Will Development Save the Real Estate Cycle?

LOS ANGELES—Cox, Castle & Nicholson gathered 30 real estate professionals together for "A Regulator's View through the Looking Glass," an event to discuss the commercial real estate permitting process. The professionals specifically looked at how the City of Los Angeles could be a partner and help facilitate development projects and looked at how development helps to save the real estate cycle from a dramatic dip. Attendees included professionals from Lowe Enterprises, Davis Partners and AndersonPacific. To find out more about the discussion and recommendations for growth, we sat down with Cox Castle & Nicholson partner Andrew Fogg, who moderated the panel with partners David Waite and Ron Silverman, for an exclusive interview.

GlobeSt.com: Tell me about the event, "A Regulator's View through the Looking Glass," that you held at your office.

Andrew Fogg: During the event, held at Cox, Castle & Nicholson's new Los Angeles office, Ray Chan, the general manager of the Los Angeles Department of Building and Safety, presented his take on making the approval process feel like a fruitful partnership instead of a series of roadblocks.

Following Chan's presentation, the group discussed several topics that drive the current development cycle in Southern California and how new offerings such as the parallel design permitting process are making challenging projects more plausible in Los Angeles and beyond.

Traditionally, the design, permitting, and construction processes are addressed in a linear fashion, but Ray is spearheading efforts in Los Angeles to offer an alternative parallel design permitting process wherein developers are able to begin the plan check process directly after submitting conceptual designs, while simultaneously handling the detail and engineering phases of the approval process. The City of Los Angeles has had great success permitting a large number of large projects using this model, and individual developers reap the benefit of dramatically expediting their projects, reducing risk and increasing speed to market.

GlobeSt.com: Why is streamlining the approval process so important at this stage in our real estate cycle?

Fogg: A development cycle can last anywhere from 12 to 15 years, and Ray Chan and the Los Angeles Department of Building and Safety (the Department of Building and Safety) present a strong argument for fighting to stretch out the current cycle. The Department of Building and Safety is committed to making it faster and easier to develop in the City of Los Angeles. They are energetic about educating developers, on both the benefits of developing in Los Angeles and the positive impact that continued development would have on extending the real estate cycle, to avoid a repeat of the dramatic drop of the last downturn in 2008.

GlobeSt.com: How would continued development soften the next recession?

Fogg: By expanding the development cycle you create a higher cycle peak, a longer plateau and a gentler decline. The challenge is that in this stage of the cycle, continued development in Los Angeles would mean competing harder for development opportunities that are considering other markets. In other words, Los Angeles needs to differentiate itself beyond the fact that it is a metropolis with great weather. It needs to compete with both global markets like New York and London as well as regional markets like Orange County and San Diego to attract developers, so the Department of Building and Safety is making a special effort to broadcast the fact that it is doing its part by establishing expeditious and client-focused programs to help developers deliver projects both safely and quickly.

GlobeSt.com: What benefits to developing in the City of Los Angeles were your attendees most excited about?

Fogg: Everyone is really enthusiastic about the Department of Building and Safety's attitude of partnership and flexibility. Ray talked a lot about specific programs such as the parallel design permitting process, as well as the benefits of assigning a specific case manager to each project. Developers appreciate the case management program, recognizing the efficiency of having one dedicated expert to help guide a project through the design and planning phases. The thing that struck everyone in the room was Ray and the Department of Building and Safety's dedication to flexibility. Ray joked about how the physical code books for the City of Los Angeles went from being four inches thick to four feet thick. The Department wants to make it known that they are dedicated to finding creative solutions. They want developers to know that they are not the keepers of the red tape, but rather their partners in breaking through it and getting to the finish line as soon as possible.