Near New Arena, It’s Early in the Game
The opening of Staples Center last week seemed like a dream come true for supporters of downtown Los Angeles, which was swamped with sports fans, concertgoers and looky-loos drawn to the sports-and-entertainment complex.
But with the exception of new parking lots and spiraling land prices, Staples Center has so far generated little in the way of new real estate development more than two years after it was announced.
“I don’t get a sense that there is a rush at the moment to buy up properties,” said Mike Pfeiffer, executive director of the South Park Stakeholders Group, which represents businesses and institutions in the 60-block area that surrounds Staples Center and the adjacent Los Angeles Convention Center.
Pfeiffer and real estate observers say that developers and retail chains will remain on the sidelines as they analyze the customer traffic generated by Staples, scope out sites and begin negotiations with property owners.
In addition, many potential players are waiting to see what plans the Los Angeles Arena Co., which owns Staples Center, has for the adjacent blocks, where it is considering the development of an entertainment complex and hotel. A project that seeks to monopolize the visitors headed to Staples Center might snuff out interest in developing nearby properties.
“There was an expectation that people were going to wait until the opening [of Staples] and see what happened . . . before they made a major investment,” said Don Spivack, deputy administrator at the Los Angeles Community Redevelopment Agency. “I would expect a few things to start happening” soon.
Staples has boosted the long-term prospects of downtown and the South Park area even if its impact so far has been negligible, say its supporters.
The throngs of visitors have bolstered the resolve of developer Forest City Residential West Inc. to purchase property near the arena for the development of 200 loft-style apartments. But in the short run at least, Staples has failed to generate any takers for the empty ground-floor space at its existing apartment tower--the Metropolitan--on nearby Flower Street.
“I certainly haven’t seen any leasing proposals coming across my desk for approval,” said Stan Michota, executive vice president of Forest City. “It’s still premature . . . but I expect we will see some action.”
The opening of downtown sporting arenas in other major cities have met with mixed results. In Baltimore, for example, the Camden Yards baseball park did little to trigger additional development. Denver, however, has seen a boom in new retail, restaurant and residential construction tied to the opening of Coors Field.
In downtown Los Angeles, civic leaders are counting on Staples Center and other new entertainment and cultural facilities--including Disney Hall--to attract more visitors and permanent residents to the central city.
The opening of Staples Center, located at the southwest corner of Figueroa and 11th streets, has coincided with the opening or planned opening of a handful of downtown restaurants. But few if any new businesses have popped up in the blocks near the glass-and-steel complex. In fact, one restaurateur who had announced the opening of a “Tuscan-style” steakhouse within two blocks of Staples has canceled those plans.
A potential barrier to new development--particularly in the South Park section of downtown--has been a sharp rise in land values, which threaten to price out pioneering developers and retailers. Asking prices for land along Figueroa have jumped from below $50 a square foot about two years ago to about $100, according to David Zoraster, an appraiser at the real estate-services firm CB Richard Ellis. At those prices, among the highest in downtown, it would cost $20 million simply to buy a city block.
“There is a concern that as land costs [rise], projects don’t pencil out [financially],” said Richard Plummer, an investment broker at Cushman & Wakefield. “People get ahead of themselves sometimes.”
Many developers and retailers may also wait several more years until plans firm up for an entertainment district and convention headquarters hotel in the blocks to the north and east of Staples Center. The Los Angeles Arena Co. expects to submit its plans for those blocks to the CRA in about two months. But, even in the best-case scenario, it would take at least three years before a new hotel--considered a crucial element to the area’s long-term success--opens, said hotel industry consultant Bruce Baltin.
But Baltin and others remain confident that Staples Center will eventually lead to the creation of new businesses and development in downtown.
“It could be one or two years from now,” said Plummer, “but there is a momentum.”
