people will come back to them,” Pagan said.

Skanska’s DeBriere, who is overseeing a 13-story office building in the Arts District not far from the Soho Warehouse, said in her eyes Downtown Los Angeles remained the place to be developing. 

“Downtown LA is the central hub to the entirety of Southern California,” DeBriere said. “There’s almost no reason to go anywhere else.”