An 80-Year Overview of Real Estate Development in L.A. — From Aeronautics, to Finance, to Silicon Beach

The concept of urban resilience — which is the capacity of a city’s communities, businesses and systems to adapt to complex challenges and grow — has received increased attention as of late, given the multitude of stress factors affecting the global economy.

This is especially true in the case of a global city like Los Angeles. To that end, using data from CommercialEdge and the U.S. Census Bureau, CommercialCafe published a study analyzing the history of residential and commercial real estate in Los Angeles. The goal was to see how the city was affected by various crises, as well as how it adapted to maintain its status as a major global city. Key takeaways of the study include:

• Construction of residential real estate spiked in the 1950s, with 724,000 housing units built metro-wide and a total of 2.5 million units built between 1940 and 1989.
• In the 1980s, Los Angeles transformed itself into one of the West Coast’s major financial hubs, increasing its office space inventory by 113 million square feet.
• LA’s status as a major international cargo port and aeronautics hub contributed to the addition of 108 million square feet of industrial space between 1970 and 1979.
• Retail boomed the most between 1990 and 2010, when the city’s retail inventory grew by 58 million square feet.

Per the study, the post-World War II growth of the aeronautics industry was identified as one of the major contributors to Los Angeles’ robust residential market. Thus, to keep up with the metro’s booming population, more than 724,000 housing units were constructed between 1950 and 1959 — nearly twice as many as in the previous decade. Many of these housing units were built in areas such as Long Beach and Torrance.

Residential development then slowed in the following decades, reaching around 200,000 units between 1990 and 1999. The subprime mortgage crisis also had a significant effect on the LA market, and the metro now generally distances itself from urban sprawl.

Although the Los Angeles residential real estate market was in its prime in the 1950s and has slowly trended downward since then, office space in Los Angeles spiked in the 1980s. In that decade, LA overtook San Francisco as the main financial hub of the West Coast, attracting a multitude of companies with a global reach.

Specifically, the city added more than 112 million square feet of office space between 1980 and 1989, including 6.8 million in the city’s downtown. Other areas — such as El Segundo, Bunker Hill and West Los Angeles — also added significant amounts of office inventory.

However, after the Cold War, defense spending was reduced and many banks in the metro were restructured and relocated. As a result, Los Angeles’ office market faced setbacks, but the effects of the tech boom — such as the popularization of office space in San Diego and in other parts of Southern California — also rippled into LA, ensuring that the city’s office inventory did not go unoccupied. Today, about 162 million of LA County’s 301 million square feet of office space is located in urban locations, while 67 million square feet is in suburban areas.

Meanwhile, the city’s industrial real estate market saw an all-time high of 108 million square feet built between 1970 and 1979. Later, construction dropped to 83.5 million square feet in the 1980s and to 43.2 million in the 1990s. Construction of industrial properties in Los Angeles recovered slightly in the 2000s before dropping further in the 2010s. However, some areas — such as Santa Fe Springs — maintained their relevance as industrial centers, with large amounts of industrial space delivered even after the year 2000.

Conversely, retail properties remained largely unaffected by most of the crises that transformed other sectors of the Los Angeles real estate market. In fact, an all-time high of 29.3 million square feet of retail spaces were built between 1990 and 1999. The second-best decade for retail in Los Angeles was 2000-2009, when 28.6 million square feet was delivered. However, the market did not fare nearly as well in the 2010s. And now, the coronavirus epidemic — coupled with the growth seen by e-commerce — will further test the market this decade.

Overall, the study underscored Los Angeles as a highly adaptable city. Its real estate market, in particular, has undergone significant transformations throughout the years. Read the full study here, including an in-depth analysis of the development of the Los Angeles real estate market.