EP.21 / Jessica Lall & Carl Muhlstein
110 Freeway, Downtown Los Angeles
What's holding LA back from reaching its potential?
Jessica Lall, Managing Director of CBRE's DTLA office, and Carl Muhlstein, a veteran LA commercial real estate advisor, have a few ideas.
When Jessica ran for mayor in 2021, she discovered the harsh reality that candidates often spend more time fundraising than working on policy. Carl has witnessed the same cycle of problems for decades. Both see the disconnect between what Angelenos need and what actually gets built.
Why are $500M downtown buildings selling for $150M? Why is the entertainment industry not-so-quietly leaving? And what are we going to do about the graffiti-covered tower that threatens to be the backdrop of the 2028 Olympics?
Jessica and Carl are honest about LA's challenges, but they also see opportunities others are missing. From residential conversion to Century City's post-COVID success, they highlight the incredible potential of open collaboration between politicians, developers, and other stakeholders.
The conversation also covers recent legislation like the Hotel Workers Minimum Wage Ordinance and what it means for the hospitality industry long-term. Plus, they share their thoughts on emerging neighborhoods and their favorite LA buildings, offering a hopeful vision for the future of Los Angeles.
Listen on Apple Podcasts | Spotify
About Jessica Lall
Jessica is responsible for developing and implementing strategic direction and day-to-day leadership for leasing, sales, valuations, debt and structured finance, and property management across all commercial real estate sectors for CBRE’s Downtown Los Angeles market.
Jessica actively contributes to several organizations as a board member. She is also involved in the 21 Century Alliance, a public advocacy coalition focused on harnessing global best practices to ensure California's sustained prosperity. Jessica ran for L.A. City Mayor in 2021, focusing her campaign on proactive solutions to homelessness.
About Carl Muhlstein
Carl Muhlstein is a trusted independent commercial real estate advisor known for identifying creative urban in-fill projects, leasing up projects with high-quality tenants, and underwriting operating assets like content-creating studios — all with a deep understanding of public-private partnerships and land-use issues. He makes it his priority to understand and advise based on the facts.
In addition to serving a wide variety of institutional and private clients, Carl has collaborated and completed transactions with senior brokerage executives at JLL, Cushman & Wakefield, Newmark, CBRE, Eastdil Secured, Cresa, Savills, LPC, Avison Young, Transwestern, and Colliers.
Topics Covered
The politics of planning vs. systemic fragmentation
Jessica's decision to run for mayor and lessons learned about campaigning
Should real estate leaders be civic leaders?
The perception problem facing developers and misaligned policy goals
The simple way to solve communication breakdowns between business and government
How the Hotel Workers Minimum Wage Ordinance impacts hospitality
What Downtown LA can learn from Century City
The future of Downtown LA and the role of the 2028 Olympics
What the entertainment exodus reveals about LA's competitiveness problem
Neighborhoods on the rise and favorite LA spots
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Sam Pepper 00:00
Welcome back to Season Two of the Building LA podcast, where we talk to the people shaping the future of Los Angeles, like the two guests we have here today, Jessica Lall and Carl Muhlstein. In this episode, we're diving into the intersection of real estate and civic leadership with two guests who know the both worlds intimately. Jessica Lall is the Managing Director of CBRE’s Downtown LA office and a former mayoral candidate who's no stranger to the complexities of both real estate and politics. Carl Muhlstein is a veteran commercial real estate advisor and broker, decades of insight into what moves and stalls development in this city. Together today, we will discuss, can real estate leaders also be civic leaders, the often perceived disconnect between policy and its goals, and what will it really take to bring Downtown LA back, reimagine neighborhoods, and critically, keep LA competitive? Super excited to have you both on the show. Jessica, we'll start with you. If you could just give a brief introduction for our listeners.
Jessica Lall 01:04
Sure. Thanks, Sam, and it's great to be here with my friend Carl. As you mentioned, I'm currently the Managing Director for our downtown LA office for CBRE. I also in that role oversee our civic engagement initiative as well as our higher education and government practice. So I'm very excited to talk further about this. And in my past roles, I was president and CEO of the Central City Association for seven years. We led a diverse coalition of businesses nonprofits to do advocacy work, primarily in Downtown LA. I served as executive director for the South Park Business Improvement District for six years, and also worked in the Viragosa Merrill administration as a senior policy advisor for economic development in Hollywood, Downtown, and Koreatown. So I'm a proud graduate of the University of Southern California, had to throw that one in as well.
Sam Pepper 01:58
Great. And then Carl?
Carl Muhlstein 02:00
Hi. Thank you for having me. I'm a proud journalism graduate of Cal State Northridge, and went into real estate because I couldn't figure out how to change the world at $400 a month, starting salaries in journalism at that time. But I enjoyed real estate because it's a bit of sociology, politics, architecture, a little bit of everything rolled into one. I've been a broker for decades, starting in 1978. Roles with traditional, large brokerage firms, management, capital markets initiatives, a slight stint in development where the first day at that job, the stock market plunged, and I lasted 18 months in development, and unfortunately, didn't ride off with an early retirement. So with that, I've also been very involved civically. I've served many mayors in different capacity, and I'm also a proud public member, previously of the American Institute of Architects, and I chaired the BOMA PAC political action committee. So I have a basic understanding of how things work in this city. So thanks you all for having me.
Sam Pepper 03:26
So you both have incredibly diverse backgrounds. You're both generalists, which I think is a huge strength in our industry. The three of us are clearly advocates for Los Angeles. We want the best for this city. I don't want to put words in your mouth, but I think we're all very proud of this city as well. I'm gonna start off with kind of maybe a slightly polarizing question, which is, what do you think is the single biggest thing holding LA back from fulfilling its true potential? And Carl, I'll start with you?
Carl Muhlstein 04:01
Well, there are issues that are above my pay grade, interest rate spikes, construction costs, serial sequel, litigation, etc. That's something that we can't really solve here locally. What we can solve are the politics of planning and entitlements, the delays, the conditions, the rear view mirror approach to getting approvals. For example, the adaptive reuse ordinance, which took years to unfold, is already out of date and not usable by the time it's rolled out. So always in the rear view mirror, never trying to figure out what's 20 feet in front of the car.
Jessica Lall 04:51
Jessica, what's your take?
Jessica Lall 04:52
You know, I'm a big believer in LA, that's why we're all here. I want to state that up front. I feel like we may talk about all of the many challenges we face collectively. I see fragmentation as being the broad word when I think about LA's challenges and what holds us back. LA County, 88 cities within a county. We have cities within cities. A lot of people don't even know sometimes that they don't live in the city of Los Angeles, and so the sort of jurisdictional challenges we face are problematic. And then I would say within that there's fragmentation within the cities in terms of taking holistic views, bringing people together with diverse backgrounds to solve some of the things that Carl just talked about. Some of this is inherent in geography, but I do think there is much that I know we're going to get into today about what can be done to overcome some of the fragmentation that we see. And I'm hopeful, because if we can do a few things right, and there is some low-hanging fruit, we truly can start to overcome many of the challenges we face, but I think that it is a pervasive problem when you almost dissect any challenge that we face at the macro or micro level.
Sam Pepper 06:08
Yeah, it's super interesting that there's almost a structural issue to leadership and governance in sort of Los Angeles County, greater LA, because of exactly what you're talking about. And there's a distinction between Los Angeles and New York, where a mayor categorically just has a little bit more power than a mayor in Los Angeles because of everything you just talked about. I am incredibly curious, Jessica, about your decision to run for mayor. Kind of it's a big decision to do that. I'm sure it was incredible experience. Can you just speak to a little bit about sort of the thought process going into running for it?
Jessica Lall 06:49
Definitely, Sam. It's not something you just wake up and decide, hey, I'm gonna run for mayor. Maybe actually, some people do, and I encourage more people to evaluate running. I spent about over a year on weekly calls with consultants, with friends, with family, with civic leaders debating sort of whether or not to do it. I had just had my first child. We were in the middle of COVID. I had lost my little brother to health and addiction issues during that time, and I would say it was the culmination of, hey, I care about this city. I believe I have ideas and practical experience. I believe we need people entering in who bring diverse backgrounds, if for no other reason than to advance the conversation, to broaden the conversation. And I love this city, and I want my children to be proud and be able to look at them and say, Hey, I did all that I could to make a difference, and I'm proud of the campaign that that we put together, and I was more excited to see a lot of the policy ideas, particularly in the realm of homelessness and housing, be adopted by many candidates after I got out of the race.
Jessica Lall 08:01
I will say the biggest illuminating thing for me is and I just take the opportunity whenever I can to share: money is so determinative in these races. And we know this, but I'll say, you know, my entire career has been spent at sort of this intersection of public and private, working on policy issues. But when I was a candidate for mayor, I would say probably spent the least amount of time I've ever spent talking and working on issues, because I spent six days a week making 200 calls a day asking people for $1,000. This is a core, and I raise this because this is a part of the problem we have in our elected system, is there's an imbalance of what people are spending their time on and what we want them to be doing to be successful. So I'm glad I did it. I learned a lot, and I hope to have contributed to the conversation, and I hope to have hopefully inspired someone else who's considering running to say, oh, there was very few people to look at as role models, having a young child, being a woman. And so thanks for asking. It wasn't a decision you take lightly, and getting out was almost as difficult a decision as getting in, but is made in a much sort of faster timeframe.
Sam Pepper 09:18
It's fascinating. I mean, I think it's incredibly admirable decision to run for mayor. It's not something you take lightly at all. I am curious, and this goes to both of you, like with so many challenges in LA, and maybe I'm biased, because I'm in the industry, but it feels like so many challenges in LA are related to the built environment, right? Homelessness to declining office spaces. So do you both think that it is time for a real estate leader to occupy the mayor's office? And do you think that skill set, that knowledge base is appropriate for what we need as someone leading the city, both maybe the LA mayor's office, but also potentially also LA County Executive as well?
Carl Muhlstein 10:06
Well, money alone doesn't solve it. We saw that with the Caruso-Bass election. And my epiphany that Caruso would lose came in an unusual way. You know how sometimes Waze takes you on wild turns and you don't know what you're doing on these streets? So I'm in Downtown LA I have to go to the See's factory on Los Cienega by Culver City, and Waze just took me through street after street of aging housing stock with cars parked on lawns, with sofas on the sidewalk and all that. I called my wife because the night before I had been in the Palisades for a fundraiser with all the Caruso signs in front of nice 10-plus million dollar homes. I called my wife and I said, he's losing.
Carl Muhlstein 11:18
And it was very different from the Mayor Reardon days, where I'd have breakfast with Mayor Reardon in the back of The Pantry, and his sleeves were rolled up, just like the servers there. He was a very different billionaire running for mayor. So let's take a step back. The mayor has very little power in Los Angeles. The City Council, the unspoken rule is they do not meddle in each other's districts when it comes to approvals and politics, they rarely meddle. All of a sudden, we have a few standouts, like Tracy Park, who is meddling, who is speaking up, but the mayor here is a tough situation. It's a lot of PR, a lot of Kodak photo opportunities, but very little substance, as we've seen since the fires and and attacking the homeless problem.
Sam Pepper 12:23
To the question about kind of the skill set required, do you think that there's someone who's deeply embedded in real estate has the right skill set, potentially to be to be mayor?
Jessica Lall 12:34
You know, I think being in a successful elected official is a unique skill set, and I think people can be successful doing it coming from all sorts of backgrounds. I think saying, hey, we need a business person, or we needed this person, is often very limiting. And I think what we need are people who appreciate the value that real estate professionals bring, that nonprofit leaders bring, because we need someone in, I believe in an executive role that has executive decision making power, executive experience, but is also willing to convene people and not vilify because of a political gain, a sector of folks that. When I worked at CCA, it was always fascinating to me that here we are in a housing crisis. We need more homes to let people be able to afford to live there to solve our homelessness crisis. Yet we spend a lot of time vilifying developers as being this or that.
Jessica Lall 13:36
And to me, we need leadership to not buy into that and promote those types of negative narratives and put people against each other. We need people who are going to say, hey, we need more homes. So we need people who are building homes. We need people who are actually building the homes to sit at the same table and figure this out, come up with the policies that enable, create carrots, not just sticks, as sort of Carl is alluding to, and those are the skill sets that I want to see in my elected officials. And if you have that experience and can translate that into successful political leadership, amazing. Do I think it's a prerequisite? No, but I think having an appreciation and a value for what industries bring, and being able to tap into, especially here as we're talking the private sector, to extract that expertise and resources for the benefit of community development, should be what we all are seeking in elected leadership.
Sam Pepper 14:35
Yeah, bridging that coalition, creating that coalition, I think, is critical, and there's just way too much polarization in politics right now, particularly in this country. But it's interesting, you mentioned sort of the perception of developers, because I actually did a lecture last week, and it was to a group of architects, and a lot of them were students, and I, just out of curiosity, Googled, kind of the famous architects, right? And on Google images, and it comes up with a lot of black and white pictures, candidly, of mostly men in, you know, round glasses with a model next to them, right? And it feels very academic. You do the same thing, you say famous real real estate developers. And there's a lot of gold, there's a lot of red ties, there's a lot of Donald Trump, and there is a perception issue that goes back a long way that developers are purely out for money.
Sam Pepper 15:28
And it's interesting, because now being on the inside of that, and transitioning from architecture to development a long time ago now, it couldn't be further from the truth.I mean, A, the risk that developers take on to build a building is tremendous, and yes, there's reward in that risk, but there's also plenty of stories, particularly right now, where people are absolutely losing their skin on buildings, where that just didn't work out. And the amount of thought and effort that goes into trying to not placemake, because I don't actually like that term, placemake, but sort of augment a place, make it better for the neighborhood that's something that goes into, I think most developers thinking.
Sam Pepper 16:13
Now there's some bad eggs out there, for sure, like there is in every profession, but that's something that I feel like gets lost in translation when people see developers, and the kind of buttoned up suits and everything that people see doesn't help that image. Carl, I want to ask you, obviously Caruso ran for mayor, and I want to just maybe get your take, if you don't mind, on maybe how he missed the mark. I mean, obviously, he was very well-funded. You talk about a little bit about the disconnect between what he was sort of advertising and promoting, and maybe some folks in LA, can you just expand that a little bit? I'm curious to kind of dig into that a little bit deeper.
Carl Muhlstein 16:51
Well, it's hard to say that he's not well-intentioned. He gives a lot of charity. He does a lot of volunteer work. He's a big supporter of the city, but when you look at he growing influence of the DSA Council and related parties, and maybe we were just entering that pain period in Los Angeles and we weren't ready for change like San Francisco now is going through, having been fed up across the different demographics about the pain. So we've taken a positive step getting rid of Gascon and bringing in Michael Hoffman. We have in 26 elections coming up, we get another bite at the apple to try and effect change. But again, it's almost suspect that the DSA-led council wants things to get so bad that their constituents blame MacArthur Park, blame Skid Row, blame crime, on the establishment and the developers and the owners.
Carl Muhlstein 18:18
And The Mansion Tax that is the best Clio Advertising Award in history. What a great name, The Mansion Tax. Well, now you build affordable housing, they have it set aside that you lose money on, and then you have a Mansion Tax to boot. They didn't even exempt affordable housing. You're a lender. You have a $500 million loan on a downtown high rise. You sell it for $150 million. Add insult to injury, they give you a tax bill of 5% on that $150 million so they just don't think through issues. I use the term a lot of times, a third grader could solve some of these problems. During COVID. You have a 700,000 foot convention center that's empty for years, surrounded by 5 million square feet of covered parking structure. The city doesn't lay off one employee associated with that convention center. Why wasn't that turned into a social services headquarters to give coverage, to give meals, to give bunk beds, to have showers set up? If LAUSD can turn a Sears building in downtown Santa Monica into a high school in a matter of weeks, how is LA so broken?
Sam Pepper 19:51
Jessica, I'm curious your take on the disconnect that's perceived, particularly in people in our industry, right, between some of the policy goals and their actual implications. It feels like it's a systematic issue. In your eyes. Is it a matter of just the wrong voices being at the table? Maybe it isn't as bad as we think? What are your thoughts?
Jessica Lall 20:16
I think it's quite simple. People are not in communication with one another, and it speaks to this vilifying. We're going to create lobbying laws so developers, or let's just call them home builders, aren't able to speak to elected officials. A lot of times, the business community is vilifying the elected officials. So you kind of just get everybody assuming the worst, which we know if you're teaching your children, you do not teach people to behave this way when you're trying to problem solve. And we need to be, and I saw this a lot when I was at CCA, you really had to push your way to have a seat at the table. The way our process is set up is so broken. I mean, council meetings in the middle of the day, only a certain type of person can go comment, and that's not really when and how decisions are being made. They're oftentimes being made by a group, as we saw with some of those tapes behind the scenes, oftentimes people are not seeking each other out. They're prevented from talking. They're afraid to talk. You have a news system that's very click baity.
Jessica Lall 21:23
I mean, I remember when the CD, Councilman Huizar, all of those stories were starting to break, and I had a reporter call me and say, you know, I thought the whole time the developers were bribing the city council members, but it appears that it's the other way around. I mean, this is the context of the environment that we are trying to serve people. It is broken. And I truly believe, and I don't believe it is naive to say, if people would just intentionally be in conversation more regularly, before decisions are actually made, before things are put onto the ballot, before policies are voted on, a lot of this would be mitigated.
Jessica Lall 22:06
And I'll give an example. We have a civic engagement initiative that we launched at CBRE. It's very simple. We aim to bring our data and resources forward. We proactively seek meetings with policymakers, elected officials, department heads. We show up with no ask, which I can tell you, if you've ever worked for an elected official, you're used to people coming in every day just telling you what a terrible job you're doing. You never get someone just showing up saying, Hey, we're here to help. Here's some information about your district, or here are some issues we know you care about. We just want to build a relationship and the skepticism of what do you really want? I mean, you really have to spend some time building trust and breaking down barriers.
Jessica Lall 22:49
With one of the council individuals we met with, really interested in better understanding why we are not building more housing, despite the effort to build more housing. CBRE, Trammell Crow Company is a subsidiary of CBRE, largest housing developer in the country. I asked their leader to come sit at the table with this council person, and it was like, What are we going to talk about or agree on? And we spent over two hours together, and at one point he simply said, you know, when you require X units per floor to be affordable, it's not that we don't want to build affordable, or have anything against affordable, but you're taking off a penthouse.
Jessica Lall 23:31
The penthouse is one of the key elements to making a project pencil. And you sort of see the eyes. Well, you could easily exempt a penthouse and still have the same outcome of units available. So I think it is very, very basic. But my call to action to everyone listening is, don't be afraid to talk to someone that you think you don't agree with, or it doesn't matter, find a place where you can educate, share your expertise, and be open to understanding what someone is really trying to achieve, and don't personalize the intention so much that you're writing someone off before you've even opened the door to see what would be possible.
Carl Muhlstein 24:13
If I could echo that. A lot of people in our planning department have never built anything in their lives. Building and Safety is completely overrun. There's a reluctance to outsource any kind of service, and so the politicians are under a lot of pressure from internal sources as to keep the status quo and slow things down. Even DWP cannot deliver electricity now to a lot of completed projects that are sitting there for six to 12 months, unable to get a certificate of occupancy. So the fear to speak up, even some LinkedIn posts, I will get text messages. I will see people in person. Carl, I love that opinion, but because I'm with a law firm seeking approvals, because I'm a developer trying to develop, because, because, because they're afraid to speak up.
Carl Muhlstein 25:25
And LA has lost its big corporate headquarter, backbone, who used to have plenty of funds and assign a lot of people to committees and charities and have social engagement. We've lost all that, right, as they, as all these corporations, no longer consider LA a home. So the real estate community has to start standing up, has to be more vocal, has to try and correct it, because it's not them suffering. It's the young creative who wants to work in Hollywood, who can't find an apartment for under $4,000 or $5,000 or is turned off that 65% of our housing stock is totally antiquated, non-ADA compliant, not sprinklered, not well parked. So what is drawing?
Sam Pepper 26:29
I've always thought about LA as being a hub for a creative class, right? And it still is, and it will continue to be, but that creative class is supported historically by the what is sometimes termed as the establishment, right, bigger corporations, corporations likemedia titans, Paramount, Netflix, etc. And what I'm concerned about is the rhetoric that often is seen in politics, but also on social which just silos everyone to a degree that is so unacceptable, there's it's pushing out that creative class, where you have the 25-year-old designer or the 25-year-old production assistant, they're going to think twice about coming to LA because the jobs aren't there to support that creative class, and so that's what I'm concerned about.
Sam Pepper 27:23
I'm very close with the architecture community. I work with a lot of folks who are in the entertainment industry, and it's that junior level, mid-level jobs, the working, middle class jobs that are creative, they are going away. And that pains me, because I feel like that is so critical to the identity of LA, and I worry about that not coming back unless there's, to Jessica, your point, a sort of a structural change in the way that we talk to each other. And we need to get off our phones, get off our computers a little bit, and just have face to face conversations, and have a better system for actually having those conversations, having those meetings, having that dialog, in order to understand each other better.
Jessica Lall 28:09
One thing we look at is the brain drain happening out of Los Angeles, right? We have some of the best research universities, community college network, trade schools, as you said, Sam. And people with their jobs, housing is unaffordable. You pay all this money in taxes, but the schools are broken, so it's out of balance. And I think the system rewards the status quo, and it does not reward problem solving. And we have to align those things. And I really believe it isn't until people start to lean in more. And it doesn't mean you have to quit your job and go run for office or go work in government. It just means you need to say, hey, what can I contribute? I don't know if anyone here has read the book atomic habits. It's my new way of life and a 2% change. If everyone were to do a 2% shift, what would that mean?
Jessica Lall 29:07
What if every elected or what if 2% more of the electeds would seek out the business community 2% more of the time? I really think we could start to make a meaningful impact in these problems, because at the end of the day, we're all wanting the same thing. We're wanting a more livable, functional city where people can graduate, afford to live, raise their families, send their kids to school, and not be forced to look outside and live in safe and clean neighborhoods. I mean, it's very basic, and I think we over complicate it. And like you said, we're on our phones in our own little silo, and we just all need to do a little bit more. And I really believe it could have a profound impact on the overall.
Sam Pepper 29:54
I'm curious. We're sitting here. It's May 29 I believe two days ago, one day ago. The city passed the Hotel Workers Minimum Wage Ordinance. Carl, I'm curious to hear your opinion on this. I think we now have the country's highest minimum wage for hotel workers. Now, I understand it is an incredibly expensive city to live in. I understand that people want to be able to earn a decent wage. Fully understand that. But Carl, you, I'm curious to hear your thoughts on this, because I'm worried about the fact that we have World Cup next year, Olympics 2028, not a lot of hotels getting built right now. There are still some, but they are further out, not in Central LA. I know we're down 56% from last year in terms of new hotel rooms coming online. Thoughts on that recent legislation, Carl?
Carl Muhlstein 30:50
It's just a tough one to address. Everyone should have a decent apartment cover over their head, et cetera. Thirty dollars, though, without delineating the class of worker, that means the valet boy who takes your car gets $30, plus $8 in medical insurance, health care benefit, even if he's still on his parents program or a spouse or significant other has him covered. So it's not $30, it's $38. So I suspect no hotels will be built. We will have a bump because of these big events coming to Los Angeles, like The Olympics. But after 2028 I suspect we're going to see thousands of rooms converted to residential. The 1000-room Bonaventure Hotel, the 700-room Biltmore Hotel, the Biltmore tower. Many of these, they can't survive on those kinds of rates. So the city, congratulations, city council, you passed that. Now you're about to lose millions in bed tax revenue. You're about to lose jobs, good paying jobs, as these fold up, and you're about to lose your incremental property taxes, because the value of these hotels is going to plummet like office buildings have, and the Prop Eight reduction are going to further hurt our fiscal responsibility.
Sam Pepper 32:45
I want to change gears here a little bit, because we're trying to pack a lot into this conversation. I want to talk about neighborhoods, and there's two in particular that I want to focus on. So we've seen in the past few years, really, since COVID, Century City has become this beacon for office leasing nationwide. It has some of the highest rents, some of the highest leasing rates anywhere in the country. On the flip side, you're seeing Downtown LA have some struggles. I think they're having a hard time coming out of the impacts of COVID. Jessica, I'm curious to hear your thoughts.
Jessica Lall 33:23
Yeah, I think it's important not to overstate or under appreciate what the difference is. I think it's interesting because Century City and Downtown LA, eight miles apart, both city of Los Angeles, right? A lot of the neighborhoods on the west side, Santa, Monica, Culver City, Beverly Hills are their own city. And so it's actually not a good comparison, because they're governed differently. But when you look at Century City, it is City of LA and I think the proximity to executive housing, right with Brentwood, Bel Air, West Hollywood, Westwood, in a post-COVID world, when we've seen who's coming back to office, who's sort of making those decisions. That's definitely a factor. Incredible amenities, walkable and I think, but the big kicker, I think, is the perceived reality around safety and cleanliness. People feel like they can go walk around, they can take advantages of the shops and restaurants and not feel unsafe. And I don't think we can underestimate how important that is when employers are making big decisions and investing big dollars in where they are going to be.
Jessica Lall 34:33
I will say again, as you mentioned, Sam, it is some of the highest in the country, so you have to take that into account when you're sort of doing the comparison is the scale on which we're we're comparing. And you know, as it relates to Downtown LA, downtown LA constantly reinvents itself. I don't think you can rule it out, like some people want to do, you also can't just look at Downtown LA through the office lens. It's not a nine-to-five office park like it used to be, although the office situation is very challenged right now. I mean, you, but you have, I even think within downtown, the tale of two downtown sort of depending on who owns what buildings.
Jessica Lall 35:14
But in my view, the big bright light for Downtown LA is the residential given the fact that we are half a million units shy of our meeting our housing goals. And that number each year that we fail to meet, it continues to grow. We still have a huge opportunity there 1% of the land, factoring in 20% of the residential growth, and the new units that are coming on are performing well. But the office is really challenging, but it is 315,000 jobs. Downtown LA remains the tax base in many ways for the city and the services that we all need. So it's in everyone's best interest to make sure that Downtown LA is successful.
Sam Pepper 35:56
Carl, thoughts?
Carl Muhlstein 35:58
For downtown LA, I like to call Bunker Hill the Century City of Downtown LA. It shares certain attributes. Almost no public parking. I guess The Hill isn't inviting. And the buildings are set back from the sidewalk. And so far in Los Angeles, we still have control of private property, as opposed to lower downtown, you don't know what you're going to step in when you open that door in your lobby and exit. So the good news is, the great reset is upon us. These $500/foot buildings are starting to trade for roughly $150/foot, which means they can offer very competitive rents and still have the capital to invest in them. So certain buildings like Two California Plaza, taking that attitude are 92% leased, pretty unheard of.
Carl Muhlstein 37:09
The other thing we have to do, since the Adaptive Reuse Ordinance was a bust, we have to get on top of that. As a city, fiscally, we have no money for giving grants, for giving real estate tax abatements like you see in Houston and Manhattan, etc. We don't have those tricks, so we have to accomplish it by zoning and the rules to convert. The 30% plus vacancy factor downtown has a lot of noise in it. The 611 West Sixth Streets, the Biltmore Towers, the 1055 West Sevens, the World Trade Centers, the 660 Figueroas. All of these are primed buildings for adaptive reuse into residential. And even some large hotels could be converted. So we've watched what's happened in lower Manhattan as it's evolved from a financial district into a mixed neighborhood with lots of uses. And echoing Jessica's comment, the residential will save us if we can improve the safety at the street level, where people, yet again, engage with their neighbor.
Jessica Lall 38:34
Carl sort of highlighted the scale of two cities in downtown, and it's wild, because when I started at the bid and CCA, I mean, Spring Street, The Arts District, South Park, everyone wanted to be down in the mix, wanted to be able to walk to the bars and restaurants. At one point, downtown LA had more Michelin-rated restaurants than Beverly Hills. A lot of people didn't know that. And now you've seen this migration back up to Bunker Hill. And I would argue that there's four buildings, really premier buildings, that they have stable ownership. They can invest in the building. They can manage the perimeter and the parking, all of which are extremely important as people are trying to find ways to make people come, incentivize them to come back to the office, feel safe. We need people out on the street walking around. We need those restaurants open for Monday lunch and breakfast. I can say, as someone who goes downtown almost every day, depending on the day, you can have an extremely different experience, and that also impacts how people feel safety-wise when they're walking around on the street, if they're the only one, that's a very different experience than when you're with a bunch of people.
Jessica Lall 39:47
So I'd say one of the highlights that we've seen recently is LA 28 moving their headquarters down onto the USC tower. That's going to bring several thousand employees walking around. It still shows the promise of downtown. The proximity to the transit lines cannot be understated. However, this transit needs to be considered safe for people to take it in every day. So I think we have the assets, and we've made those investments, we need people to feel comfortable and safe so they're able to take advantage of it, because we all know if you take the metro and have a bad experience, you're not taking the metro again for the foreseeable future.
Jessica Lall 40:34
You're telling your friends, there's such if you're if you're making the effort to come down and your restaurants aren't open and you can't get around, you're just going to work from home, or you're going to go to your office on the west side. And I think that's what we're really struggling with. And so we need to get several things right at the same time, and that value proposition of why people want to be living and working in Downtown is realized. Because when it's not working, it becomes extremely inconvenient versus convenient, and that, to me, is where we really need to focus on those things coming together and people having a quality experience in terms of the holistic view.
Carl Muhlstein 41:15
Another third grade idea: Graffiti Towers.
Jessica Lall 41:20
Oh, I mean...
Carl Muhlstein 41:21
Get a casino operator. You have 300,000 feet at the base. You have a residential tower, a hotel tower, and you're across the street from LA Live. I could put that deal together in 60 days. The city doesn't even know where to begin.
Jessica Lall 41:40
I think we could all go take a can of paint and just start painting over it. I mean, really, it is such a symbolic failure of so many things that building standing there. And I'll tell you what it is going to be the backdrop for The Olympics. World dignitaries will be staying across the street. And I hope by then that we have figured something out. It is demoralizing to drive by and see that, day in and day out.
Sam Pepper 42:09
Yeah, I couldn't agree more. It is one of the most visible buildings in all of Los Angeles, and it's where symbolism really matters, and you are not going to attract any institutional company or resident, for that matter, to come and would live or work in that area, with that being the symbol of that particular area of downtown. And downtown's not even that big, so it kind of representing all of downtown, really. For me, it is simple Downtown LA has all the necessary attributes to be a great downtown. We have seen revitalization of downtowns, certainly in Manhattan after 9/11, then Sandy, did it twice through mechanisms and a toolkit that maybe is easier to do in New York than it is in LA. But we've also seen Bedrock and Dan Gilbert's company in Detroit have an enormous impact. And of course, that was an incredible bet that he and his company made, but that area has seen a resurgence that has lived through COVID.
Sam Pepper 43:17
So there is a template, and obviously what works in one city might not exactly work in another, but there are simple ways that we can improve downtown, because when it comes down to it, people want to be near other people. They want to be close to activity. They want to have a neighborhood where they can go to a coffee shop and they someone knows their name. People want quite simple things. They also want to make sure that they can walk their nine-year-old child down the street and not be harassed, right? It's kind of basic stuff. So there is a simple solution to all of these things, but it's right to your point, Jessica, like the sequencing of that and everything needs to happen in parallel to ensure that we can actually have momentum for revitalization. It can't be this stop-start process where we have all this disagreement, all this vilifying and this lack of cohesion in terms of that rebounding effort. So I hope Downtown LA rebounds. I hope that the LA 28 headquarters, which I'd be remiss to say, Lincoln is actually managing that build out, but I hope that those have a big impact. UCLA is also putting a lot of investment in there with with trust building. So I'm hopeful. I'm curious, Jessica, also, you know Downtown LA better than most people. Where do you see it? What is your hope for in LA 2028? What's your vision for it?
Jessica Lall 44:42
Yeah, I think the focus can't be the games, and that's going to save us all. And I think Carl nicely pointed out that you don't want to just sort of go off a cliff after the games. All of the games are an incredible opportunity. They orient, they align, they give deadlines, which I truly you cannot undervalue here, but I think we're just sort of, oh, the games are coming and all of our problems are going to go away. That's not how this works. And you can put the fires and the tragedies that have happened in January from that on top of what was already sort of a monumental task. I think the need couldn't be greater. And so my hope for Downtown is that, it's so sad, I felt like, you know, in 2019 hitting our stride. I went to USC, I remember the days when your parents would come visit, and you they'd stay on the west side. I got married in 2016 and actually got married in Downtown. And my friends who had moved were like, you're getting married in Downtown? Is it safe? And they brought their kids, they had this incredible experience, Grand Central Market, the Arts District. And it's really heartbreaking to see that all of that progress almost washed away in a couple of years.
Jessica Lall 45:59
And I think COVID played a part. I think, again, dysfunctional political leadership. We had the Huizar scandals, kind of coming into COVID, and then subsequent issues after but I'm hopeful, with some hopeful stability around political leadership, you know, speak to the fragmentation, most people don't know. Downtown LA is represented by one predominant council member, but is in three council districts. So that, in and of itself, is a challenge, right? So we really have our work to do. I think the city really needs to be honest about what is happening. And I you know, unfortunately, I think you're seeing major employers and industries reduce their footprint greatly downtown, and they're not going to make some big exit. They're just going to do it. And so understanding that, understanding what that does to the tax base, people on the street, I think if we had government workers back more regularly in downtown, that would also help.
Jessica Lall 46:58
So I think again, we need to be pursuing a variety of things relatively quickly, and then we need to sustain. I will say, when you look at metro ridership, it's really interesting, because the Regional Connector opened last year, and we've seen actually ridership reach pre-pandemic levels, I believe, for weekends and even on Sundays, has exceeded which tells me that people are still coming downtown for entertainment and sports. They're not, though, using it to come to work, and whether that's because people aren't coming down to go to work at all that regularly, or they don't feel comfortable taking the metro, but I think we need to be looking at these things interdisciplinary, out of our silos, with the private sector, with small business, with residents to really put some wins on the board.
Jessica Lall 47:48
I will highlight a win, the Settecento restaurant that just reopened at Maguire Gardensat the library. It seems to be doing extremely well. It's always packed. I think people go, they feel safe. It's a beautiful restaurant. It's such a visible corner right now where Bunker Hill meets City National Plaza, and I see people very excited about that, where it once was something that people were maybe scared to walk by. So I think it shows what activation can really do, and if we can start to piece and identify specific areas of downtown to really invigorate and then connect in between. It's very doable. We just have to really all be rowing in the same direction.
Sam Pepper 48:33
Carl, you've seen a few cycles through Downtown LA. Are you hopeful?
Carl Muhlstein 48:37
Yeah, 33 blocks of built environment just don't go disappear in a poof. I remember when Spring Street emptied out. I was the leasing agent on 600 Spring when the first interstate got absorbed and moved to 707. The first building I sold downtown was at Fifth and Spring when Crocker Bank vacated for 611 West Sixth Street. I've seen a lot of cycles, and what saved the old Bank District was some new alternative retail, which the city enjoyed, but also government taking a stand to put the library into the old Ticor Title building, to occupy the Rowan building, to occupy many of these. And people like Tom Gilmore pioneered the first office to resi conversions. It wasn't so complicated today. It's much more complicated.
Carl Muhlstein 49:47
So I think what we're missing back to the comment that the real estate community has to get more involved and vocal, I miss the John Cushmans, the Nelson Risings, the Rob Maguires, the Wayne Ratkoviches. And our next gen of developers, we have a lot of great developers. I won't call out any by name, but we have a lot of great 40-somethings out there who are doing incredible things, attracting institutional money, and the city needs to make them feel welcome. The city has to invite them. The city has to encourage them and get planning on board and building departments on board and everything else. How do we make this work? Because these, again, these PR stunts, like ED 1, all they do is entitle a bunch of sites, and then the family or the developer who did that just list it with Marcus & Millichap, and then no one shows up to buy it. So how many units did we really deliver with ED 1? I think it's pretty faulty. So we need to invite the next gen of residential, office, creative office developers downtown and turn it around.
Sam Pepper 51:14
Carl, you speak with a lot of tenants, I'm sure CEOs, people who are representing their companies, who are looking for spaces investment in Los Angeles. What are you hearing from them today about the city? You mentioned earlier that we've maybe lost some of the headquarters that we previously had. Do you see that coming back? Is there a misunderstanding from external companies, external investors About Los Angeles that you hear repeatedly?
Carl Muhlstein 51:49
We're not ready yet to attract new corporations to LA. We're rehearsing. We're setting the stage. We're not ready to ask the question. I think I've been busiest with family offices who invest in their neighborhoods. I could show them a better deal in Redlands, in Del Mar, or wherever it might be, they don't understand that. They invest in their neighborhood. So we've seen a lot of local investment take on these very large structures and start turning them around. But what I'm really encouraged by is it's Black Friday, your favorite building is half off, and the users are waking up, and they're starting to take advantage. The Carpenters Union buys Union Bank Plaza at a price per foot that would have historically been just the FAR price and, oh, by the way, you get a 700,000 foot structure with two-per-thousand parking for free.
Carl Muhlstein 53:03
And LA County foregoing spending $2,000/ foot to retrofit their building buying Gas Company Tower, what a great upgrade for their employees. It reminds me when the School District took the IBM tower on Bunker Hill, same kind of thing. Wow. Look at us. We're like everyone else. And now DWP in the market for 600,000 feet. So I'm encouraged by owner users city-wide, fashion companies buying in the Arts District, a bank just bought a regional headquarters building from HPP in the Arts District. We're seeing a lot of owner users who have strong financial positions. But what's really important, they're making a long term commitment to Los Angeles.
Sam Pepper 54:01
I want to talk about the entertainment industry a little bit. It's been in the news a lot, not only the LA Times, New York Times has had a few pieces on it recently. We know that the entertainment industry has been hit hard, not only by COVID, there's also the strikes. A lot of production appears to be moving to states like New Mexico, New Jersey, certainly Georgia, also The UK. They're following incentives and they're following cost of labor. Are we at risk of that, or do we feel like it's always going to be here?
Jessica Lall 54:37
I'll speak broadly to that. I think LA, California, we take our industries that employ people hugely for granted. And I think we assume that no matter what tax, whatever we hit them with, that they can just all absorb, make money and continue on. This is not how things work. This, again, speaks to just sort of a lack of understanding of how things work. And I think the pervasive sort of general thought is, well, these people make a lot of money, and they can endure it, and they will. I think there's a lack of understanding of the ripple effect with the amount of people these industries employ, that a lot of these people are not, they're living paycheck to paycheck, and with the high cost of living compounding that this is absolutely a real threat. And COVID sort of accelerated I think a lot of it with people sort of dispersing and entertainment, it's harder to work remote.
Jessica Lall 55:41
But my point is people are more comfortable with all sorts of different work styles and technology and have resettled. And I think we should be wrapping our arms around any owner, any employer, any person who's looking to expand, government is a customer service job. How can we help you and how can we help you grow? How can we create a more livable city so we're not having to mandate wage increases? We want people to be able to afford to live here and survive and thrive. But I think we take a lot for granted.
Jessica Lall 56:16
A lot of times, the business community also kind of shows up in a frantic last minute after the fact. I don't think that helps really sort of preventing some of this to happen in the first place. So I think if I were an elected official, I'd be convening the employers the industries that have capacity to grow. What can we be doing more of? I think some of those answers are going to be a lot more simple than people think. And I think, again, a little goes far. If people sense that you care and are not taking them for granted, they're not going to try to uproot. It's very disruptive to take that approach, and I think most don't want to take that approach. But again, I think it needs to be proactive. And we can't take things for granted, just not the world we live in these days, and these are people's jobs and livelihoods we're talking about.
Carl Muhlstein 57:10
Take things for granted. Well, so far, the rear view mirror has served LA pretty well in the entertainment industry. Again, the entertainment industry blossomed when Aerospace Defense left Los Angeles, it left a lot of high skilled people who could go to work for Technicolor, Panavision, all these companies and help produce the content. And fast forward, tax credits from the state will help, but it's also, and Film LA has been called out to start relaxing their approach to approvals. But again, I think housing crisis is the number one issue. And think about it: Atlanta, Las Vegas, a lot of these markets are IATSE and Teamster friendly. There's no state income tax. You can buy a home for $400,000-$500,000 and many of the big studios maintain private jets in Burbank Airport where they're 35 minutes away from North Las Vegas Airport, so any people can go back and forth.
Carl Muhlstein 58:39
And the other part of it is AI. We should be embracing AI to cut costs, because look at the stock price of many of the content creators. They're hurt, they're hemorrhaging and they need economies. And I'll just close on entertainment with I've been involved with The Burbank Studios for many years. I sold it when GE decided, Gee, why do we have Universal City and the Burbank Studios? Let's sell off the small one. It went from Johnny Carson to Jay Leno to Blizzard Sports to The Sphere, the R&D for The Sphere work in Las Vegas was done at the Burbank Studios. There's still a need for The Box. The Box will have different personalities, different technology, etc., but you need that controlled environment. So the close in, larger studios are going to continue to flourish and evolve.
Sam Pepper 59:47
So coming to the end here, I've got two more questions for you both. First, is kind of a quick hit? Actually, both are kind of quick hits. So I want to understand you both have such a broad perspective on Los Angeles, which LA neighborhoods or sub markets are quietly becoming potentially the next hot spots. What are you excited about? Jessica?
Jessica Lall 1:00:07
Well, I think there are parts of Downtown that are coming back that excite me, because I love the historic theaters. I love the Arts District, Chinatown. There's a lot of exciting cultural things happening. Carl mentioned Tom Gilmore, I know he's got a new art project in Downtown LA taking place. So watch for those green shoots in downtown reemerging, coming back, stronger, more resilient. I think there's a lot of interesting things happening in Koreatown, again, culturally, development wise, that are exciting and different, and not what you think of when you think of Los Angeles. And I'd also lift up Hollywood. I don't spend a ton of time in Hollywood, but the last couple times I've gone, it seems, in my view, not so gritty, but more cleaner, safer, with the dynamic, interesting things that make Hollywood a world-renowned location. So I'm excited to see a lot of the new restaurants opening there, and the reclaiming of the public spaces in a way that is inviting for everyone, including families.
Sam Pepper 1:01:16
Carl?
Carl Muhlstein 1:01:16
I like all those. I like all those. So sometimes going out for dinner, a warm welcoming sign that greets me is in Beverly Hills where it says you are subject to drone surveillance by police. I don't mind giving up a few civil liberties. I'm not worried about myself, and that's what I think all these neighborhoods need, is more safety. And that's why we like The Row a lot of times, because we pull into a self-contained environment. The Grove, a self-contained environment. It gets a little more gritty and challenging when you have to walk two three blocks and it's 11 o'clock at night after you finish the late dinner and just things go through your head. So I like all those neighborhoods. There's more of them, but generally speaking, LA needs to work on its safety.
Sam Pepper 1:02:24
Final question, what are your three favorite buildings or places in Los Angeles? Jessica?
Jessica Lall 1:02:30
I love The Bradbury Building. I love The Los Angeles Theater, and I am a sucker for Griffith Park.
Sam Pepper 1:02:38
Excellent choices. Carl?
Carl Muhlstein 1:02:40
I'll match your Griffith Park with Descanso Gardens because it's also an easy hop down to Lake for a meal. I already talked about The Grove and The Row, but I think Broadway in general, the only thing holding back Broadway is the former May Company super block that is stuck in Starwood Land. But other than that, even the Herald Examiner building. And ASU, what a great addition to downtown and the hotels I like Broadway, in general, but again, make it safe.
Sam Pepper 1:03:22
Well. Carl, Jessica, thank you both so much for your time. I know you are both very busy people. It's been such a pleasure to talk with you both. Thank you so much.
Carl Muhlstein 1:03:31
Thanks for having me.
Jessica Lall 1:03:33
Thank you both so much. Thanks for having us, Sam.
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