Should L.A. Follow the Dallas Example?

With the imminent departure of its remaining Fortune 500 companies, Times Mirror and Arco, downtown Los Angeles seems on the verge of slipping into irrelevance. Downtown, says Carol Schatz, president of the Central City Assn., represents “a lot of concrete.” Outside of such specialized districts as jewelry, garment and toy, along with class-A space on Bunker Hill, too much of this concrete is unoccupied, rented at ruinously low rates or kept alive by the forced entrenchment of public employees. Downtown’s office markets still struggle amid a powerful regional recovery and a nationwide resurgence in downtowns.

Yet, if its plight seems dire, there are several demographic, economic and cultural factors that could work to its benefit. Here the experience of other downtowns is relevant. In recovering central business districts around the country, much of the impetus for their transformations comes not from late-20th-century office cores but from surrounding older districts that were once largely discarded. Today, these outlying areas are centers of “knowledge value” production, notably multimedia, Internet, artistic and culturally oriented industries.

Perhaps the most relevant case for Los Angeles is Dallas. Like downtown L.A., Dallas’ historic business core was largely deserted when the Texas economy imploded during the oil bust of the mid-1980s. Even as the economy came back, most of the progress occurred in sprawling glass towers and corporate campuses in outer suburbs north of Dallas.

But by the mid-1990s, there were stirrings of hope for central Dallas. It didn’t start in the immediate central business district, where vacancy rates remained virtually the same as in downtown Los Angeles. Rather, recovery first surfaced in neighborhoods surrounding the core that had become magnets for artists, bohemians, creative workers, singles, gays and others who didn’t fit into the region’s predominately conservative, conformist culture.

Probably the greatest transformation took place in Deep Ellum, located across the Central Expressway from downtown Dallas. Once an African American entertainment district and a center for automotive-related industry, Deep Ellum emerged as Dallas’ primary nightclub, entertainment and arts section. Among those who came to settle and work in the area were a group of nonconformists fascinated by the technology of the Internet, including Mark Cuban, founder of Broadcast.com.

Today, Deep Ellum is home not only to Broadcast, which, as a part of Yahoo, will soon employ 4,000 workers, but also to a plethora of smaller Internet firms. During the past year, as many as 12 such companies have set up shop in the district. In addition, upward of 10,000 people either have already moved into Deep Ellum or are expected to move there soon.

At the same time, adjacent areas encircling downtown Dallas, some within walking distance of the core, have experienced robust residential and commercial growth. Plans are afoot to expand the city’s thriving Infomart by nearly 1 million square feet. As a result of this peripheral activity, the small central business district is showing signs of rebirth, with new loft construction, hip restaurants and restorations of some landmarks.

For downtown L.A., the Dallas story has tremendous relevance. Los Angeles, notes Dallas developer Cliff Booth, president of Southwest Properties Group, possesses far more of the structures, historic as well as warehouse, that attract the new generation of urbanites than its Texas analogue. On a recent trip to downtown Los Angeles, Booth recalls he was “astounded” by the enormous inventory of classic buildings along such historic arteries as Olive, Spring and Broadway.

Ironically, Los Angeles has such a repository of great buildings because it has failed to develop its historic core. Cities like New York bulldozed much of their history as their downtowns expanded in the 1960s and 1970s. By contrast, Los Angeles’ center of business gravity simply moved elsewhere, notably to Bunker Hill.

“Los Angeles’ historic core has great potential precisely because it deserted its downtown and left it as a junkyard of failed businesses,” says developer Tom Gilmore, who is spearheading the area’s revival.

The challenge for downtown L.A. is to use its impressive collection of beaux-arts office buildings, warehouses and industrial structures to reinvent its role and find an identity all its own. The pretension of being an all-powerful corporate center, the capital of the Pacific Rim, should be abandoned in favor of something less serious. The key element in such a transformation is not how much downtown L.A. resembles other regional business centers, like Century City, but how it offers a stunning array of one-of-a-kind ethnic, retail and artistic experiences.

A 30-acre entertainment, retail and residential district adjacent to Staples Center, as recently proposed, could play a small catalytic role by attracting people downtown. Yet, this kind of self-contained project could also divert interest and potential markets from more historic, aesthetically unique areas such as Broadway. For almost 40 years, downtown boosters have placed many hopes precisely on such mega-developments, from the Music Center and Bunker Hill to Staples, yet none have helped give downtown the kind of bracing, street-level experience that has propelled most downtown recoveries.

Until recently, Gilmore says, most major property owners downtown either were uninterested in their buildings or content to lease lower levels to low-end retailers or pack them full of government workers. The resulting streetscape consists largely of poor people, the homeless and 9-to-5 government toilers, a sure prescription for an uninteresting place.

Now, developers like Gilmore see in these architectural gems the potential for the creation of a Southland Deep Ellum. Where former landlords saw nothing but concrete, Gilmore is developing “wired” hotels, live-work and retail spaces. Investors may be noticing: The prices of space in these older buildings in the historic core, he claims, have nearly doubled over the last 18 months.

As in Deep Ellum, several factors may be working to speed the transformation. One is the growth of the new urbanite demographic, largely young, educated and childless, that gravitates to interesting urban spaces. Another is a gradual reassessment among digital firms that profits are indeed important and that to achieve them, costs must be controlled.

Until now, says Mark T. Sullivan, executive vice president of Julien J. Studley Inc., the soaring stock market for dot-coms and other digital firms allowed these money-losing ventures to house themselves in some of the region’s most expensive space, particularly on the Westside. But profit motive now compels these companies to look downtown, where rents are roughly 50% less than on the Westside.

Already, one building, at 548 S. Spring St., has come to life with such firms. Lovingly maintained, the structure is a classic beaux-arts gem. Built in 1913, it looks like it came out of a Raymond Chandler movie. One expects Sidney Greenstreet or Humphrey Bogart, cigarette in hand, to emerge from one of its office suites.

Instead, building manager Cherry Wilson has filled the structure with numerous dot-com, multimedia and other arts-related businesses. Vacancy rates, once in the 40s, have dropped to roughly 10%. The whole building teems with entrepreneurial energy. “I am from New York and this feels like the funky parts of Manhattan,” says Laurence Tietz, who runs Studio Software Multimedia Inc. from an airy space in the building.

Of course, the fate of a downtown cannot be foretold in the success of one building. But as in Deep Ellum, the stirrings of recovery on Spring Street and other parts of the historic core have to start somewhere. The Southern California Institute of Architecture’s decision to relocate to a quarter-mile-long, nearly 100-year-old railroad freight building in the artists’ loft district is another example. Such small developments may presage the resurrection of a downtown that is again relevant to the future history of the region. *