Southern California Development Forum brings value through educational, networking and philanthropic events around current developments in the A/E/C world. Read all about our recent events here.
As one of the largest travel destinations in the world, Los Angeles is a premier target for hospitality development. Some may argue that with the surge in short-term rental services, such as Airbnb, the need for hotel development is obsolete. However, not only is the hospitality sector thriving, but there is a shortage of hotel rooms throughout various sub-markets of the greater Los Angeles region.
Our State of the Los Angeles Hospitality Market panel on August 7, 2018 was a lively discussion comprised of speakers from various arenas within the hospitality industry. Moderated by Steven Sharp, editor and co-founder of Urbanize L.A., the panel included: real estate developer Ricardo Pagan, CEO of Claridge Properties; Hari Jun, director of development at Kimpton Hotels & Restaurants, and Jessica White, vice president of HVS, a hospitality-focused consulting firm.
Panelists discussed a range of hospitality-focused topics, such as challenges associated with the Los Angeles hospitality market, how the Los Angeles hospitality market compares to other markets, the shortage of hotel room options in certain sub-markets, what hotel guests are looking for in their experience and Los Angeles’ Transient Occupancy Tax (TOT).
Challenges Associated with the Los Angeles Market
Several of the most notable questions asked by the audience centered on the lack of hotel developments in Los Angeles. All panelists agreed the largest factor contributing to the scarcity of new hotels boils down to costs. The cost per square foot to build a new commercial development is simply too high for many developers and investors. The Los Angeles market was compared to its East Coast counterpart, New York City, which is also burdened with sky-high construction costs. New York City has seen a steady decrease in new developments of any kind, simply because the cost is significant. Construction costs, the price of building materials and labor, as well as recent tariffs, have all contributed to the decline in new hospitality-related developments in both Los Angeles and New York City in recent years.
Panelists noted the reluctance of the metro area to catch up to speed with the rest of the nation in terms of facilities and development practices.
“The city of Los Angeles has a hole in the sophistication of its development practices,” said Pagan, referring to his experience working in New York.
Pagan commented on his latest development, Angel’s Landing, and how the public has responded to the new development’s lack of parking spaces. The development will contain just 465 parking spaces for 675 residential units, two hotels, dining locations, an elementary school, plus an additional 45,000 square feet of retail space.
“The square footage that would have been used for parking would be better served as commercial or retail use,” Pagan said. “The development team and possibly the city may be looking for a way to encourage people to use public transit or ridesharing.”
Shortages across Greater Los Angeles Area Sub-Markets
Panelists agreed that while the metro-area has been able to adapt to taxes and rate increases, it has created a gap in the market. Many current hotels cater to either a higher-end and luxury-oriented consumer, while most others serve no-frills budget travelers, with not much in between.
“There is definitely a gap in the market,” said Jun. “We at Kimpton have identified this gap and we are working to fill it,” she continued.
Jun highlighted the recent completion of the Kimpton Everly Hotel in the Hollywood Hills, what she describes as a casual, yet sophisticated establishment that is designed to meet the vibe of the surrounding neighborhood and environment. With a light and airy ambience, modern décor and “upscale-casual” dining options such as Jane Q, the hotel provides guests a chance to feel what it would be like to be a resident of Hollywood Hills, rather than just as the typical hotel guest experience.
While the addition of hotels such as Kimpton Everly are meeting needs of hotel guests, there is still a shortage of hotels at the mid-level price point and a shortage of rooms in general.
“There are several pockets in Los Angeles County and Orange County that are simply under-utilized,” said White. “The area between Huntington Beach to Redondo Beach, which encompasses many square miles, is lacking in hotel options and has great potential.”
The panel touched on the upcoming Los Angeles 2028 Summer Olympics. White mentioned neighborhoods in Los Angeles such as Long Beach that have the potential to become hotel meccas. She said developers are already preparing Long Beach for the upcoming Olympic Games since the majority of the water sports will be hosted in the area.
Pagan addressed the fact that developers must be cautious when preparing for Olympic Games and not overbuild, leading to an oversupply of developed properties that could potentially lead to “ghost towns.”
Designing For Guest Satisfaction
The panel discussed what the most important factors are when designing hotels for guest satisfaction. Although the panel touched on the fact that no hotel is built for the same guest, they agreed that convenience is key.
“Room design is the bottom line when it comes to a successful hotel development,” said White. “This can be as simple as designing a hotel room that has charging outlets in convenient locations.”
The panel discussed the rise in mixed-use hotel developments and the importance of integrating amenities such as rooftops, bars and restaurants that all cater to a successful hotel development. The panel mentioned how 24/7 operations such as JW Marriott in Koreatown are becoming the norm, with condos and hotel rooms all under one roof.
“Being thoughtful about the programming behind hotel rooftops is important,” said Jun. “It is crucial that developers be creative in amenity choices to ensure guests actually come and utilize these spaces.”
Another topic the panel touched on was the issue of transient-occupancy-tax (TOT). According to the Los Angeles Office of Finance, this tax is best described as a rental tax that is paid by the hotel guest for short-term rentals up to 30 days. Contrary to popular belief, this is not a tax on the business operator. Rather, this tax is passed down to the consumer and also applies to all internet-rental services such as Airbnb, HomeAway and VRBO.
“Many people are misunderstanding this,” said Pagan. “Essentially it is revenue you are creating through the sale and usage of rooms.”
Currently, the TOT rate in the city of Los Angeles is 14 percent and is applicable to all properties rented to transients. By this legal statute, transients are defined as any person who exercises occupancy or is entitled to occupancy for 30 days or less. Surely, this added 14 percent tax will drive up the total cost of staying in a Los Angeles hotel, which might seem problematic to the untrained eye.
On Thursday, July 19, leaders in the Southern California real estate industry gathered to mix and mingle at our 2018 Annual Night Under the Stars Cocktail Mixer. We enjoyed stunning views from the rooftop terrace of the California Club in downtown Los Angeles.
In attendance were this year’s 2018 Philanthropic Award recipients, Brandon Wexler, Executive Assistant of the USC Veterans Association, as well as New Earth’s Founder & President, Harry Grammer and Executive Director, Yana Simone.
USC has a long history of supporting the United States military, veterans and their families. With over 1,200 enrolled veterans per semester, USC supports the return of veterans to civilian life through the assistance of the USC Veterans Association, among other programs.
New Earth is a nonprofit that provides mentor-based arts, educational, and vocational programs that empower juvenile justice and system involved youth ages 13-25 to transform their lives. The organization is committed to significantly reducing the youth recidivism rate in Los Angeles (Los Angeles County locks up more kids than any other metropolitan area in the world), by providing transformative programs and enrichment opportunities for incarcerated and formerly incarcerated youth that nurture self-expression, stimulate positive growth and address emotional barriers. New Earth serves 700 people a week in youth detention camps, juvenile halls and placements throughout Los Angeles and Orange County.
“We are honored to support the USC Veterans Association and New Earth in their mission to provide a welcoming and inclusive environment for underserved communities in the Southern California region,” says SCDF President-elect, Carolina Tombolesi. “Organizations such as these are not only making a difference by providing robust programs for the community, but are spurring long-term growth and generating future leaders.”
We will be honoring the 2018 Award Recipients at the Annual Design & Philanthropy Awards, which will be hosted at City Club LA in December 2018.
Cultural districts are catalysts for the revitalization of communities. Museums, performing arts centers and universities, among other cultural establishments, provide continuous revenue, making them not only a great return on investment for developers and lenders, but also benefit the city as a whole. These districts also increase financial, educational and recreational opportunities to residents of the surrounding area.
The Cultural Districts panel included a diverse range of leaders in the Southern California arts industry, including Rob Creighton, Principal at Red Cape Studio; Brian Pratt, Assistant Vice Chancellor & Campus Architect at UC Irvine speaking about the Institute and Museum for California Art; Sel Kardan, President of The Colburn School; Judy Kim, Deputy Director of Lucas Museum of Narrative Art and Diana Vesga, Chief Operating Officer of Los Angeles County Museum of Art (LACMA).
Some of the hot topics that were addressed by the panel included accessibility, community outreach and green building practices of cultural facilities.
The panel discussed various challenges cultural districts face, such as accessibility. “One of the biggest impediments to bringing people to cultural institutions is access,” said Creighton.
Since transportation is such a hot button issue in Los Angeles, panelists explained how they are approaching this issue for cultural institutions. Kim mentioned that The Lucas Museum will be located off Vermont Avenue, just south of Exposition Boulevard, and will be a short walk from the Expo/Vermont Station of the Metro Expo Line.
Vesga mentioned that LACMA purposefully places a lot of their major sculptures, such as Urban Light and Levitated Mass, outdoors as a magnet for engagement. Placing artwork outdoors makes the museum more accessible and approachable and provides an opportunity for the general public to enjoy art without having to step inside a museum.
Vesga also shared how the LACMA team took into consideration the surrounding community when expanding into South Los Angeles. The South Los Angeles region is in need of access to cultural institutions, so the museum is hopeful the presence of a new LACMA building in the region will encourage further revitalization of the area.
Pratt explained how UC Irvine is creating strategic partnerships to connect better with the community and to collaborate with other nearby institutions such as the Orange County Museum of Art.
Involving members of the community is a critical component to the design and construction process and having a positive impact on the community is key to the success of cultural institutions. Panelists discussed the ways in which they take into consideration the needs of the surrounding community, as well as the entire Los Angeles population, when undertaking expansions and construction projects, among other ventures that may have an impact.
The audience asked how the panel is creating ways to bring people into their spaces. Vesga mentioned how LACMA is creating ways the museum has incorporated Friday Night Jazz and Saturday Night Latin Sounds as public events to expand the museum’s reach and draw new crowds into the space. “We’re LA’s living room, a place to hang out,” proclaimed Vesga.
Kim explained how her and her team incorporated community outreach. “We performed months of community outreach to learn about what people are looking for from the new museum and to truly be mindful about the surrounding community.”
Kim also explained how the Lucas Museum of Narrative Art is joining Expo Park as a valuable addition to an already existing cultural district. “We considered placing the museum in Treasure Island in San Francisco, but given the established museum environment in Expo Park, we decided it was where we could build the quickest and could plug into an already existing ecosystem and have the most impact in the community,” Kim stated.
Pratt talked about the new theater being a hub for the entire campus and mobilizing the university professors to get involved. “It’s a very campus-driven initiative,” said Pratt. “Most universities are seeking to connect with the community, whether it be through incubators or partnerships.”
Kim shared her team’s approach to making green spaces at the Lucas Museum of Narrative Art. “There is a very small percentage of green space in Expo Park, so we are making sure to fill this need by creating communal, natural spaces for people to gather at the museum.”
More cultural facilities are emphasizing the importance of designing a building that has a connection to the world outside the space to establish a more humane environment. Kardan addressed the challenges that come along with incorporating natural, outdoor lighting into performance venues, which are typically dark and windowless. He explained how it is an intricate process to create a balance. Many issues arise when attempting to achieve this balance, including the issue of being able to control the lighting and avoid distractions during performances that require specific lighting and visual effects.
Kardan mentioned what a pleasure it has been to work alongside Frank Gehry in the Colburn School’s expansion due to his depth of knowledge, particularly when it comes to designing interactive spaces.
Vesga commented on how LACMA utilized glass in the museum’s expansion project as a strategy to create a more inviting atmosphere with a connection of the indoor and outdoor.
The U.S. Department of Housing and Urban Development estimated that over half a million people living in LA are in danger of falling into homelessness.
On May 8, 2018, city officials and developers, among others, met at City Club LA to discuss how to cultivate developments that mitigate the housing drought across multiple demographics.
The panel, moderated by Otis Odell, AIA, LEED AP, Associate Principal at HED, spoke about a variety of housing types, including: homeless, seniors, veterans, special needs, mixed-income, mixed-use, cohousing and more.
Panelists discussed Measure HHH, which recently passed with more than a 76 percent vote. The measure authorized $1.2 billion in bond funds, allocated to homeless housing in LA. Sean Spear, Assistant General Manager for the City of Los Angeles, discussed how wonderful it is that the initiative is underway and discussed how it is aiding to solving the homeless crisis in LA.
“The first thing I should say about HHH is: thank you voters,” said Spear. “Because HHH is a bond, we can access those funds immediately. We’re already looking at providing 2,700 units by the end of the year at about $220,000 per unit. At this rate, the funding will be used within about five years.”
Dora Gallo, CEO of A Community of Friends, addressed the current lack of veteran (VA) only housing.
When asked what some of the unique design elements are for VA housing, Gallo mentioned that “the main things veterans desire in their housing spaces are open, social spaces such as clubhouses, as well as gyms.”
She spoke about the passing of California Proposition 41, Veterans Housing and Homeless Prevention Bond, a few years ago and how helpful it has been. The measure authorized the state to provide local governments, nonprofit organizations and private developers with financial assistance, such as low-interest loans, so they can construct, renovate and attain affordable multifamily housing for low-income veterans and their families.
Gallo discussed what the qualifications are for getting accepted to low-income VA housing.
Gallo also expressed how excited she is about November, 2018’s Legislative Housing Package, which places a $4 billion general obligation bond on the ballot. If approved, it will allocate $1.5 billion to low-income multifamily housing and $1 billion to veteran’s housing assistance.
Senior Housing/Assisted Living
Craig T. Fukushima, Partner at The Fox Group, LLC, spoke about how the senior housing market has faced many challenges recently and addressed the significant lack of affordable senior housing facilities, with emphasis on the LA region.
Fukushima explained that “the strategy for delivering effective assisted living, which must be driven by the needs in the market.” He raised spoke about how to program assisted living in addition to the cost of assisted living units, which The Fox Group, LLC’s typically sees as $170-210 per square foot.
Tony Salazar, President of McCormack Baron Salazar, Inc., says “we’ve got too many people and too many cars in LA, so we either have to increase the density around transit stops or build outside of LA.”
Salazar believes there is no clear, separate concentration of income. When it comes to financing developments, there are varied levels. While the government contributes 100 percent to homeless housing, the other housing classes have very in-depth and diverse financing processes.
Salazar also explained the variation in inclusionary requirements for each city and state. “Each city has different initiatives, so we have to adjust our developments accordingly,” said Salazar. “Affordable housing is done through the private sector. Each state has the right to layer different requirements for the development. And when it comes to developing in San Francisco, you must have fortitude.”
Gallo emphasized the importance for architects to understand the wide-range of requirements and regulations for each city they plan to develop in and the entire panel and room agreed how vital this is.
The panel also commented on cohousing spaces, which are communities of private homes, clustered around a shared space. The attached or single-family homes have standard amenities, including private kitchens as well as shared spaces, which typically include a common house that may include a large kitchen and dining area, laundry room and recreational spaces. The panel and the audience expressed how exciting this newer market is and the great potential it has, however, they also discussed the challenges of finding the right model for this type of housing, especially in the LA region.
With rapid urbanization and population growth in Los Angeles, there is an increased strain on the public infrastructure and transportation.
At our Transportation panel on April 10, 2018, leaders from three different agencies convened to share insights as to how they are implementing creative finance strategies to plan and build the future of transportation in Los Angeles. Panelists raised the question – can Los Angeles catch up with its transportation needs to improve urban mobility?
“Among housing and employment, transportation is one of the biggest challenges Los Angeles is currently facing,” says Stephen Polechronis, Regional Business Line Leader, Transportation at AECOM, who moderated the panel discussion.
From left to right: Stephen Polechronis, AECOM; Jenna Hornstock, Metro; Samantha Bricker, Los Angeles World Airports; Darin Chidsey, Southern California Association of Governments
Darin Chidsey, Chief Operating Officer of Southern California Association of Governments (SCAG), an organization that undertakes a variety of planning and policy initiatives to build a more sustainable Southern California, believes “we have a responsibility to look ahead at the next 20 years of transportation and to consider the foundation of what the demographics will look like.” He recognized the fact that no one wants to sit in traffic concluding that if we don’t come together to solve transportation issues now, we’ll have bigger problems in the future.
Fortunately, things are looking up for Los Angeles as Measure M, a half-cent sales tax that will fund an unprecedented $120 billion in transit projects in the next 40 years, recently passed in the county. This measure will allow the Metro Board of Directors to improve the traffic in Los Angeles, repair potholes and sidewalks, repave local streets, improve connections and more.
Jenna Hornstock, Executive Officer at Metro, expressed how excited her team is about the current opportunities. She provided insights on current projects throughout the county and highlighted Metro’s purchase of Union Station in 2011, for which they have done some major restoration, preserving its historic characteristics while also improving its functionality.
Chidsey reemphasized that, because voters have set the stage and funding is now available, the time to act is now.
Another way to be mindful of spending is to consider public-private partnerships (P3s). P3s can be an effective way to build and implement transportation infrastructure for multiple decades. In both the public and private arenas, P3s can be a mutually beneficial way to resolve important transportation issues without the financial strain on the public.
Samantha Bricker, Deputy Executive Director of Project Development, Coordination and Environmental Programs Group at Los Angeles World Airports (LAWA) acknowledged that pursuing P3s for the current LAX LAMP project has allowed her and her team to maintain their design aesthetic and keep costs to a minimum. Although P3s are not ideal for all transportation projects, they often reduce upfront public costs through fast-tracked, efficient delivery methods. That is because with P3s, all stakeholders collaborate early in the process, allowing each team member to provide valuable insight which ultimately results in savings and a longer project lifespan.
According to Hornstock, we are the local advocates and, as a result, “we have to go out and fight for this new image of Los Angeles. We have to take the fear of change and turn it into excitement for the future.”
Healthcare organizations can be perceived as “tired” based on their delivery models. Because of this reality, healthcare M&A have been on the rise over the past several years. Hospitals are merging, technology and service vendors are consolidating and systems are integrating ambulatory centers, physician practices and oftentimes clinics.
At our Healthcare 2018 panel, pre-eminent health system leaders discussed the surge in healthcare M&A and how they improve delivery of care and lower costs. Moderated by Sarah Jensen, president of Jensen + Partners, panelists provided a background history of their respective companies in addition to their insights on what the rise in M&A activity means for healthcare facilities. They each discussed how they are preparing for the future as technology continues to transform the way healthcare facilities function. Jay Gellert, former president and CEO of HealthNet, “a combination of technology and opportunity” is changing healthcare.
Gellert explained that some of the rationales for M&A, include “demographics, economics, technology and delivery.” Jeff West, senior regional director of Providence St. Joseph Health, pointed out that “healthcare M&A allow for increased market share, keep the market relevant and accelerate transactions.”
Gellert mentioned some of the largest healthcare M&A in history that took place over the past year, including UnitedHealth Group and DaVita Medical Group, Aetna and CVS, Cigna and Express Scripts, Anthem and Florida Medicare Acquisitions, Centene and Community Medical Group and Humana and Kindred Healthcare, to name a few. In an effort to become one stronger, more valuable company, better suited to achieve market success, this trend in healthcare will continue to be on the rise. Gellert also explained several factors companies must consider in the M&A process, such as new entrants versus incumbents, policy, capital/facilities, transition versus disruption, timing and prudent planning.
Panelists called attention to the current state of healthcare in the U.S. and Gellert remonstrated that “the U.S. spends more money on healthcare than any other country and the least on social care,” but still does not meet the needs of the nation. Jared Langus, director of strategic initiatives at Cedars Sinai Health Systems, added that “the gap between what employees are paying for healthcare and the price of their plans in widening.” It’s clear there is an imminent need to restructure our healthcare system, but only time will tell what the future of healthcare will look like in the U.S.
According to West, “maintaining infrastructure, increased regulatory environment and seismic compliance” are just a few of the challenges healthcare facilities will have to overcome in the next few years.
The panelists could all agree that the healthcare industry has plenty of hurdles to overcome, but with the number of big-name health systems headlining the year in M&A and the advancement of technology, the future of healthcare looks bright.
Technology is influencing the world with everything from virtual reality to 3D printing. Emerging technologies are presenting progressive developments, providing competitive advantages and changing the status quo for the built environment and reshaping commercial real estate as we know it. At our Emerging Technology, over 175 industry leaders mobilized to discuss cutting edge technologies, how such technologies are being used in the industry and what the future of technology looks like.
The panel included a diverse group of experts, moderated by Stan Chiu, AIA, LEED AP, Principal at HGA. Speakers included Jose Sanchez, Professor at USC School of Architectureand Director of the Plethora Project; Erik Narhi, Computational Design Lead at BuroHappold Engineering; Paul Martin, Director of Engineering Sales at A. Zahner Company and Jen Hawkins, Product Development Manager at Digital Building Components.
Key takeaways from the event include:
We are grateful to our panelists, attendees, table sponsors (Corgan, Haworth, PCL and Southland) and event sponsor, BuroHappold, for helping us make this event happen.
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