The Adaptive Reuse Ordinance, which helped developers convert historic old buildings into residential buildings, was the spark that finally reignited Downtown starting 14 years ago. But now the Downtown News notices something odd: today "few local developers are making use of it, even as Downtown is in the early stages of a second housing boom." Almost everything underway Downtown right now (and there's a fair amount: Chinatown Gateway, Eighth and Hope, Avant, Grand Avenue) is being built from scratch. Developer Barry Shy alone developed eight adaptive reuse projects but is now planning on building new for his SB Omega. What's up with that? Well, it's a money thing:
-- "It's to the point that it actually costs less to build on an empty plot. Construction costs are significantly higher today and most of the buildings that were best suited for residential conversion have already been transformed."
-- And the success of Downtown (ironically spurred by adaptive reuse!) has made things incredibly pricey: "Buildings that used to go for $3 million or $5 million are now $20 million," according to Tom Gilmore, who pioneered adaptive reuse in his Old Bank District conversions.
-- "As land values have soared by as much as 400% since the early 2000s, rents have only increased about 30%."
-- Most of the development in the neighborhood now is "being driven largely by institutional investors and private equity funds" (rather than by locals like Gilmore and Shy); they tend to "eschew adaptive reuse-type projects because they are riskier, more time-consuming to permit and as a result, more expensive to build out."
-- Adaptive reuse usually requires more skilled contractors used to working in delicate old buildings.
Some people are hoping to tweak the Adaptive Reuse Ordinance to be more usable in the DTLA of 2013--one idea is to reduce the minimum unit size required in an adaptive reuse project (thus upping the price per square foot). Right now units have to average 750 square feet. Otherwise, Gilmore thinks the future of adaptive reuse is in hotels (like the under-construction Ace in the old United Artists Theatre building): hotels make more money and can work with trickier layouts.
· With Adaptive Reuse Options Limited, Developers Adapt [Downtown News]