The real estate landscape in Los Angeles is undergoing a transformative shift, and according to a recent report from the Los Angeles Business Journals, 235 office buildings have been identified as prime candidates for conversion into residential properties.
The report cites Columbia University and New York University’s working paper, “Converting Brown Offices to Green Apartments,” which was published by the National Bureau of Economic Research. The research sheds light on the feasibility and environmental impact of repurposing office spaces into modern, energy-efficient apartments. This endeavor encompasses 235 office buildings in total across the Los Angeles-Long Beach-Anaheim Metro Area, with an impressive 76 of them classified as Class A properties.
The selected buildings collectively encompass over 14 million square feet, with Class A spaces constituting approximately half of this substantial footprint. Among the office properties in Los Angeles that are ripe for transformation are iconic landmarks such as the Glendale Galleria Office Tower, Capitol Records Building and Wilshire Landmark I. Wilshire Landmark I, located in Brentwood, stands as the largest property earmarked for conversion, boasting a sprawling 328,000 square feet. Interestingly, five out of the six largest properties identified are strategically situated along Wilshire Boulevard, spanning from Santa Monica to Downtown Los Angeles.
The researchers’ selection excluded buildings constructed after 1990, those smaller than 25,000 square feet and those with floor plates exceeding 60 feet, deeming these features as unfavorable for conversion. Furthermore, inadequate plumbing infrastructure was identified as a major cost factor that could hinder successful conversions.
However, it’s important to note that the profitability of these conversions is contingent on various factors. The researchers found that, when solely considering construction costs, such conversions are financially viable in only six out of the 20 major metropolitan areas they evaluated, and Los Angeles did not make the cut.
To bridge this financial gap, federal and local subsidies are being considered as potential lifelines, making these conversions more economically attractive. Advocates of residential office conversions in Downtown Los Angeles have been actively promoting adaptive reuse laws and initiatives, especially in the wake of the pandemic when traditional office occupancy faced uncertainty.
However, not all identified office buildings will be logistically viable for conversion. Iconic structures like the Capitol Records Building, the Consulate General of Chile in Los Angeles, Live Nation’s Hollywood office and the historic Art Deco Telephone Building in Santa Monica may face resistance due to their historical and cultural significance.
Regardless, the office market in Los Angeles has struggled for a number of years, facing challenges associated with growing remote work trends and other financial stressors. A recent second quarter Los Angeles office market report from Avison Young shows that companies continue to reduce their office space, and that there has been 726,587 square feet of negative absorption so far in 2023. Additionally, second quarter vacancy rates have hit 18,9 percent, with 69.7 million square feet of available space in Los Angeles, or approximately 23.2 percent of the total office market.
