L.A.’s Future Is in Its Blue-Collar Roots
As Southern California adapts to the needs of the new economy, downtown Los Angeles’ office district appears to be one of the region’s weakest links. Nowhere has the loss of major corporations--most recently, First Interstate Bank--and the current wave of corporate restructuring hit harder, pushing vacancy rates up and rents down.
Yet, if the ‘80s dream of downtown as the West Coast’s mini-Manhattan seems out of sync with reality, the central district could still be reborn if it returns to its more blue-collar roots. In contrast to the torpor of downtown’s white-collar economy, the central district’s garment, textile, warehousing, wholesale and distribution industries continue to show remarkable vitality in the face of both regional and global competition.
At the same time, this repositioning of downtown would better fit the enormous, largely immigrant population that works in, shops at and operates businesses in the central area. These “grubby” industries continue to be run by newcomers--in the past, by Jews and Japanese, for example, and today, by Latinos, Middle Easterners and people from the Asian mainland.
These demographic changes are driving the shifts in downtown’s economy. Roughly two-thirds of all manufacturing workers in Los Angeles County are Latino, and their work ethic dominates the local light-industrial economy, particularly the garment industry.
These newcomers hold the key to creating something unprecedented: a sprawling supermercado for the various cultural, economic and social forces reshaping the contemporary urban core. Yesterday’s vision of a downtown of elite cultural institutions, major corporations and armies of white-collar office workers offers only limited economic potential.
Indeed, even the creation last year of at least 30,000 business-service jobs did little to help downtown, or its even sicker cousin, the Mid-Wilshire district. Despite cheaper rents in those areas, office-seekers have been voting with their leases for Burbank, Glendale, Pasadena, the Westside and outer suburban rings.
The problems plaguing downtown’s towers are not unique to Los Angeles. Throughout the country, the vast majority of white-collar job creation is occurring in small companies sprinkled outside central business districts. In 1970, the nation’s downtowns accounted for about 80% of all office space; today, it’s about half that. Meanwhile, the overall growth in the office-labor force has dropped to 1% annually, less than half the rate of the past two decades.
Even worse for traditional downtowns, virtually the entire universe of high-growth companies, particularly in high technology, exists on their periphery. Major service firms also are showing a marked preference for lower-rise, campus-like complexes located closer to their predominately suburban middle-class work force. Nearly all the fastest-growing metropolitan regions--Atlanta, Dallas, Denver, Phoenix, Orlando, Houston, Charlotte--have the bulk of their economic activity scattered throughout different urban mini-centers. Booming Dallas has a downtown vacancy rate of 35%, highest among the nation’s largest regions, but only 13% in the suburbs.
Job growth natiowide, by contrast, has been slowest in traditional, highly centralized regions, particularly in New York. Manhattan, the role model for downtown L.A.’s most grandiose yearnings, has discovered that even it cannot afford two huge office districts. Although midtown remains marginally successful, the old Wall Street “downtown” district has become, as Barrons recently put it, “ghost towns of boarded up Art Deco towers.”
In this sense, Southern California, which pioneered the polycentric model, is fortunate that only a relatively small percentage, about 13%, of its office space is in its central district. Yet, as the real, as well symbolic, center of the region, the central core’s health remains critical to the region’s future, both in economic and social terms.
To revive downtown, Los Angeles likely will not be able, like such cities as San Diego, San Francisco, Seattle and Boston, to construct a yuppie-led revival built around the arts, high-end business services, tourism and convention business. Unlike Los Angeles, notes Daniel Rosenfeld, who is working on a new master plan for the Civic Center, these compact cities are situated on the waterfront with spectacular vistas, charming older neighborhoods and other amenities.
“Downtown (L.A.) should have been located in Santa Monica. If it were, it would be glamorous and the skyline would look like Chicago’s,” says Rosenfeld, who works as assistant general manager of the city’s Department of General Services. “As it is, downtown is not a pretty place.”
Yet, if downtown fails to make it aesthetically, it does not have to be relegated to a second-rate afterthought like Dallas’ downtown. Fortunately, L.A.’s central district, more than any other city in the nation, retains a strong market-driven economy based on such diverse industries as apparel, textiles and food-processing, as well as the warehousing and distribution of toys, jewelry, vegetables, fish and flowers.
Even as landlords of the swank downtown towers fret about vacancy rates in the low 20s, vacancies in the industrial, warehouse and other buildings used by apparel, toy, jewelry and food wholesaling businesses stand at about half that. In fact, notes Michael Smith, who covers the market for CB Commercial, vacancy rates for modern class “A” or “B” industrial properties downtown, as opposed to the high number of mostly obsolete pre-’40 buildings, range between 1% and 3%.
These market signals are causing some developers to brush off plans to build new industrial space downtown, something no rational entrepreneur would even consider for office space. “The people who own the high-rises are going to face the music, but we are developing new properties for where the future is,” observes Doug Hinchliffe of Lowe Development, a major builder of industrial and warehouse space now working on a 23-acre import/export center on Alameda Street downtown. “It’s the importers, the garment people, the immigrants, the Asian entrepreneurs who are driving things.”
One key factor favoring such development, notes Toytown developer Charlie Woo, is that many immigrants actually consider downtown a preferable location. “There’s an advantage to being here,” says Woo, whose district includes more than 500 distributors and employs upward of 6,000 people. “People from Mexico, if you say ‘We’re in downtown L.A,’ they are comfortable. The same is true for people from China or Taiwan. All you say is, ‘We’re near Chinatown or Monterey Park’--in these places, you are really closer to the world. This is where the information comes together.”
As is already occurring in other cities, including New York, some of downtown’s abandoned buildings, particularly on the edges of the office district, could be converted into lofts or, perhaps even better, accommodate expansion of some light-industrial or warehousing companies. Rather than holding fast to a fading image, downtown needs to go with the economic flow, converting unwanted real estate to the needs of those industries that naturally cluster downtown.
Ultimately, this development could help reposition downtown as a commercial and shopping area for its natural primary market--the vast immigrant and minority population that abuts the central areas. These populations, as well as bargain-minded Anglos and African Americans, throng downtown in search of broader choices and better prices than are available in conventional malls.
Making these districts more appealing will take some government leadership and support, but nothing on the scale that was needed to build Bunker Hill or the Metro. Especially critical would be an effort to transform the Broadway corridor, as one development group now suggests, into a new center for Latino-oriented entertainment. With the restoration of its once magnificent, now debilitated theaters and shops, it could become a vital thoroughfare, a Huntington Park’s Pacific Boulevard writ large.
Such efforts, combined with a new sports arena, reductions in the city’s noncompetitive fee structure, new business-improvement districts and improved safety, could help revive interest in the city’s underutilized office towers. Over the next decade, these buildings could attract tenants tied to downtown’s natural connections with global trade and ethnic businesses. Already, Far East National Bank, a Chinese-immigrant-run bank, is ensconced in a California Plaza high-rise, while Japan-based Sanwa Bank’s tower is now among downtown’s most recognizable symbols.
A revised downtown might also lure professionals of all ethnic backgrounds who would benefit from close proximity to an archipelago of light-industrial, distribution and retail centers. Although it might lack the easy charm of downtown San Francisco, L.A.’s central district could become a modern American city with the commercial energy and cultural ferment of such great trading cities as ancient Alexandria, renaissance Venice and turn-of-the-century New York.*
