John V. Tunney's opinion piece (Revising Real Estate Tax Breaks Could Remodel Entire Industry, Feb. 23) misses several key points about the office building market, chief among them the fact that real estate is cyclical by nature. Thus, limited "overbuilding" is to be expected every few years as developers react to the law of supply and demand.
While he bemoans this "serious overbuilding" and the 18% vacancy rate in downtown Los Angeles, he fails to point out the favorable conditions that now exist for office building tenants who can find excellent rental rates and favorable concession packages in state-of-the-art structures.
This favorable climate allows tenants to now take advantage of expansion opportunities that they've delayed or postponed over the last few years.
In order to "reindustrialize" the United States, we must redirect this office building development, he contends. But that's exactly what is taking place--aging industrial centers, like the South Bay region of Los Angeles, are undergoing massive land use transformations from old manufacturing centers into sparkling new office and research-and-development structures designed to house the nation's new, high-technology industrial base.
And it is the very same group of investors about whom Tunney raises questions--pension funds, banks, insurance companies, syndicators and savings and loans--who have provided the financial punch for this "reindustrialization."
Finally, Tunney's assertion that the skyline consists of nothing but empty buildings is false.
According to our own building-by-building surveys, which are updated monthly, vacancy rates in greater Los Angeles are 18% downtown; 15% in West Los Angeles; 20% in South Bay; 20% in the San Fernando Valley; and 17% in Ventura County. Those figures hardly suggest a hollow skyline.
KEITH H. KARPE
Vice President/Public Relations
Pacific Southwest Region
Grubb & Ellis Co.