Los Angeles – A major developer is planning a $1 billion high-rise office and hotel complex, the first new downtown construction project since the real estate spiral largely scuttled dreams of a resurgent city center.
Thomas Property Group Inc.’s plans call for a 60-story glass-walled building with a slanted profile resembling a ship’s sail that would be built on property owned by development partner Korean Air Co.
The design includes a 40-story hotel and condo tower and an 18,000-square-foot public park that would replace the 50-year-old Wilshire Grand hotel.
Company Chairman and Chief Executive James A. Thomas said the city’s first major office high-rise in some 20 years will satisfy what he sees as a rising demand for business real estate as downtown grows after the recession.
“There is no place that has the amenities, the attractions that downtown Los Angeles has,” he said.
The news offers a glimmer of optimism for a downtown rebirth that has suffered in the slumping economy. A Frank Gehry-designed tower complex is stalled, developers have declared bankruptcy and condo prices have plunged.
Some bright spots have emerged in the core of the nation’s second-largest city, however, including small businesses cropping up in the area’s forgotten storefronts and renewed condo sales in downtown lofts.
The area’s long-term hopes are pinned to an emerging nationwide demand for smaller homes in compact, walkable neighborhoods as families shrink and fears of increasing gas prices drive people from their cars.
“I think downtown Los Angeles is going to do quite well when this economy recovers,” said Christopher B. Leinberger, a land use strategist and visiting fellow at the Brookings Institution think tank in Washington.
Some observers think early boosters’ vision of a Manhattan-like metropolis on the Southern California coast was destined to fail in a city where development sprawls and there are several major financial centers in the region.
Downtown “will never be for Los Angeles what midtown Manhattan is for New York or the Loop is for Chicago, because it hasn’t been that since the 1920s,” said urban scholar Joel Kotkin, author of “The City: A Global History.” ”There’s something called history and it has an odd impact.”
The city Building and Safety Department’s list of high-rise buildings approved for the permitting process show dozens of downtown projects that have never broken ground.
The stalled projects include Gehry’s $3-billion Grand Avenue housing and retail project and the 76-story Park 5th condo complex, which was billed as the tallest residential structure in the West.
The median price for new homes downtown has plummeted from $535,000 in the first quarter of 2008 to about $422,000 in the first quarter of this year, a 21 percent drop, according to tracking firm MDA DataQuick. The median price for all new condos in Southern California dropped about 14 percent during that time.
The slump has forced a growing number of landowners and developers into bankruptcy, including downtown’s largest landlord, Meruelo Maddux Properties Inc.
While most construction has halted downtown, smaller businesses are staking a future on streets once largely empty after office workers went home.
And lower condo prices have lured some bargain-hunting buyers, although overall sales remain sharply down.
Homes have been selling on the far upper end of the scale, too, such as the two-story penthouse bought for $9 million on the top floors of the 54-story Ritz-Carlton Residences, where prices start at $1.4 million. The building is part of the LA Live entertainment and retail complex a few blocks from where Thomas plans its new project.
Thomas said the company, working with the A.C. Martin Partners architecture firm, has completed preliminary designs and was preparing to file plans with the city.
Thomas Properties and Korean Air planned to seek financing from lenders and investors on both sides of the Pacific and begin construction in 2011.
Thomas said he expected credit markets to thaw by the time the partners seek construction loans and that the current downtown slump only encourages him to begin the ambitious project there.
“Construction costs are down, material costs are down,” Thomas said. “It’s ideal to be placing yourself to be ready to ride the wave when the recession turns and the economy moves up.”