Sunday Summary: There’s No Way L.A. Is Ready for This

Los Angeles has been beset with problems.

The two most obvious are the fires that ravaged the city in January and the Trump administration’s decision to deploy thousands of Marines and National Guard troops in the city to quell anti-ICE protests.

But the city has more endemic difficulties that have dogged it for much longer, like the fact that its most famous industry (film and television) slowly seems to be abandoning its birthplace for cheaper pastures. And that its office market has never recovered from the COVID shock. (Few notable buildings are immune. Just last week, a CMBS loan on the Santa Monica Clocktower Building was transferred to special servicing.)

Likewise, the city is a zoning and regulatory nightmare. Environmental impact reports on single projects under the California Environmental Quality Act (CEQA) are supposed to run no more than 300 pages, but in reality often run to thousands of pages and take years to produce.

“Will I pursue a project that gets [targeted by] CEQA, or in the frame of having to engage with CEQA? The reasonable answer is, I’ll probably avoid it,” Pastor Martin Porter of the affordable housing builder Logos Faith Development told Commercial Observer. “There’s so many stipulations, and reporting requirements, and fiduciary requirements that come with taking on a project that’s CEQA-heavy that, all things considered, I will avoid.” (There’s some grumbling from the political world about finally addressing this problem … but we’ll see how it turns out.)

All of which is a very roundabout way of asking a simple question:

Will L.A. be ready to host the Summer Olympics in 2028?

The city is anticipating 10 million to 15 million visitors for the Games (not to mention 11,200 athletes). A proposed $1 billion Olympic village has been shelved. Estimated costs have risen to $7.1 billion, up from $5.3 billion when the bid for the games was accepted.

At the center of the city’s proposal was a $2 billion transit plan that relied on federal assistance to bring in thousands of new buses in time for the games. Will that still happen if Gov. Gavin Newsom is feuding with President Trump? (Department of Transportation Secretary Sean Duffy recently reaffirmed the administration’s commitment. But you never know.)

We’ll be watching developments in this area like a head coach whose skater just added some triple axel-esque moves that we didn’t know about.

Speaking of pending disasters…

L.A. isn’t the only real estate issue that has us a little nervous.

Every day, 10,000 Americans turn 80 years old. With people living longer, the expected senior citizen population is expected to reach 82 million in the next 25 years — a 50 percent increase from where it stands currently.

Which begs the question: Where are all these people going to live?

“We’re woefully unprepared with an insufficient supply of senior living options,” said Lizbeth Heyer, president of senior living nonprofit 2Life Communities. “The question for senior living is whether there is enough and can people out there afford it, and the bottom line is most senior living is built for the very wealthy and is not applicable for the vast majority of this country.”

If we’d want to keep up with demand, the U.S. will need to build 700,000 new units of senior housing in the next five years. If you think that’s going to happen … insert cold nation / Summer Olympic sport / gold medal probability joke here.

Let’s talk about office

Plot twist: The news last week was actually pretty good for office!

For the first time in a quarter of a century, it looks like the U.S. office supply is set to shrink, and this could be a very welcome thing for the owners who remain.

A big part of this is because of the wave of office-to-residential conversions, which has been continuing apace. Just last week the New York City Planning Commission approved the Midtown South Mixed-Use Plan which clears the way for 9,700 units of housing across 42 blocks smack in the middle of office-rich Manhattan territory. (This was not the only housing news in NYC last week; the Adams administration also announced a plan to build 1,100 new units in Coney Island.)

And the good vibes are not just in New York. Some are feeling very bullish about individual office markets elsewhere in the nation.

“We think today is a great time to invest in office buildings in the Sun Belt,” said Chris Eachus of CP Group, which is in the middle of a big renovation of the CNN Center in Atlanta. “Pricing is not only at a cyclical low but also a historical low. The prevailing winds are going to blow in favor of the office market.”

Deploy or die

It’s also an interesting time for proptech, where capital seems to be … flowing?

“Despite a slowdown in activity [in 2024], the proptech market remains strong, with ~$4.3 billion in growth equity and debt financing and 90 M&A transactions in 2024,” said Houlihan Lokey, an investment bank, in a report on 2024 that was published in March. “Houlihan Lokey is optimistic about growth in the proptech market in 2025 as business momentum improves and the need for consolidation across the category continues.”

“I’ve seen deployment speed up this year,” said Zach Aarons, co-founder and general partner at MetaProp.

But you can read all about it here.

Speak to you next week!

Correction: An earlier version of this said 100,000 Americans turn 80 years old every day. The number is 10,000.