Construction Slow-down Good for Downtown LA?

The construction slowdown is clearly a good thing.  It's weird though that the slowdown hasn't happened in the USC neighborhood just south of Downtown LA.  In this market, there are already starting to be vacancies due to several factors: enrollment is down as USC tries to become more exclusive, there have been over 1,000 beds of new supply added in the last few years by USC and a developer called Conquest Housing.  More students are choosing to live Downtown or in Hollywood and commute to school, etc.  USC now guarantees housing for all freshman and sophomores (half the student body).  Even worse, USC just released its Master Plan (www.usc.edu/masterplan) that says starting in 2011 they will start construction to guarantee housing for all USC students.  Once this happens, every privately owned project in the area will be screwed.  USC Housing is operated as a non-profit business, meaning they charge below market rents on 8.5 month leases.  Regardless of these factors, there are more and more projects planned.  There is only so much depth to this market.  The only people paying big rents to live in South Central are USC students.  There needs to be a slowdown in the USC area because the supply has already surpassed the demand.  There is a serious risk of foreclosures in this area that will only increase with more development.

Great point Shane, but also consider the followng 3 factors: 1. LA wants to develop the Figueroa corridor between Staples and USC so that it is a true entertainment strip. As entertainment and food venues appear along this two mile corridor, people of means will begin to move closer to SC. 2. With the rise in fuel and transportation costs, living and working in Downtown becomes more attractive once LA implements the taxi program and more bicycle lanes throughout the city. 3. SC's affordable housing for students/staff reduces crime in the area, because the local populaton are mostly university residents. This is a 5-7 year vision of Downtown LA that will come to fruition.

I understand the factors you mention, but have to respectfully disagree.  Yes, LA wants to develop the Figueroa Corridor, but that doesn't mean it will work.  LA really wanted to convert downtown LA to a residential market, but it has proven that it will be decades before that actually happens.  There is currently a huge excess supply downtown that developers are desperately trying to fill up.  This will always be people's first choice to live over the USC area (South Central LA).  Plus most of the entertainment corridor stuff is north of the 10 freeway by Staples and LA Live.  Lastly, I think your point about SC's affordable housing is not accurate.  Once prices in the area start plummeting, it will not attract people of means.  It will attract people that can afford lower priced rentals.  USC is manipulating everyone very well here (city officials, developers, etc).  They want developers to believe there is a major shortage of housing, so the area will get overbuilt, and prices will come down.  The fact of the matter is that USC is developing their master plan, which will house all the students, and will be a giant fortress surrounded by ghetto.  No students will live outside this fortress (which will offer 8.5 month leases at below market rents).  USC has publicly stated they want to maintain artificially low prices.  Talk about having a monopoly.  All the privately owned buildings will have no choice but to lower their rents significantly and fill up their apartments with whoever will move in just to try and survive.  That likely means the private sector will deteriorate to a more ghetto area.  The reality right now is that the demand for housing is the USC student body, and will remain that way for our entire lifetimes.  Overbuilding will just make the area worse.

Great points Shane. I must admit, I'm pretty interested in the development around SC as I am a Trojan alumnus, but your points are definitely valid. Here is what I see. The development of the Figueroa corridor will proceed independently of SC's intention to create affordable housing for its staff. Now, two things may happen from this point forward: 1. Figueroa becomes what optimists expect in 10 years: a true entertainment mecca, or 2. Figueroa remains stagnant and development continues at a snail's pace. I see #2 as a possibility only if developers/investors los interest in L.A. as a real estate destination. This perception largely depends on the success of L.A. Live and Grand Avenue Project. If both these developments succeed, then South Park will be a huge investment area. I know for certain that the civic leadership of Downtown L.A. is pretty united on "changing" the core nature of what was traditionally a 9-5 work town. As long as the leadership "cooperates" with developer/investors, there is no reason why we can not do what Chicago and San Diego did in the 90's or what NYC did in the 80's. Impact on the SC area: if the Figueroa corridor is successfully developed, SC is suddenly sitting on a goldmine of real estate values and I would wonder how they might parlay that into an investment. At worst, it is affordable student housing, and at best it would be market rent more competitive with what South Park would be offering if Downtown takes off. As is always the case, lack of real estate results in development of growth into areas previously considered undesirable. Status quo: if things do not change, I must sadly concede that your vision is likely. But if money pours into Downtown like everyone is anticipating (working for), then the sky is the limit.