Amid a housing crunch, empty offices in downtown Los Angeles appeal

The shimmering office towers of the downtown Los Angeles skyline conceal a hard truth — much of the space is empty.

In the years since the pandemic, which upended workplace norms and evaporated demand for office space, landlords downtown have watched in frustration as the value of their office buildings has plummeted. More than a few have faced foreclosure, leaving owners anxious about the need to get tenants back in their buildings or find another use for the millions of unused square feet.

An uptick in office lease signings has led some to hope the office rental market has hit bottom, but others, like landlord and developer Garrett Lee, believe there’s a more reliable path forward than trying to convince tenants to return: converting offices into apartments.

Converting offices to apartments

The idea took on new urgency this month as wildfires destroyed thousands of homes in Los Angeles’ Pacific Palisades neighborhood and Altadena, a community in the foothills just north of the city, exacerbating the region’s long-running housing shortage. Downtown is zoned for some of the densest residential development in Los Angeles County.

“We have an unprecedented need for housing right now,” Lee said. “There needs to be an even greater effort than before to build housing of all unit types and rent levels.”

Jamison Properties’ plan

Lee is president of Jamison Properties, a prolific converter of midsize, older L.A. office buildings into apartment buildings. Now, Jamison is about to plow fresh ground by turning into housing a glossy 32-story office tower built on the edge of downtown in 1987.

Efforts to create a second act for underused office towers that were the height of prestige a generation ago are part of a larger drama playing out in a financial center that has lost much of its shine in the years since the pandemic. Restaurants and shops have struggled with the departure of many workers while homelessness and a sense that sidewalks aren’t safe has risen and helped lead to the departure of some office tenants.

Older office towers

While many downtown office buildings built before World War II already have been converted to residences or hotels, the eye-catching skyscrapers built in the late 1980s and early 1990s have mostly remained offices. A successful makeover of Jamison’s L.A. Care tower at 1055 W. 7th St. could set an example for repurposing prominent office towers that were built relatively recently and designed to house corporate businesses for decades to come.

New building code

The city is close to adopting a new building code that will make it easier for developers to get approvals to convert offices built after 1975. A previous code for conversions that focused on buildings erected before that year, when construction standards were less stringent, led to a boom in office, apartment, condo and hotel conversions starting in the early 2000s.

Conversion process

Jamison is close to securing city approval to convert 1055 W. 7th St. “with very little structural retrofit,” Lee said, which will reduce construction costs by about 10% and save a lot of time compared to the company’s previous conversions of midcentury office buildings, which required significant improvements to meet city seismic codes.

The ability to convert some office buildings to residential use without going through a full structural retrofit is a game changer for developers in another way too, Lee said. They can leave rent-paying office tenants in place while they convert empty floors to apartments, instead of having to empty the whole building for the retrofit.

Benefits of conversion

Lee plans to start work this year on 1055 W. 7th St., which will be converted to 686 apartments. Newer office towers like that one are “night and day” more attractive to convert to housing than midcentury buildings from the 1950s and ‘60s, he said, and should command higher rents.

“The bones are so much better,” he said, with floor-to-ceiling windows and panoramic views. Much of the mechanical, electrical and plumbing system can be reused “because it’s still very adequate to today’s standard.”

Floor by floor, though, the buildings get a complete makeover.

Future of downtown

There’s room at 1055 W. 7th St. to create amenities such as a gym and co-working space so tenants have a place to do their jobs outside of their apartments. Other tenant attractions probably will include a theater, golf simulator, karaoke room and card room — amenities Jamison added in earlier conversions in Koreatown.

Challenges ahead

Making residences out of struggling office buildings is considered environmentally desirable and can be far cheaper than building new apartments or condos from the ground up, but most landlords are hoping the office rental market is bottoming out and may begin to recover this year.

Leases were signed for more than 600,000 square feet of office space in the fourth quarter that ended Dec. 21, a 21.7% increase from the previous quarter. More than half of that involved renewals of existing leases, with some companies expanding their offices even as others contracted.

Conclusion

As the housing shortage continues to worsen, the conversion of office buildings to residential use may provide a much-needed solution. While there are challenges ahead, the potential benefits of this approach make it an attractive option for developers and landlords alike.

Frequently Asked Questions

Q: What is the current state of the office rental market in downtown Los Angeles?

A: The office rental market in downtown Los Angeles is struggling, with many buildings having high vacancy rates and rents plummeting.

Q: What is the advantage of converting office buildings to residential use?

A: Converting office buildings to residential use can be a more cost-effective and environmentally friendly option than building new apartments or condos from the ground up.

Q: What is the timeline for the conversion of 1055 W. 7th St. to residential use?

A: Jamison Properties is close to securing city approval and plans to start work on the conversion this year, with a completion date of 2025.