Only in LA…

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broadway adaptive re-use

Vacant buildings on Broadway

…would you have huge buildings on Broadway, where studios rent for $4 sq ft, totally vacant above the first floor.

Why haven’t the owners used the adaptive re-use ordinance to re-purpose these interesting old buildings as either condos or apartments?

Simple: Prop 13.

The owners probably bought the buildings a million years ago for pennies, their property taxes are likely incredibly low. And the rate of growth in the buildings’ values is dramatically outpacing the growth in the carrying costs (principally property tax, capped at 2% annual increases). If you have a $5MM asset growing in value at, say 5% / year ($250k) and costing you, say $25k in carrying costs, you’re in no rush to sell.

At some point, someone will tempt these owners will very high offers for their buildings and then convert them. But, in the meantime, in the midst of a dire shortage of housing, we have prime real estate sitting vacant.

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