Arena

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In a new study certain to fuel the ongoing debate about the future of downtown, the Staples Center sports arena is expected to boost the value of some nearby commercial properties but it will not necessarily result in a broad revitalization of the area.

The study’s authors USC real estate professor David Dale-Johnson and local real estate consultant Robert Bridges acknowledged the development of several major downtown projects, including the Walt Disney Concert Hall, the Cathedral of Our Lady of the Angels and possibly a new Memorial Coliseum.

But based on their studies of other cities where development of a sports venue has been followed by revitalization, housing is a vital element. And that’s what L.A. lacks.

“A major component affecting the success of downtown redevelopment from an office market perspective is proximity to residential areas,” the study states. “Both Denver and Cleveland included significant new residential and rehabilitation projects in their downtown plans, and seem to have reaped the benefits. Although the success of redevelopment in Denver and Cleveland cannot be attributed directly to the residential component alone, it is important that their experience be evaluated from the perspective of Los Angeles, which has historically been unable to attract residents to its core.”

Indeed, downtown boosters have tried for decades to establish a sizable residential community. Those efforts have included developing new high-rise structures, several of which went bankrupt; encouraging artists to live near the Museum of Contemporary Art; and trying to turn aging buildings on Spring Street into apartment complexes.

William Fulton, editor of the California Planning and Development Report, a monthly newsletter, said those efforts have not succeeded because downtown does not have basic amenities, such as grocery stores, movie theaters and recreational facilities. Furthermore, unlike other major cities, downtown faces competition from areas like Pasadena and Santa Monica.

“They’ve tried everything,” Fulton said. “There just aren’t enough amenities in downtown L.A. to give it a competitive advantage over other urban walking-type places.”

Downtown’s housing vacancy rate is below 2 percent, the study notes, but the amount of housing stock there is miniscule compared to the amount in other downtowns. Some new residential development is being seen in the downtown L.A. area, and the plan to convert older downtown buildings into live-work spaces for artists and others is moving forward albeit not in the large numbers some downtown boosters have hoped for.

“That’s going to be the big challenge for L.A. if they can get people to live down there,” Bridges said.

The new study focused on Baltimore, Cleveland, Denver and Phoenix because they all have had stadiums or arenas built in the last 10 years and because they are demographically similar to Los Angeles.

The study was commissioned by commercial real estate brokerage firm Cushman & Wakefield Inc. to show the impact of Staples Center on the 801 Tower, an office building on Figueroa Street less than a mile from the arena site. But the study’s scope was not limited to just that building. Rather, it looked at the impact of new stadiums and arenas on downtown areas specifically focusing on properties within half a mile of each venue.

Cushman & Wakefield was hired by the building’s owner, the Shidler Group of San Diego, to find a buyer for the 801 Tower. Last month, it was sold to Fifth Street Properties, a partnership of the California Public Employees Retirement System and downtown-based CommonWealth Partners, for more than $87 million.

In each of the cities included in the study, office buildings directly adjacent to the sports venue tended to have lower vacancy rates and higher rents than office buildings in other parts of the city.

In Denver, the office vacancy rate within a half mile of Coors Field, where the Colorado Rockies play, has averaged more than 9 percentage points lower than the region’s overall rate, and 3.4 percentage points lower than the downtown rate, since plans for the stadium were announced six years ago. Monthly rental rates in the area closest to the stadium have averaged $1.42 per square foot higher than downtown overall, and $1.62 higher than the region.

In Phoenix, the class-A office vacancy rate in the area closest to America West Arena has been 4.9 percentage points lower than the region’s class-A rate, and 2.1 points below the overall downtown class-A rate, since the arena was announced in 1989. All classes of office buildings (A, B and C) in the area closest to the arena have also garnered higher rents than comparable buildings in the region, according to the study.

Similar trends were found near Camden Yards in Baltimore, and Gund Arena and Jacobs Field in Cleveland.

But these arena and stadium developments were accompanied by other types of redevelopment in the area, such as new shopping centers, museums, theaters and especially housing.

“If all those factors come together, there seems to be evidence of reduced vacancy and relatively higher rent,” Dale-Johnson said.

Bridges, the study’s co-author, stressed that Los Angeles differs from the other cities he and Dale-Johnson studied in that it has been trying to revitalize its downtown for years for the most part, unsuccessfully.

“The problem in the analysis is that Los Angeles is a much larger city than any of the others, and it’s had this pernicious problem with urban development over the years that the others haven’t had,” he said. “You can’t refute what we’ve seen, but on the other hand, you’ve got to make a leap to say that the changes you’ve seen in the other cities will happen here.”

While the extent to which Staples Center might spark downtown renewal remains to be seen, it’s generally agreed that the $305 million facility will be an important addition to the area.

It will be home to the Lakers and Clippers basketball teams and the Kings hockey team after its planned October 1999 completion. It is being developed by Kings co-owners Edward Roski Jr. and Philip Anschutz and News Corp.’s Fox Sports division.

John Semcken, vice president of Roski’s Majestic Realty Co., has not seen the study by Dale-Johnson and Bridges, but agrees with the basic premise that new arenas and stadiums tend to help revive their surrounding areas.

“When we were doing the project, we went all over the country and looked at examples of what arenas have done for urban areas in places like Phoenix, Portland, Nashville, Cleveland, St. Louis and Buffalo,” he said. “And they generated a significant economic improvement to the area around the building. In most cases, it was an entire economic rejuvenation of the neighborhood.”

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