Reusing L.A.'s Older Buildings Makes Economic Sense.

Los Angeles' population is projected to grow by several million in the next ten years, and as a result many new projects, from housing to offices to municipal buildings, are needed in order to serve the city's residents. At the same time, the geographical boundaries of the metropolitan area have reached their outer limits and parcels of open land are scarce, leaving few options for new developments to support our astronomical growth. Developers are increasingly turning to infill ill as the most viable alternative to traditional "green field" building, with the option of either razing the defunct structures on these precious sites or adapting existing buildings for new uses.

Many neglected buildings truly are jewels in the rough. Los Angeles is filled with vintage or otherwise unique buildings that have fallen into decline but still have "good bones." Adaptive reuse enables us to conserve these structures that reflect our city's history and culture while at the same time providing for current and future space needs.

Aesthetics are not the only features that make buildings good candidates for adaptive reuse. One of our clients is turning an out-of-date office building in the South Bay into a telecommunications hub. The availability of fiber optics infrastructure in the surrounding area made it attractive for this purpose. This renovation not only improves an old, unused building, but it also creates an economically viable new use that supports L.A.'s growing technology needs.

While adaptive reuse opens the door to myriad opportunities, developers also must be careful and thorough in their due diligence when considering such a project. Most renovation projects must meet the same zoning and code requirements as new buildings, calling for hefty investments in upgrades and retrof its that may or may not reap economic returns. Because the age-old criterion of time-cost-value is applicable to any real estate project, discovering challenges up front will help prevent costly setbacks that ultimately could defeat an adaptive reuse project.

A developers first step is determining the local governments political will. The priorities of City Hall and local leaders can shed light on the viability of new uses for an existing property. For example, some cities are stalwartly dedicated to maintaining affordable housing and would frown upon any attempt to remove residential units from circulation, while other cities are focused on new sources of income for city operations and thus more amenable to retail, hotels and other such uses that generate additional tax revenue. Understanding a districts political environment can quickly build a case for or against a particular reuse.

Zoning is another determinant of the direction for adaptive reuse projects. Some cities have clearly defined commercial and residential cores that restrict density and use. It may be impossible to open a neighborhood retail center along a quiet residential street, but an old warehouse or factory could be turned into creative office space, such as Eric Owen Moss' unique structures in Culver City. A zoning change or a conditional use permit to accommodate the new use in the old zone may be required.

Once a use is established, a thorough investigation of the property must be done in order to determine its ability to meet current building codes. Seismic, fire and safety, and ADA accessibility requirements can create engineering nightmares during a retrofit; understand the depth of work required before jumping into a project. An accurate assessment of the required environmental remediation also is important. Asbestos, lead paint and other hazardous materials, all once permissible, must be completely removed during an upgrade. For some sites, level of clean up varies depending on the intended use: residential properties have much more stringent environmental standards than, say, a warehouse or even an office building.

Most properties built before the mid-century automobile boom are enormously underserved with parking. Planning codes are very specific about the required number of spaces, and developers often must devise creative alternatives for supplementary off-site parking, such as directing an entertainment centers overflow to a nearby office complex during evenings and weekends.

Finally, many logistical situations must be considered. It existing residential tenants must be relocated, investigate any rent-control or relocation ordinances that govern how much notice must be given and the payments necessary to get tenants to vacate. Determine whether commercial leases can be terminated at will or must be bought out Even the presence of squatters can delay a project.

After due diligence has been completed, a smart developer will search for sources of public funds that may be available for the adaptation. Certified historic structures over 50 years old may qualify for federal tax credits for up to 20 percent of the rehabilitation cost. Certification, if not already in place, takes time, involving both state and federal governments. Furthermore, many certified historic structures fall under the jurisdiction of government and special interest groups, creating a very lengthy approval process. For example, when the El Capitan building in Hollywood was undergoing its rehabilitation, six different organizations, ranging from the National Parks Service to the Los Angeles Conservancy, had to approve the changes.

Adaptive reuse presents many excellent opportunities for developing infill projects and can even lead to the revitalization of blighted neighborhoods and districts. At a minimum it is the most viable alternative for an increasingly dense urban environment such as Los Angeles, but developers must proceed with caution to make the most of their investment.

Timi Anyon Hallem is a principal in Tuttle & Taylor and chair of the firm's real estate practice group.