High-rises are not penciling out.


The skyrocketing cost of building materials, combined with rising interest rates and the price of entitled land spiking past $500 a foot, have several developers moving to low-rise projects or going back to the drawing board entirely.


Even in downtown, where there are plans for at least 50 high-rises, city codes limit the size of towers to the point of making them less economically viable. The fallout could echo what happened after the recession of the early 1990s, when many large developments were shelved and have only recently been reconsidered.


"There's quite a few high-rise projects being proposed," said Paul Thometz, managing director of architecture firm Austin Veum Robbins Partners' L.A. office. "As costs escalate, it's becoming questionable whether those plans will work out."


The vast majority of high-rise projects are condominiums, where prices in L.A.'s over-heated housing market have been justifying the construction costs and risk of building tall. To make a tower economically feasible, developers say they must be able to sell units for $800 a foot already well above the county's median condo cost.


When developers build taller than six stories, they are required to use frames made of steel or concrete, which cost far more than timber. Labor is more expensive, and there's the added expense of more complex and mandatory fire and safety systems.


Thometz said building high isn't always efficient, either. "You're only selling the unit, but you have to add more corridors and elevator shafts," he said. "The more building you build, the less you can sell on a percentage basis."


Hollywood high rises
Rents from apartments and office buildings, which haven't risen as dramatically as housing costs, can't pay for the increased expense of projects that rise more than six stories. An apartment would have to rent for more than $4,000 a month and an office building would have to get more than $4 a foot to make a new high-rise pencil out.


Currently, the average apartment in the L.A. region rents for about $1,450, according to Novato-based RealFacts, which tracks buildings of 100 or more units. At the end of September, the average L.A. County office building had asking rents of $2.48 a foot, according to Grubb & Ellis Co.


"There's a long way to go before anything other than for-sale housing makes sense," said developer Ken Kahan, whose firm, California Landmark Development, is building a 24-story condo tower at Wilshire Boulevard and Barrington Avenue.


Developer resistance to high-rises comes at a time when more communities want them.


L.A. City Councilman Eric Garcetti opposes plans by Clarett Group Inc. to redevelop five acres surrounding Hollywood's Pantages Theatre with low-rise apartment buildings that contain 1,000 units.


Garcetti, among others, wants Clarett to include a tower and a broader mix of uses, such as offices and for-sale housing. Executives of Clarett Group, a New York developer with plenty of high-rise experience, argue that Hollywood's economics don't support those desires.


Also complicating matters, Clarett isn't able to build for-sale units on the property because the company has a long-term lease on the site from the Nederlander Producing Co. of America Inc., which owns and operates the Pantages Theatre.


"Clarett's problem is that it doesn't own the land," said Phil Simmons, division president of John Laing Urban, a division of John Laing Homes. "They can't build condos and for that reason they can't afford to go tall."


Simmons speaks from experience. After first considering a project with a tower component, John Laing Urban is building a low-rise, mixed-use, 180-unit condominium project on La Brea Avenue called Madrone, after an indigenous Hollywood tree.


Though John Laing Urban is using the same building standards as a high-rise, including a more expensive concrete frame, the building rises to seven stories at its tallest and steps down to five stories near a residential neighborhood.


Thometz said some of his clients are redrawing their high-rise plans because of changing economics. The choice: find a way to go taller and have more building to sell or downsize to something cheaper.


The few high-rise projects that Thometz's firm is designing are for wealthy individuals who are building on the Westside and plan to hold onto the property for as long as it takes to make a profit.


Outside those few exceptions, he said building towers in much of L.A. doesn't make sense. "We may get there one day," Thometz said, "but for now we're pretty much limited to six stories."

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