It doesn't seem that long ago when I believed it wasn't asking or expecting too much for the Grand ave proj to breakground by no later than Dec 2008. Or for the park 5th tower to be under construction by no later than early 2009. Now even those dates look waaaay too optimistic.
I've seen a few ppl complain when a new apt or condo proj in DT is wood framed & no more than 5 floors, instead of a steel or concrete tower of at least 10, 15 to 30 plus stories. But since highrises cost more $$ to build, & since to pencil out they therefore need a higher minimum PSF sales or rental price than lowrise bldgs----& since ppl no longer are willing to buy condos priced at pre 2008 levels----is the next new tower to rise in the hood yrs & yrs off into the future?
So the only things to look forward to in 2009 is the completion of lowrise wood framed bldgs like the apt proj on San pedro St in Little tokyo, ongoing work on the Medallion in the OBD, & the response from buyers or renters to the completion of the Concerto & 717 9th St towers.
Brockman Condos Go Rental
Change, Blamed on Economy, Comes as Downtown Apartment Occupancy Plummets by 11%
by Anna Scott
DOWNTOWN LOS ANGELES - The developer of the long-awaited Brockman Building, recently completed after years of delays, has switched the project's for-sale units to rentals. The move came after some prospective buyers were unable to secure loans due to the current financial market.
"We were just at the point where we realized that with the real estate market where it's at, with the liquidity markets where they are, trying to sell units is not beneficial," said Norman Salter, chairman of developer West Millennium Group, which originally aimed to open the $35 million project in 2005
The development team made the decision to go rental about a month ago, said Salter. Units have not begun leasing yet, but Salter expects them to generate significant interest. "For this rental market, they should be a hot item because we've got condo specs and this is an above-average unit for a renter," he said.
Despite the condominium-like amenities, the Brockman arrives at a suddenly tough time for apartments. The Downtown rental occupancy rate has plummeted from 96% in September 2007 to a current 85%, "which is very low," said Dolores Conway, director of USC's Casden Real Estate Economics Forecast. By comparison, Downtown occupancy dropped a seemingly small but still significant 2.7%, from 98.7% to 96%, between September 2006 and September 2007, Conway said.
The recent, dramatic fall has been driven by the high number of Downtown Los Angeles apartments that have come online recently, said Conway. At least 10 new rental projects have added more than 1,700 units to the Downtown market in 2008. The new arrivals include those always planned as rental complexes, such as the Belmont Station Apartments in City West, and developments originally envisioned as condominiums that changed when the market soured, like the Brockman and the Union Lofts on Hill Street.
Conway noted that other statistics reflect a softening rental market. She said that the Downtown area has seen 5,400 move-outs in the past year, "reflecting very weak demand."
"I think we're starting to see some rent sensitivity on the part of the Downtown population," said Conway. "We're starting to see people double up in apartments. Also, as people get laid off they may move to cheaper areas."
Making It Work
At 530 W. Seventh St., the Brockman stands a stately 12 stories. The restored 1921 structure is decked out with a marble and brick faade, cornices and other Beaux Arts flourishes. In mid-September, approximately half of the building's 80 units, which range from 850-2,280 square feet, were either reserved or had been sold to all-cash buyers. In the following weeks, however, about half of the prospective buyers were unable to secure financing. Ultimately, the number of people able to close escrow fell below the pre-closing requirements.
"In order to close escrow on any unit, you have to have a certain number of escrows ready to close," said project spokeswoman April Fissell. "We're going to go lease and when it makes sense, then we'll become a for-sale property again."
Rents have not been finalized yet, she said, but will run approximately $2.25 per square foot. Those who previously reserved or purchased units, and who remain in the building as renters, will have the first option to buy their residences when the property reverts to condominiums. So far five former prospective buyers have remained as renters, Fissell said.
The all-cash buyers have had their money refunded, said Fissell. One of them, economist Katie Galley, purchased an $850,000, 1,300-square-foot unit at the Brockman earlier this year. Last week, she said via email that she was disappointed by the turn of events and has since bought a loft in the Eastern Columbia building on Broadway and Ninth Street.
Despite losing most of the building's buyers, Salter said he expects the Brockman's condo-quality finishes and historic elements to attract a healthy slice of the rental market. "Just the overall look of the units, with the exposed brick and the concrete refurbished to the old style of the building, there's a wow factor," he said.
The Brockman faces competition from other historic properties planned as condominiums but forced to lease. In May, the developers of the Chapman Flats at Eighth Street and Broadway announced that the 168-unit property would open as rentals after several buyers were unable to close escrow. Like the Brockman, the building offers high-end appliances and original structural elements.
Other developers with projects near the Brockman agree that times are tough. "In general, the market is a lot slower than last year," said George Peykar, a partner in the Mandel Lofts at Seventh and Olive streets, which opened in February. While the Mandel is approximately 85% leased, "our occupancy is up because we started leasing it last year," said Peykar. "We started off very strong, and as the market was hit it kind of tapered off. I hope things will change, but I don't see that until 2010."
The Brockman received its certificate of occupancy late last month - it was expected by the end of September, but inspections took longer than planned, Fissell said - and the first renters will move in this week.
In the meantime, work is continuing on the Bottega Louie Restaurant and Gourmet Market on the building's ground floor. The upscale establishment was expected to open in November but has been delayed at least until January, said Salter, because of ventilation challenges and other logistical issues.
As for when the Brockman might revert to a condominium project, "It depends on the market," said Salter. "I'd like it to be two or three years, but it might be as long as five years."
page 1, 12/8/2008
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I do like it when these academic programs focus on local issues.
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