Future/30″/mike1st/mark2nd

By ELIZABETH HAYES

Staff Reporter

The year is 2020, the place Los Angeles. Downtown is teeming with life, as more people choose to live right next to office towers. Workers report to satellite offices in their neighborhoods or just operate out of their homes. Older neighborhoods and commercial corridors have been rebuilt with newer, denser housing stock.

These are a few of the predictions or perhaps hopes of local real estate experts and observers.

With the new century less than 15 months away, important questions loom about the future of L.A. real estate, especially with global markets in turmoil, a swelling local population and technological changes shaking traditional notions of office space.

Will residents and governments finally embrace the mixed-use projects that characterize other world-class cities, such as New York and Paris? Will high-rise towers be a thing of the past as L.A.’s new entrepreneurs gravitate increasingly to low-rise, campus-like environments? Will governments make the necessary investments in infrastructure to support the wave of new residents?

Such issues are not just curiosities anymore they’re critical policy questions for business leaders and elected officials alike. And as expected, opinions vary widely about what to expect and whether L.A. is ready.

The demographic and economic changes already afoot will impact all real estate sectors, from housing to retail to office to industrial.

Richard Lawrence, a Santa Monica attorney and chair of the Urban Land Institute’s L.A. District Council, said he’s concerned that not enough dialogue is taking place about these big-picture issues.

“You get a sense with many communties now, the response is, ‘If we don’t build it, they won’t come.’ In reality, that won’t happen,” Lawrence said. “We will turn around and have a significant influx, and if we haven’t made plans, it will be more critical.”

First and foremost will be a demand for housing in order to accommodate the 2.6 million additional L.A. County residents expected by the year 2020 (with much of that growth coming from an increase in births over deaths). Where that housing stock will come from is anyone’s guess; the 1990s promises see the least homebuilding of any decade in Los Angeles this century.

“The county is in dire straits as far as housing is concerned,” said G.U. Krueger, deputy chief economist for the California Association of Realtors. “Unless something is done, it’ll be not a nice picture.”

New housing could take several forms more sprawl into inland counties, redevelopment of existing neighborhoods and mixed-use projects in urban areas.

The mixed-use idea with retail and office space on lower floors and housing above has obvious appeal in some of the area’s more densely populated areas. But the concept, being tried in parts of Santa Monica and downtown, has had only limited success.

“Mixed-use neighborhoods are the future. It’s just how they’re expressed. The vertical concept isn’t as accepted in L.A.,” said William Fain, architect and urban designer at Johnson Fain Partners. If the concept does catch on, it would “solve a lot of traffic and congestion problems,” he said.

Krueger doesn’t believe L.A. “will be Paris, but it can be more high design, with green stuff around it, garden terraces.”

Older sections of L.A. such as Compton, Bellflower and Watts could be rebuilt with two-story retail projects and denser housing with neighborhood “pocket parks,” said Larry Bond, managing director of the Century City-based Summit Fund, which invests in and redevelops commercial and multi-family buildings.

“It will be more like New York City,” Bond said. “People who fled (the city) for a better life for their kids will come back.” But he conceded that “nobody has stepped up in L.A. and redone neighborhoods on a mass scale. That’s what should happen.”

But who is willing to take the chance? So far, developers have been reluctant to embark on major infill projects at least not without significant tax incentives or other breaks. And the long-delayed and controversial Playa Vista project is likely to dissuade many developers from making urban investments.

“It will take someone who’s a pioneer, someone to really hit a home run doing it, as well as assistance from cities and the county,” Lawrence said.

No matter what form the new housing takes, many local observers believe housing and jobs will move closer together in fact, they must for business centers to be viable.

“You have to have housing, retail and entertainment,” said John Long, managing partner of Highridge Partners, a real estate acquisition, development and finance company. “Isolated office buildings are going to be a thing of the past. Any building built without synergy will be at a disadvantage.”

Long even points to the Mid-Wilshire area, for years among the area’s softest office markets, as having potential because it has a housing component.

As for downtown, there continues to be talk of a renaissance that will make the area more attractive as a place to live. Again, retail and entertainment projects are essential ingredients to making that happen, and some believe the groundwork already is being laid, with the new Staples Center arena and the Disney Concert Hall.

Just as housing needs are changing, so too are requirements for office space. Southern California’s population growth and entrepreneurial economy will continue to fuel demand for both office and industrial space. But technological advances already in place allow individual companies to operate in smaller offices, as more employees work off site. Telecommuting and so-called hoteling where employees only occasionally visit the office will increase.

“We see that already, where people don’t come in every day. That will increase. But it’s not the demise of the city,” said Stan Ross, vice chair and managing partner with E & Y; Kenneth Leventhal Real Estate Group. “We may go down to 100 square feet per person, but we’ll have more people.”

These structural changes have implications both for where offices will be located and what form they’ll take.

“The markets will move more and more toward suburban nodes and centers and away from any downtown, per se,” Long said. “Not that downtown won’t survive, but it’s another suburban node. Areas like El Segundo, Glendale, West L.A. and Warner Center will continue to expand and flourish.”

While no one is predicting the demise of the high-rise tower, campus-like projects in garden settings clearly are becoming more popular. Buildings of all types will be more informal, open and flexible made of natural materials, with skylights and floorplates that don’t necessarily need to be a strict rectangle, said architect Scott Johnson.

“You’ll see a mushrooming of different options,” Johnson said.

On the industrial side, today’s booming, billion-square-foot market faces several challenges, including the long-term impacts of the Asian and Russian financial crises and the trend toward just-in-time deliveries, which diminish the need for warehouse space.

Even so, the planned Alameda Corridor is predicted to be a boon to the industrial cities of Vernon, Huntington Park, South Gate and Compton. Some of the space in those areas has become outdated, and will likely need to be replaced. Outdated industrial buildings in other areas of town will be converted to other uses in the future. Already, outmoded manufacturing facilities are being converted to creative office space for entertainment and multimedia firms in Santa Monica and Culver City.

A critical factor underlying all this is transportation. The anticipated population boom could translate into this nightmarish regional scenario: 11 freeways operating at speeds of 10-15 mph and peak morning commuting periods lasting from 6 a.m. to 11 a.m., according to the Regional Transportation Plan released by the Southern California Association of Government’s Regional Council.

Among the plan’s major recommendations are to build truck lanes on five freeways, construct high-speed rail lines from San Diego to Palmdale and restructure transit systems. One plan for restructuring would include decreasing the number of big buses with fixed routes and increasing the number of “smart shuttles” smaller vehicles whose daily routes are determined by rider demand.

“In the past, all transportation solutions focused on moving vehicles. That philosophy has to change,” said Tony Harris, director of Caltrans District 7, which encompasses Los Angeles and Ventura counties. “Transportation systems are going to have to deal with moving people, information and services.”

The solution must be multi-pronged, he said, encompassing mass transit, telecommuting, improvements to streets and freeways (such as extending carpool lanes) and providing better traffic information to the traveling public.

Future transportation planning must also take changing lifestyles into account, such as the fact that people now combine several errands into each trip. “Maybe we need child care centers at transit centers,” Harris said.