New office construction likely to reappear in some parts of L.A.

Downtown L.A. won't get out of its doldrums - not in 1997, anyway - but commercial real estate prospects are considerably brighter for high-demand media centers like Burbank.

Fueled by demand for space from entertainment firms, the greater Los Angeles area will likely see a few already-approved commercial development projects secure financing and get under way in 1997.

"You can't develop unless rental rates in the marketplace support it, and we haven't seen any development for five years" said Howard Sadowsky, executive vice president with brokerage Julien J. Studley Inc.

"So the fact that developers and lenders think we're close to those rates says to me that 1997 could be a real comeback year for L.A. and its real estate markets," the veteran broker added.

But current rent levels in L.A.'s biggest office market - downtown L.A. - remain well below those required for new development.

In fact, while office vacancies are gradually falling and rental rates finally firming, it may be several years before downtown sees new office development.

Even so, sales of existing properties may increase.

"Buyers are gaining more confidence that the downtown market is turning the corner, and they can still buy at relatively low prices and take advantage of the upside as the market improves," Sadowsky said.

Much hinges on confidence in the downtown market - which could get a boost if plans go forward for a new sports arena adjacent to the Los Angeles Convention Center.

But it's the prospects for new development in L.A.'s other markets that have commercial real estate professionals most excited about the coming year.

Possibilities include two big office projects by teams headed by J.H. Snyder Co. a 585,000-square-foot office campus adjacent to the NBC studio in high-demand Burbank, and the 600,000-square-foot Water Garden II complex at Colorado Avenue and Cloverfield Boulevard in Santa Monica.

Spillover from Burbank has filled nearly all the quality highrise space in downtown Glendale. Any of several proposed developments there could get under way in 1997.

But the planned project generating the most discussion - and which would likely have the biggest impact on the local economy - is Playa Vista, the mega-community slated for 1,087 acres below the Westchester bluffs.

As 1997 opens, the much-publicized development plan - slated to include L.A.'s first major new studio in a half-century remains a question mark.

Playa Vista's lead developer, Maguire Thomas Partners, has yet to secure a financial package needed to get construction going on the first phase - which includes plans for a media-technology campus to be anchored by new entertainment studio DreamWorks SKG.

DreamWorks principals have chastised Maguire Thomas over the delay, and have threatened to back out of the project. Officials at Maguire Thomas insist they will secure the needed financial commitments early next year.

Meanwhile, sponsors of several controversial development proposals are expected to pursue public approvals next year.

The biggest of these is Universal Studios Inc.'s $3 billion, 25-year expansion plan at its 415-acre Universal City property, which must be approved by L.A. County and City of L.A. authorities.

In the heart of Burbank's Media District, NBC will likewise face scrutiny as it pursues a 1.7 million-square-foot expansion plan including four 15-story office towers and six new sound stages.

And a key development project slated to anchor Burbank's fledgling Media District North near the Burbank-Glendale-Pasadena Airport will take shape as 1997 progresses.

Vestar Development Co. has agreed to acquire 103 acres there from Lockheed Martin Corp., but city officials want Vestar to place a greater emphasis on commercial development than is contained in the original retail-heavy plan.

Some big Westside development projects are bound to face high-profile public scrutiny - including JMB/Urban Development's proposed 34-story highrise office tower in Century City, and dueling Westwood Village theater-anchored redevelopments proposed by developer Ira Smedra and the parent of the Mann Theatres chain.

As L.A.'s commercial vacancies continue to dwindle from their recessionary highs - and rents continue to recover accordingly - investment activity should remain robust in 1997.

There was certainly precedent in 1996, which saw the $230 million sale of the MGM Plaza complex in Santa Monica and the pending $480 million purchase of the Century Plaza Towers by an affiliate of New Yorking banking giant J.P. Morgan and Co. Inc.