Crossroads Nears in Downtown Loft Boom

Climb the grand spiral staircase at the century-old Pan American Building at 3rd Street and Broadway and you enter offices left vacant since the 1960s that workers are busily converting to luxury lofts.

The buzz of their drills and pounding of their hammers mix with the sounds of traffic, a familiar melody these days along the streets of downtown Los Angeles, where long-neglected structures are springing back to life as homes for downtown’s new urban dwellers.

But the boom in residential development -- which has been at the heart of downtown Los Angeles’ recent revival -- is reaching a critical crossroads. Of the 50 historic buildings preservationists and developers identified five years ago as candidates for housing, 44 either have been converted or are near completion.

This has city officials and developers mapping out the next phase of downtown’s renewal. They are considering more modern office towers, from the 1960s, ‘70s and even ‘80s, as potential condos and lofts. At the same time, they are looking at downtown’s wealth of parking lots as potential spots for new construction while eyeing prewar buildings south and east of the traditional downtown historic core for renovations.

The shift also is prompting a debate about how far the residential boom will go. The number of residents downtown has grown in the last few years from 18,000 to 24,000, and most of the new lofts have long waiting lists that suggest the demand for housing remains strong.

But some developers acknowledge that downtown still has drawbacks that could cool the market. Among them: The area lacks the kind of shopping found in more suburban areas, a deficiency that officials vow to address in the coming year.

Residents who like the urban feeling of downtown nonetheless complain about having to drive into Pasadena or the Miracle Mile area for gourmet supermarkets and to suburban malls to shop for clothing and gifts.

Crime remains a problem, with more than 10% of the city’s drug arrests occurring in downtown, more than any other area counted by the Los Angeles Police Department. With many of the new lofts rising in and around skid row, builders worry that panhandling and overnight encampments -- if not addressed by the city -- will eventually turn off residents.

The very success of downtown is also proving its own challenge. The initial round of conversions early in the decade produced mostly rentals, attracting people with modest incomes and a sense of adventure.

But as real estate prices have soared, developers increasingly have found that the only way they can finance the purchase and refurbishing of old buildings is to immediately sell them as condos. Today, a loft in a historic building can go for anywhere from $350,000 to more than $1 million.

Rents are rising, and some early loft residents fear they will eventually be priced out.

“I really enjoy it ... but I can’t afford it,” said graphic designer Jason 71, who moved into the old Hellman Building four years ago as a renter. “I’m really kind of leery.... There’s a lot of money being dumped into downtown, it just feels like it’s forcing too much in too small a space.”

Jason 71, who said he uses this name both professionally and personally, pays about $1,000 a month for an 800-square-foot loft. But he said he has watched anxiously as rents for similar spaces have doubled over the last few years and equivalent condos have sold for $450,000 or more.

“We’re at a real interesting point,” said Tom Gilmore, who has renovated the Hellman and a group of other buildings around Main Street, once the heart of Los Angeles’ banking district.

“The urban agenda, the transportation agenda and the social agenda all intersect in the city here in downtown. You have to pay attention to them in a balance that makes sense.”

In the mid-1990s, Gilmore and a few other developers saw potential in the ornate but dilapidated buildings near skid row, many imposing stone structures built as banks before World War I. Previous downtown revivals, including the one attempted in the area now called the Artist district, just east of Alameda Street, failed amid rising crime.

Gilmore and the others bought the buildings for as little as a few dollars per square foot and begin to renovate them.

The fledging effort received a major boost in 1999, when the city adopted rules making it much easier for developers to convert office space into residences. The rules cut red tape, eased parking requirements for buildings and loosened other zoning rules in the historic core area.

The rules attracted more prominent developers into loft conversions, in part because Gilmore’s first lofts were drawing unexpectedly strong interest.

“If Tom Gilmore can build skid row-adjacent and rent those units

By 2003, the downtown revival was well underway, stoked by a burgeoning art scene and the opening of Walt Disney Concert Hall and the Standard Hotel.

The transformation has perhaps been most dramatic along aging corridors, including Main Street, Broadway and Spring Street: One by one, buildings have seen decades of grime and decay stripped away by workers who restore them to their original luster.

Today, 4,487 units are being built or converted and permits have been granted for 1,383 more, according to the Downtown Business Improvement District, which represents property owners.

Some of Los Angeles’ forgotten landmarks are finding new lives as residences. The turquoise and terra cotta-tiled Eastern Columbia Building, constructed in 1930 and mostly vacant since the 1950s, will open next year as 147 units of housing. The 1925 Subway Terminal Building, with its columned, marble lobby, was built above the city’s first subway station. Renamed Metro 417, the building will reopen this summer with 264 apartments, with an average rent around $2,200 a month.

“It’s very exciting,” said Izek Shomof, a developer who has been renovating historic buildings, mostly along Spring Street, since the late 1990s. “I see the demand, and it’s here.”

Despite the building boom, even the biggest downtown boosters acknowledge the area has a way to go to fully serve its increasingly well-heeled population.

Although downtown now boasts of coffee houses, art galleries and fancy restaurants, it still lacks the kind of neighborhood retail outlets found in Pasadena and the Westside: chain bookstores, supermarkets, brand apparel stores. Residents also complain about precious little in the way of parks and public open spaces.

Residents are eagerly anticipating the opening next year of the first supermarket downtown in decades, a Ralphs near Staples Center. Further in the future, philanthropist and businessman Eli Broad is leading the effort to build a $1.8-billion retail and residential complex along Grand Avenue that would including a shopping center, bookstore, multiplex movie theater and gourmet supermarket. The project also calls a terraced park connecting Bunker Hill to the Civic Center.

Small businesses are opening on the ground levels of the loft buildings: bars, bistros and coffeehouses that developers hope will help create a sense of neighborhood.

Another pressing issue is what to do when the supply of older buildings in the historic core runs out.

A year and a half ago, the city expanded its downtown conversion rules to include buildings built after 1974, if they are no longer economically viable in their current use.

This has made dozens of other buildings, many of them office spaces with high vacancy rates, eligible for possible conversion as long as the demand for housing stays strong.

It remains to be seen whether newer buildings -- and those farther from the central city -- will be popular with urban residents.

A case in point is 1100 Wilshire, a 38-story building undergoing its own version of urban renewal. The building, which has a triangular glass tower, was constructed in 1986; since that time, it’s been mostly vacant. Now it’s being converted to 230 condos and is set to open next year, the first modern skyscraper in downtown to go residential.

The upscale condos, however, are west of the Harbor Freeway, away from the dense urban core of Spring Street and Broadway.

As downtown’s residential area expands, it will take some “alchemy” to ensure the new neighborhoods work and fit into the whole, said Kate Bartolo, senior vice president of development for Kor Group, which is renovating the Eastern Columbia Building among others.

But in a sign of how desirable downtown has become as a residential area, developers are building luxury condos there from scratch. Three residential towers in the southern part of downtown are rising. The first, dubbed Elleven South, is scheduled for completion next fall and is already sold out.

Jason 71 looks at all this change warily.

When he moved downtown, he called his gritty neighborhood “No Man’s Land.” The fact that it felt kind of spooky, he said, drew him closer to his neighbors and friends.

But with rents rising and more people coming in, he fears he might not be able to afford downtown much longer.

“There’s such a follow-the-leader trend culture in Los Angeles, that one person moves here and then it just expands in waves,” he said.

But Tracy Lynch, who moved to downtown from Silver Lake a few years ago, is more optimistic.

“I like bumping into people on the streets,” said the 38-year-old hospice worker who lives in a loft at the San Fernando building. “You can feel the life energy. Sometimes you don’t feel that, because L.A. is so isolated.”

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Times staff writer Natasha Lee contributed to this report.