Santa Monica Buildings to Face Tighter Review
The city boasting one of Southern California’s hottest office markets is about to adopt a measure that real estate developers predict will dramatically slow the pace of commercial construction.
Santa Monica’s new guidelines reduce the size of new buildings subject to extensive Planning Commission and public review to 7,500 square feet in most of the city’s commercial districts. The old cut-off was 30,000 square feet, already under the Los Angeles standard of 40,000 square feet.
Supporters of the new guidelines say Santa Monica has become a victim of its own success. The steady pace of new employment and development--particularly in the technology and entertainment industries--is causing congestion and spoiling the quality of life that has made the city desirable.
But business and real estate interests fear the city’s new review threshold will drastically slow the building process and effectively kill even modestly sized commercial developments. It may also cut the value of properties suddenly subject to more stringent review.
Santa Monica has a history of willingness to legislate against business interests. In 1978, voters there enacted strict rent controls over the objections of landlords. In the 1980s, the city set limits on oceanfront hotel construction. Last year, Santa Monica became the first city in the nation to ban ATM fees at banks.
Now proposed developments below the 7,500-square-foot threshold--which is about one-third the size of a single floor in a modern office building--are subject only to a less-intensive “administrative review” by city staff.
Larger projects will require review by the Planning Commission, along with public hearings where residents can suggest various requirements aimed at reducing potential impacts on the neighborhood, such as traffic.
The city Planning Department approved 69 building projects averaging about 16,780 square feet between January 1996 and June 2000. Under the new requirements, 60% of those would have required the more extensive hearings.
Affordable multifamily housing developments are exempt from the new threshold, as are mixed-use developments featuring mostly multifamily housing. The City Council gave preliminary approval to the new ordinance last week on a 4-3 vote and is expected to formally adopt it next week.
Santa Monica is hardly alone in its efforts to cool expansion. There were 60 slow-growth measures on local ballots in California Nov. 7, with most of them passing.
As the Southland’s economy stormed back from the early ‘90s recession, growth in the high-tech and media-entertainment sectors boosted demand for commercial space in Santa Monica and other Westside markets. Office rents and values in Santa Monica are now typically the highest in Southern California. The pool of office space there has grown by 38% in the last five years to 7.6 million square feet, according to CB Richard Ellis.
Santa Monica has become an employment hotbed because many high-ranking executives live nearby and because many skilled workers, much in demand amid a tight employment market, are attracted to the seaside city’s trendy eateries, entertainment and shopping venues and offbeat workplaces.
Former Burbank City Manager Larry Kosmont said the new standards might delay the approval process in Santa Monica’s “historically overwhelmed” Planning Department even further, potentially adding another four to six months to the handling of projects bound for Planning Commission review.
Planning Commission approval can now take a year, said Kosmont, president of Los Angeles real estate advisory firm Kosmont Partners. With the lowered threshold perhaps doubling the department’s workload, projects subject to Planning Commission review and then appealed to the City Council might take two years, he estimated.
Veteran Westside-based office broker Bob Safai said the new threshold represents “a big threat” to commercial landlords who would like to develop their properties, but he said he can see why Santa Monicans could be alarmed about the recent pace of employment growth.
“We’re talking about a lot of new bodies in a pretty small area,” he said.
While the city is densely populated at about 90,000 full-time residents, Santa Monica City Councilman Kevin McKeown said, about a quarter of a million people now crowd its streets every weekday. The situation has intensified as several development projects approved in the 1980s finally became financially viable in recent years.
McKeown stressed that while the ordinance reduces the review threshold, it does not change zoning requirements. Developments that meet zoning rules can still be approved--even if they will see more intense design scrutiny. Development review includes evaluation of a proposed project’s location and size, with emphasis on compatibility with surrounding neighborhoods.
The City Council will work to speed reviews by beefing up the Planning Department, McKeown said. “People have said the process is already slower than it should be.”
“There will be a clear impact on the values of projects in the [approval] pipeline,” Kosmont said. That’s primarily because owners will face “a higher degree of uncertainty and a greater likelihood that the conditions of approval will be more onerous and hence more expensive.”
But the lowered threshold may actually boost the value of existing buildings as well as properties boasting already-approved development plans, Kosmont said. “Approved entitlements are money in the bank.”
