Downtown Building Seen Aided by Prop. U : Slow-Growth Measure Will Restrict Office Developments at Westside and Valley Sites

The passage of a slow-growth measure in Los Angeles more than a year ago will help boost construction of new office space downtown over the next few years, but will curb new construction in most other parts of the city, according to a local commercial brokerage firm.

A report by the Los Angeles office of Julien J. Studley Inc. said 14 major projects totaling more than 11 million square feet are either under construction or are planned for downtown, in part because most of the area is exempt from the growth restrictions contained in Proposition U.

The proposition, approved by an overwhelming majority of voters in November, 1986, cut in half the amount of construction allowed in most other parts of Los Angeles.

Westside office construction will drop off dramatically, the report said. With the exception of four high-profile projects presently in the planning stages, very little space will be built on the Westside in the foreseeable future.

Growth in the San Fernando Valley will also slow, except in Warner Center, which is exempted from Proposition U.

The restrictions have resulted in a proliferation of planned retail centers in areas traditionally used by office projects, the report said.

About 16.3 million square feet of office space was leased in the Los Angeles area last year, according to the report. The downtown area accounted for about 3.8 million square feet, making it the busiest market.

The downtown market is being fueled by almost every segment of the economy, especially the financial services industry, the report said.

Tenants still have most of the bargaining power downtown, the report said, but that is rapidly changing. Rents are rising in most areas and landlords are making fewer concessions.

According to the report, owners of downtown office buildings were asking tenants to pay an average $27.36 a year for each square foot they rented at the end of last year, compared to $25.68 in 1986.

At the end of 1987, Beverly Hills landlords were asking for an average $29.52 a foot, up from $27.48 in 1986. In Westwood/West Los Angeles, asking prices rose to $29.16 from $27.96.

In Century City, 1987 asking prices stood at an average $27, up from $25.08, according to the report.