Sunday, February 05, 2006

The Bubble Goes To Hollywood

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Developers in Hollywood clearly are bullish on the Los Angeles real estate market, as evidenced by a story in the Los Angeles Business Journal by reporter Andy Fixmer. The continued conversion of office space into condominiums in Hollywood clearly demonstrates that somebody's numbers say the Los Angeles bubble isn't going to pop, at least, not until after these units are completed and sold.

And, of course, there are those who would rather we talk about a bubble in the construction of homeless shelters in Hollywood. The Los Angeles Times had a story this week that said new shelters and residences for homeless people in Hollywood are being criticized as magnets for the homeless community. It seems a predicable response. What would really be news is if someone built a facility to help the helpless and no one complained:
Some 20 drop-in centers, shelters, homeless feeding programs and health clinics already dot the area around Hollywood Boulevard and Gower Street. And the Los Angeles Community Redevelopment Agency has just purchased three lots steps from the intersection and announced plans to construct up to 60 residences and a companion social services program catering to the homeless.
Here's an exceprt from the Los Angeles Business Journal story, the remainder of which is behind a registration wall:
The sizzling rate at which Hollywood office buildings are being converted into expensive residences is getting too fast for even some of its original proponents – the city of Los Angeles and members of the local business community.

While initial conversions mostly have been of unoccupied older buildings, developers recently have begun targeting more modern offices that have significant occupancy.

Much of the recent concern was sparked by Phoenix-based Alliance Residential Co., which paid $29 million for the 180,000-square foot office building at 7060 Hollywood Blvd.

The company informed city officials last month that it plans to convert the building on the southwest corner of Hollywood Boulevard and Sycamore Avenue into high-end residences.

“That really opened our eyes,” said Leron Gubler, executive director of the Hollywood Chamber of Commerce, which has been lobbying city officials to protect the community’s remaining office buildings.

The property is one of the neighborhood’s largest office buildings and is adjacent to a twin tower at 7080 Hollywood Blvd. that is completely filled with office tenants.

City officials say that if 7080 is successful in attracting tenants there is little reason that 7060 can’t be revitalized to do so also. Moreover, there is concern that other Hollywood buildings currently for sale – such as the CNN building on Sunset Boulevard – could be next.

If the buildings are taken off the market, and no new offices are built, then much of Hollywood’s office tenants could be forced to relocate to surrounding communities.

The concerns prompted the Hollywood Chamber of Commerce to set up a meeting next month among city officials, property owners and developers to discuss ways to balance residential and office development.

— The Boy in the Big Housing Bubble