TWO VIEWS:

The redevelopment and planning agencies of Los Angeles issued a directive last month to preserve industrial space in the city. In so doing, they barred from redevelopment some industrial space downtown that developers wanted to convert to condos or mixed-use projects. This is one of two commentaries were written for the Business Journal on the issue.

By BILL ALLEN, BRENDAN HUFFMAN, BRUCE ACKERMAN AND MARIA ELENA DURAZO

Anyone who’s witnessed the transformation of downtown Los Angeles from mostly deserted streets especially after hours and on weekends must be encouraged by the thriving new urban center that’s sprung from the ashes. New restaurants, bars and much-sought-after housing in the central core have brought the area a vibrancy worthy of this great city.

In the process, however, real estate speculators have been acquiring industrial land downtown and throughout the city in the hope of converting parcels to residential uses with individual zoning waivers approved by the city.

While downtown’s transformation was long overdue, we are concerned about the negative long-term economic consequences of the entire city’s dwindling industrial land base and the accelerating pace in which job-producing industrial land is being taken away to meet housing needs.

Our level of concern is heightened when one considers that Los Angeles has about 56,000 fewer jobs today than it did in 1980, but nearly 1 million more residents. A quarter-century ago the city had 61 jobs for every 100 residents, but now has only 45 jobs for every 100 residents. In Central L.A. a favorite target for new high-priced residential development employment growth has been moribund.

This is troubling when you consider that in the industrial-zoned portions of Central L.A., major parcels of former and future job-producing industrial land are being purchased for a fraction of the cost of residential land elsewhere for conversion into housing. Meanwhile, there are millions of square feet of land and historic buildings in the Historic Core and South Park still available to be converted or developed to meet housing demand downtown, without the need for converting any further industrial land.

Unlike many other urban centers, which have been critically impacted by the growth of global trade, Los Angeles’ city center continues to thrive as an established global leader in manufacturing, logistics and warehousing. In Central L.A., the demand for industrial space is so great that the industrial vacancy rate is below 1 percent, by far the lowest of any major metropolis in the nation.

Unknown to many, Los Angeles County is the largest manufacturing center in the country, employing more than 460,000 people. In 2005, the city of Los Angeles’ manufacturing sector employed about 165,700 workers, about 9% of its total workforce. Manufacturing and other industrial uses represent a critical component of the city’s economy, generating 12.9% ($219.4 million) of the total citywide tax revenues in 2002.

Though some critics attempt to portray “industrial” activity as a blight on our communities based on conjuring up old images of “smokestack industries,” in the 21st century, “industrial” is no longer a dirty word. Industrial today means skilled, high-value and high-wage jobs in growth areas vital to our city’s long-term economic prosperity, including industries such as logistics, which supports L.A.’s No. 1 employment sector international trade and “new economy” areas like biomedical, high-tech, entertainment tech and green technology. The city’s industrial lands also serve as de facto incubators for its entrepreneurial class, spawning many of our region’s top-tier companies that once depended on acquiring less expensive spaces when they were startups.

Unmet demand

Yet, with unmet demand for industrial land so high (more than 1 million square feet) and vacancy rates so low (below 1 percent), continuing to allow residential uses in industrial zones will only serve to increase land costs for new or expanding businesses, driving L.A.’s best job-creating prospects to other cities or to the Inland Empire.

Already 26 percent of industrial land in the city is being used for other uses, and what’s left of the city’s industrial land cannot be preserved without city government taking responsibility for orderly land-use planning.

The city of Los Angeles must make a commitment to preserve its vitally important industrial land, taking into account: 1) each new housing unit creates the need for 1.5 jobs, and industrial jobs on average pay substantially better than the retail jobs located in and around new residential development; 2) more residential means an increased demand for city services without a corresponding increase in revenues (further exacerbating the city’s massive budget deficit); 3) new housing within industrial zones negatively impacts new and expanding businesses; and 4) once converted, industrial sites will be impossible to regain.

There are no easy solutions to the city’s land crunch. But the pendulum has swung too far in favor of residential uses over job-producing land. We are at an important crossroad on this issue, and the city cannot afford to make the wrong decision. Los Angeles’ future economic health depends on it.

Bill Allen is president and chief executive of the Los Angeles County Economic Development Corp. Brendan Huffman is president of the Valley Industry & Commerce Association. Bruce Ackerman is president and chief executive of the Economic Alliance of the San Fernando Valley. Maria Elena Durazo is executive secretary-treasurer of the Los Angeles County Federation of Labor.