Downtown L.A. downturn gets labeled as bad as Great Depression.

Downtown Los Angeles is suffering through a real estate downturn which can only be compared to the Great Depression of 1929, said Albert C. Martin Jr., partner in the architectural firm which has built L.A.'s major landmarks, from the City Hall in 1928 to the Sanwa Bank Plaza in 1991.

The acclaimed architectural firm in the last year has been forced to lay off half its 200 employees and has shelved designs for an 88-story office tower it was going to build for Shuwa Investments Corp., Martin said. Now, Martin said he doubts the project, which was to be the tallest building in downtown L.A., will ever see the light of day.

"I realize full well the depth of the depression we have. Being in the design business, we feel it distinctly," said Martin, 78. "All firms like ours are struggling. The only work we have is jails and public buildings. It's very worrisome, if you really want to know."

Real estate brokers say that the downtown vacancy rate could tip past 30 percent next year as 3.8 million square feet of space hits an already flooded office market and law firms and banks continue to downsize. Currently, a quarter of the office space in downtown is either empty or up for lease.

Banks will not lend and builders will not build until downtown posts healthy vacancy rates of about 10 percent, real estate experts said.

Martin's assessment, that the current glut of office space and vacancies is matched only by the Great Depression era -- when no new buildings were built for almost 30 years -- is shared by a number of real estate experts. But others say that the current situation isn't too much worse than what happened to Los Angeles in the 1970s.

From 1966 to 1974, modern downtown Los Angeles was born, as developers built 8.2 million square feet of office space, according to David Cushman, vice president of Cushman Realty Corp. The building boom began with One Wilshire in 1966 and culminated with Security Pacific Plaza in 1974.

One of the most significant projects erected in that period, by Albert C. Martin, was the two-tower, 2.3-million-square-foot Arco Plaza. The two towers snagged as tenants the "Who's Who" of Los Angeles' power brokers, including four of the Big Eight accounting firms and law firms Gibson Dunn & Crutcher and Latham & Watkins, Cushman said.

"From 1966 to 1974 there was an overbuilding. And guess what, the banks stopped lending," Cushman said. As a result, from 1975 to 1979, no new office towers went up in downtown L.A.

Tom Meeker, executive vice president of Raffi Cohen Industries Inc., was a real estate broker downtown in the 1970s. He recalled, "A whole generation of qualified real estate brokers left the profession."

The situation in the 1970s was similar, but the current scene is worse in a number of ways, Meeker said. The vacancy ratio is a bit higher now, but more important, vacancies pervade all three classes of office buildings, he said.

In addition, more buildings in the 1970s were owner-occupied, Meeker said. And, he said, "In '74, '75, '76, the financial institutions were strong, despite the recession."

John Howard, who now is the owner of the Mid-Wilshire real estate brokerage The Howard Co. but in the 1970s was a broker for Coldwell Banker, said he remembers tough times in trying to lease the United California Bank Tower, at 707 Wilshire Blvd., which is now called the First Interstate Tower.

"I did the leasing for United California Bank," he said. "I had 500,000 square feet and I couldn't lease it at all."

Howard said there are a lot of similarities between the current downtown real estate situation and the 1970s, but there are differences as well. Today, brokers make leases for larger blocks of space, 200,000 square feet. In the 1970s a 60,000-square-foot lease was considered a "megadeal," Howard said. In addition, Japanese investment in downtown Los Angeles should speed recovery.

Howard said the real estate recession of the 1970s didn't get as much press attention as has the current office oversupply. "The press today is exacerbating an average situation," he said.

But Richard Peiser, director of The Lusk Center for Real Estate Development at USC, thinks the situation is a little more serious. "I don't think downtown L.A. has seen vacancies of this level for the last couple of decades," he said.

The real estate center is currently working on a study with commercial broker Grubb & Ellis Co. to find out how long it will take downtown Los Angeles to return to "normal" vacancy rates of about 10 percent, Peiser said.

It's true, Peiser said, that other urban office markets have developed through building bursts and lulls, but what happened in downtown Los Angeles in the 1980s is "unprecedented" for the young office market.

"A whole lot of things conspired to cause the problem we have today that were not present in the '70s," Peiser said.

Among the factors that made building office towers attractive was the 1981 tax reform which gave office tower developers tax breaks, the discovery of commercial real estate as an investment by pension funds and a general disregard for the actual demand for office space, Peiser said.

Dowell Myers, a professor at the Lusk Center, said he doesn't know if today's office oversupply can be compared to the 1970s oversupply problem.

"It's a bigger boom than before, the 1980s office boom," he said. "Let us just say we built aplenty."

Still, Los Angeles' problems are not that much different than the overbuilding situation in major metropolitan areas all over the place, he said. "There are other cities that are in worse shape, Boston is far, far worse," he said.

New York City, meanwhile, has 61.7 million square feet of office space vacant, about twice the total Los Angeles office market, according to Cushman & Wakefield Inc. Of course, Manhattan's base market is much larger than that of Los Angeles, with a total of 226 million square feet of office space, according to Cushman & Wakefield.

The problem with comparing Manhattan's commercial real estate woes with Los Angeles' is that New York City is a "captive" market, while downtown Los Angeles has to compete for tenants with other office markets, like Century City, Myers noted.

Martin agreed with Myers that downtown developers built too much space in the 1980s.

"Everyone was too much of a dreamer and that's true of all depressions," Martin said. "The economy is so heated up, the real true growth of industry won't keep pace with the ambitions of those that are providing the space for them."