Redevelopment Agency Proposing Rebuilt Downtown Industrial Zone

Staff Reporter

The L.A. Community Redevelopment Agency, fresh on the heels of the recent L.A. City Council approval of its 892-acre City Center redevelopment plan, has proposed a new 738-acre redevelopment zone for the industrial section in the eastern part of downtown.

Called the Central Industrial Redevelopment Project, the proposed area covers most of the neighborhood bounded by San Pedro Street on the west and the L.A. River on the east and by 3rd Street on the north and the Santa Monica (10) Freeway on the south. Much of the area is in the Central Business District, which is being phased out because of a 20-year-old redevelopment revenue cap.

The aim of the new industrial redevelopment zone is to rehabilitate existing space and bring in new development. However, critics say much of the area is already improving on its own and may not meet standards for blight.

CRA officials said the proposal is still in the formative stages and that any comments on the plan would be "premature."

"The plan is still evolving," said CRA spokeswoman Kiara Harris. "We're now in consultations with community stakeholders and will be refining the details of the plan in the weeks ahead."

The proposal could come before the CRA board later this summer and before the L.A. City Council later this year or early next year.

The new zone could add up to 8.4 million square feet of new and refurbished industrial space over the next 30 years, according to Terry A. Hayes Associates LLC, an economic development consultant retained by the CRA and cited in a draft environmental impact report on the proposal. The plan also calls for up to 1.2 million square feet of commercial space and up to 1,500 housing units.

As yet, no figure has been set for the amount of additional revenues the project could generate. The slightly larger City Center redevelopment project area to the west is estimated to pull in $2.4 billion over 30 years.

Lack of industrial space

The downtown industrial core is in desperate need of space. During the first quarter, the industrial vacancy rate for the central L.A. area, including downtown, was a mere 3 percent, according to Grubb & Ellis Co.

"The roads are narrow, the utility connections substandard and the buildings need major rehabilitation," said Larry Kosmont, an L.A.-based economic development consultant. "With space so tight, rents are high, much higher than the conditions would otherwise dictate. Anyone already there looking to expand is forced to look elsewhere, while new industrial tenants barely even look at the area."

According to one industrial real estate broker, once companies need to expand into buildings larger than 25,000 square feet, they have very few buildings to choose from.

"Most of the buildings there are small; if you're looking for larger space, you will probably migrate to Vernon or Compton," said Dwight Hotchkiss senior director with the downtown office of Cushman & Wakefield.

"This is where rehabilitating and expanding existing buildings through redevelopment would be particularly helpful," he said.

Nonetheless, significant portions of the zone have improved on their own with new industrial and commercial development projects. A previous redevelopment proposal, known as the Alameda East Redevelopment Project Area, collapsed after subsequent studies determined that a significant portion did not meet the criteria for blight.

Improvements cited

The new Center Industrial Redevelopment Project Area includes some of these areas, along with portions of the Central Business District. Critics say these areas don't need a helping hand from the CRA and that the move to create a redevelopment zone may be more about securing revenues for other projects than removing blight.

"There's no doubt that much of the area north of 7th Street could use some redevelopment," said Ken Jackson, director of sales for Dynamic Builders Co., an industrial developer with several projects in the proposed zone. "But the area south of 7th Street seems to be doing OK just on market forces alone.

Jackson pointed to the Produce Mart, the Alameda Trade Center recently built by Lowe Enterprises, and a number of infill projects that his firm has built in the area.

"It may be that the CRA wants to capture some of the tax increment financing from property values that are already rising in the area," Jackson said. (In a redevelopment zone, tax revenues derived from increasing property values are plowed back into the zone and are not disbursed to various government agencies, as in other areas.)

Although it was approved last month, the City Center project sparked criticism from secession proponents in the San Fernando Valley as diverting much-needed redevelopment resources from other parts of the city to the downtown area.

County officials, led by County Supervisor Zev Yaroslavsky, have challenged the redevelopment designation for 30 acres of the City Center redevelopment zone right next to the Staples Center. Yaroslavsky has said that the area, which is slated for the second phase of the Staples sports and entertainment retail complex, does not meet the criteria for blight and that it would divert hundreds of millions of dollars from county coffers over the next 30 years.

The county has taken preliminary steps to filing a lawsuit to block the redevelopment designation for those 30 acres and Yaroslavsky has indicated that the county would take similar action against any other redevelopment designations that appear not to meet the criteria for blight.

For reprint and licensing requests for this article, CLICK HERE.