Downtown Los Angeles and the greater LA area continue to face economic and commercial real estate challenges. However, there are reasons for optimism. CBRE Managing Director Jessica Lall will be a presenter at the upcoming Connect LA 2023 event . Recently, she sat down with Connect CRE to answer questions about current CRE issues in DTLA.
Connect CRE asked: How is commercial real estate faring in DTLA following the difficult pandemic years? What are some bright spots and challenges?
Lall responded that Downtown LA is currently experiencing a “perfect storm”. Loans maturing at an inconvenient time combined with uncertainty around return-to-work have led occupiers to pursue shorter-term deals rather than longer commitments until they know how things will shake out. Additionally, there’s been a perception of downtown being unsafe which has impacted desirability of office space; however more people on the streets could help solve many of these ancillary issues by increasing safety perceptions. Bright spots include opportunities for creative work spaces beyond just paying for lunches as well as not all sectors going through same pain (e.g., industrial & multifamily). Office comps being low can benefit occupiers & investors who can weather this storm – plus potential reuse opportunities exist such as conversions into hotels or other uses like childcare/educational facilities repurposing downtown office space.. Long term future looks bright due urban centers’ adaptiveness & resilience despite current economic environment impacting overall market conditions including back-to-work still uncertain, pending recession/interest rate hikes making debt expensive/tightening lending conditions especially affecting office sector owners facing maturities this year needing more expensive debt + tighter lending terms but those without immediate maturities doing well next 5–10 yrs investing in buildings attracting new tenants etc..
Connect CRE further inquired about what specific economic issues might be impacting DTLA’s real estate landscape? Lall noted that while mandate to return still choppy w/many not taking effect til later this yr challenging downtown more than other places or submarkets; technology integration w offices helping entice people back plus 3 days in 2 days out seeming sweet spot while also noting combination of pending recession+ongoing interest rate hikes massively impacting market yet bouncing back faster when it does so owners facing maturities need affordable debt+tighter lending terms but those without doing ok next few yrs if able weather storm etc…
Finally ConnectCRE asked regarding her previous role on commission w Los Angeles Homeless Services Authority re housing situation improving any – Lall answered huge housing crisis exists exacerbated by affordability&supply problems thus RENA Regional Housing Needs Assessment 1st step towards addressing issue yet cities struggling executing building plans esp if don’t have updated rules®ulations streamlining process slowing down development compounded by market forces inflating prices thus state may need intervene enforcing mandates meeting goals aggressively&creatively acting urgently streamlining construction processes overcoming political resistance creating needed housing supply quickly enough meet demands labor demographics choosing live close proximity requiring affordable places live etc…
