November 8, 2000

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L.A. Officials Mull Scaling Back
Limits on Downtown Telco Hotels
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By Shirley Leung

LOS ANGELES -- City officials are considering scaling back their plan to limit the spread of "telco hotels" in the downtown area.

Economic planners and City Council staff members have been drafting an interim city ordinance that would help check the growth of telco hotels -- buildings or floors of buildings entirely devoted to telecommunications-switching equipment -- because they feared the hotels would turn an already-struggling downtown into a warehouse district.

City officials had originally proposed an interim city ordinance that would require that 50% of a building in a designated downtown district contain retail or commercial space. Now city officials are considering lowering that figure to 20% to 25%. The city would still require that the ground floor of the buildings be devoted to retail or commercial use.

What's more, officials may also back off on a plan to require additional review and permits for telco-hotel projects, which would have lengthened the application and review process. Now officials are considering a permitting process that would simply create a zoning designation for a telco hotel. Currently, there aren't any city regulations targeting telecommunications buildings.

City Councilwoman Rita Walters, who has been working with Councilman Nick Pacheco on the ordinance, stresses that it's still unclear what will be proposed before the council. An interim ordinance stays in effect for up to two years until more studies are conducted. "What I would want and what a number of people want is to see businesses at the street level, to open up the possibility of attracting people to walk and come to do business, to have a meal," says Ms. Walters.

Jeff Walden, director of LA's Business Team, which is part of Mayor Richard J. Riordan's Office of Economic Development, says the city is changing its proposal because of a new study that indicates that telco hotels aren't as harmful to the downtown as once was thought.

The study, conducted by Jones Lang LaSalle Inc., a Chicago-based real-estate-services firm that also does telco-hotel projects, looked at 18 downtown telco hotels totaling three million square feet. The study concluded that telco hotels created a net addition of 8,500 new jobs in the past 21/2 years and attracted New Economy tenants that can help bring people downtown.

The study also found that there's little competition between apartment and telecommunications uses because many of the apartment-conversion buildings don't have the right floor shape that telecom tenants prefer.

The telecom industry and technology allies laud the city's proposed changes.

"It's a much more reasonable plan," says Rohit Shukla, chief executive of larta, the technology alliance for Southern California. "They're cognizant of the fact that they don't want to freeze out potential development just when it's starting to become interesting for people to move into the downtown area."