Construction

Los Angeles construction surging to levels not seen since the 1980s

Los Angeles World Airports. (LAWA) | Photo: David Grenier / Arellano Associates Los Angeles World Airports. (LAWA) | Photo: David Grenier / Arellano Associates

As of the third quarter, nearly 40 million square feet of commercial real estate — including office, industrial and multifamily projects — are in development, with another 127 million square feet in the pipeline, found CBRE.

LOS ANGELES, California. November 29, 2020 (Annlee Ellingson / L.A. Biz) — Construction in Los Angeles is reaching greater heights — figuratively and literally — despite the coronavirus recession. The region is seeing a surge in new builds with volumes not seen since the late 1980s, wrote CBRE Group Inc. in a recent Greater L.A. Marketflash report.

As of the third quarter, nearly 40 million square feet of commercial real estate — including office, industrial and multifamily projects — are in development, with another 127 million square feet in the pipeline, found CBRE. The surge comes amid the economic uncertainty and physical distancing guidelines of the pandemic, which appears to have had little effect on construction, as nearly all major builds are moving forward.

“Many of the projects underway reflect long-term confidence in the region’s growth and economic vibrancy,” said Eric Willett, director of research and though leadership for CBRE’s Pacific Southwest Division, to L.A. Biz. “Take, for instance, office: The handful of landmark new office projects under construction are moving forward and are a reflection of the dynamic growth of content creators in L.A. — a trend that promises to continue as people consume more content through the pandemic and beyond.”

The robust construction activity in Los Angeles is being driven by new multifamily properties for a region facing a “systemic housing shortage,” noted CBRE. Approximately 135 million square feet of new apartment buildings are under construction or in the pipeline — surpassing levels from the past two decades.

Looking up

The amount of available land isn’t infinite, however, so developers are looking at building up rather than out. In the first decade of this century, 21% of newly built office, industrial and multifamily buildings were over five stories. Between 2010 and 2019, nearly half of completed construction, comprising more than 58 million square feet, was five stories or more.

And as of 2020, 57% of properties planned or under construction, comprising nearly 95 million square feet, are five stories or taller. The trend is especially acute in multifamily construction. From 2000 to 2009, 31% of new apartment buildings were five stories or higher; from 2010 to 2019, the rate has more than doubled to 70%. The increased interest in high-rises comes at a moment when public health guidelines ask households to limit mingling to prevent the spread of Covid-19.

“In the short-term, high-rise multifamily buildings have adopted new safety standards to mitigate the spread of the Covid-19 virus,” said Willett. “However, we anticipate that demand for apartments in dense urban locations will remain robust, and L.A. will have to continue to build up with land increasingly scarce.”

Meanwhile, with the media and technology industries continuing to grow in Greater Los Angeles, more than 16 million square feet of new office space has been added to the region since 2010 — mostly in West Los Angeles, where 4.2 million square feet went up. And more than 19 million square feet of new office space is scheduled to go up over the next half-decade, including 6.7 million square feet under construction or in the pipeline in West L.A.

This trend also continues in the midst of a pandemic that has many office workers working from home, though the health crisis is only speeding up developments that have already been taking place, Willett said. “In the past decade, we’ve already seen a shift in the type of office space being built, and we expect that shift to accelerate as a result of the pandemic,” Willett said.

“Most new construction in the region is creative office space and centers the office as a place for collaboration and interaction. We think those activities will be even more important in a post-pandemic world and the office space under construction will reflect that.”