Produce brought industry to downtown Los Angeles, ever since the railroads arrived in the 1870s to transport fruits and vegetables from local agricultural settlements.

Today, properties in the Industrial District command top dollar thanks to a dearth of new space and the strength of the nearby Alameda Corridor, where goods are transported to and from the ports.

A 7,000-square-foot warehouse, with few services or parking, can sell for as much as $120 per square foot, driven by downtown's overall 1.4 percent industrial vacancy rate, the lowest in more than a decade.

The Industrial District, straddling Alameda Street and running east to the L.A. River, and south from Sixth Street down to the Santa Monica (10) Freeway, also serves the produce, apparel and textile industries just west of Alameda.

In addition, the area is home to the Los Angeles Times printing plant, which sprawls over some 23 acres, making the newspaper the district's largest landowner, according to CB Richard Ellis Inc., which surveyed downtown for the Business Journal.

The major landlord, meanwhile, is Lowe 6th Street Properties, which owns nearly 15 acres, including 290,000 square feet of modern concrete tilt-up warehouse space. The partnership is a subsidiary of Lowe Enterprises, the privately held developer.

While rents may be high, the district is not altogether healthy, since there also is an abundance of obsolete industrial space that cannot support modern users.

"There are many obsolete buildings that will never again be adapted for industrial use. The future of industrial and manufacturing in downtown Los Angeles may well be limited to those large players and properties that are currently thriving," said Estela Lopez, Executive Director of Central City East Association, a non-profit group trying to establish a business improvement district (BID) east of Alameda.

While the buildings would logically support a conversion into residential lofts and yield a much higher payoff for residential developers, it's not all that easy.

"Residential conversion below Sixth Street will create friction," said Mark Moniz, an urban redevelopment associate with CB Richard Ellis. "Industrial users routinely bring in 18-wheelers to park and off-load goods. They believe residential property owners will impose restrictions."

Part of the problem is that properties east of Alameda were not included in the city's adaptive reuse ordinance, which facilitates that conversion. Instead, the area's zoning administrator grants conversions on a case-by-case basis under a more restrictive ordinance that has promoted the development of artist lofts.

"That allows for existing property owners in the district to have their say. Conflict with long-standing industrial owner/users will slow residential growth below Sixth Street," Moniz said.

Two conversions by Linear City LLP will be test cases to determine how compatible residents and warehouse operations will be.

The partnership has completed the $25 million repurposing of a 1924 warehouse that was once a toy factory on Industrial Street. Already all 19 live/work condos are sold out. The building features a rooftop pool, landscaped gardens, and full-time security.

Then there is a $20 million renovation of the 1925 Nabisco Bakery building on South Mateo Street, which will bring 200 new live/work lofts into the district by summer of 2006.

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