Apartment demand drives commercial building rebound

After an extended lull brought on by the economic downturn, commercial real estate developers are building again.

Some of the activity involves the revival of projects that stopped during the recession, but many others are new from the ground up and mark the return of construction cranes to the Southern California skyline along with the injection of billions of dollars into the local economy.

An intense demand for apartments is the biggest driver of development, as the improving economy supports the formation of new households. But offices, warehouses and stores are also being built, according to real estate brokerage Marcus & Millichap.

"We haven't had any meaningful construction of any type since 2005 or 2006," said Hessam Nadji, managing director of research at the brokerage. "A new cycle is beginning."

He expects 6,600 apartments and 2.4 million square feet of commercial space to be delivered this year in Los Angeles County. More is on the way.

"We're finally coming out of our bunkers," Los Angeles developer Wayne Ratkovich said of his fellow builders. "People are tired of being down in the dumps and are starting to look for opportunities."

Ratkovich is renovating aviation mogul Howard Hughes' former offices in Playa Vista, a development called the Hercules Campus that he expects to cost as much as $90 million. His tenants, including YouTube, are also spending substantial sums to build out their spaces, he said.

One of the region's most high-profile developers, Rick Caruso, estimated that he has about $750 million worth of development in the pipeline including what he called a "huge" project the size of his popular Grove shopping center in the Fairfax district of Los Angeles.

He declined to elaborate or say where in Southern California he intends to build the new project. One development he expects to finish in September is a $60-million luxury apartment complex on Burton Way at La Cienega Boulevard. The eight-story complex, called 8500, will house 88 apartments over a Trader Joe's grocery store.

At his Americana at Brand shopping and residential complex in Glendale, Caruso is building a new Nordstrom store and adding four apartments to the development's roster of 100 condominiums and 238 apartments, almost fully occupied.

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Apartment demand drives commercial building rebound