L.A. is undergoing a physical transformation on a level unseen since downtown’s forest of skyscrapers took root on Bunker Hill almost two decades ago.
But unlike the explosive commercial development of the late-1980s, today’s construction isn’t isolated to a single geographic area or a specific type of construction.
While L.A.’s sizzling residential market is attracting a flood of national builders, the Business Journal’s ranking of the 25 most expensive construction projects shows a broad range of activity.
Only one purely residential development, the $145 million Elleven and Luma condominium in downtown’s South Park neighborhood, made the list. The others are hospitals, public schools and massive transportation projects.
“There’s just been a whole bunch of big projects coming online at once,” said Ben Bartolotto, research director for the Construction Industry Research Board. “We are seeing, especially in the commercial sector, a large uptick after three years of decline.”
Hotel construction is up 33.9 percent, industrial building is up 17.5 percent and retail is up 20.3 percent. Meanwhile, reflecting a stubbornly high office vacancy rate, spending on office building projects fell by 26.2 percent. Century City’s 2000 Avenue of the Stars, at a cost of $300 million, is the sole office project ranked this year.
“We haven’t seen major new office construction,” said Con Howe, director of the L.A. city planning department. “The only really significant upsurge seemed to be Constellation Place in Century City.”
Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University, said the construction industry accounted for 136,000 jobs in L.A. County last year 5,000 more positions than in 2000, when the overall economy was roaring.
“For the past several years, construction activity has been the main engine of job creation in Southern California,” Adibi said. “We’re running at the same pace or slightly slower, but we expect job growth to be as strong or even stronger next year.”
Through July of this year, construction permits valued at $5.9 billion were issued for private residential and commercial projects in L.A. County, a 7.3 percent increase from the like period in 2004. Public works projects did show a decline from a year earlier.
Sustainable levels
In last year’s ranking, a project with a $56 million budget could have secured a spot in the top 25. This year’s floor is more than double that: $117 million.
Part of the increase can be attributed to a steep rise in the cost of materials such as steel, concrete and timber. Wages for contractors also have gone up, along with increased demand for firms and workers with construction experience. Still, Bartolotto said those hikes only reflect about 8 percent of the project’s increased price. “It’s a function of the economy growing and coming back and stimulating job growth and stimulating expansion,” he said.
New regulations have also driven construction activity. Because of strict new seismic codes, hospitals are being built in nearly every corner of L.A. County, with Kaiser Permanente alone spending in excess of $1.5 billion on new facilities.
As part of the Los Angeles Unified School District’s $2 billion building initiative, two high schools made the ranking: Central L.A. Area New High School No. 10 ($138.6 million) and Central L.A. Area New High School No. 1 ($127.3 million).
The Metro Orange Line Rapidway, a $323.6 million project connecting Warner Center in Woodland Hills to the Red Line subway station in North Hollywood, will be a major addition to the San Fernando Valley.
In North Hollywood, construction has begun on the $180 million mixed-use project called NoHo Commons, which will have 438 apartments, 292 lofts and 60,000 square feet of shops and restaurants. In Westlake Village, billionaire David Murdock is building the $206 million Westlake Wellness Center Hotel & Spa, a 267-room hotel and conference center.
Several projects on the Business Journal list including the $868.8 million extension of the Metro Gold Line into East Los Angeles have completion dates that are more than three years out, signaling the heightened building activity won’t fade any time soon.
“Right now this level of activity seems sustainable,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “There’s just a lot of stuff going on.”
Among large-scale projects, Anschutz Entertainment Group is beginning work this month on a $1.2 billion retail and entertainment complex including a 1,100-room hotel and a 7,000-seat live theater surrounding the Staples Center. And the MTA is starting construction of the $680 million Mid-City/Exposition Light Rail Transit Project, a 9.6-mile line running between downtown and Culver City.
Further out is the $1.8 billion Grand Avenue project, a massive residential, retail and office development that includes a 16-acre public park. Work also is expected to begin on the scaled-back modernization of Los Angeles International Airport.
Though bigger-ticket items garner the most attention, it’s the smaller construction projects that have driven growth. “Frankly, the face of city is being changed by hundreds and hundreds of small projects rather than a number of big institutional projects,” Howe said.
The constant level of work has kept construction workers steadily employed. When projects end, workers have been able to easily jump to a new site. So far, Bartolotto said there hasn’t been a labor shortage, though some specialized trades such as electricians and welders are stretched thinly.
“It’s always been an issue, having adequate supply of skilled labor,” he said. “It becomes more serious when you have upticks in activity like we’re having now.”
