LB HAS ITS OWN DISASTER THREATS TO PREPARE FOR

The devastating January wildfires in Altadena, Pacific Palisades and their surrounding communities, is seeing significant economic and social impact in the Southland. At least 29 people have died, officials say, as the fire spread across the Los Angeles area. More than 16,200 homes and commercial properties were damaged or destroyed, along with numerous vehicles and personal belongings.

About 200,000 people were displaced following evacuation orders, with many of them staying in Long Beach hotels and in other cities.

A study released last week from the Southern California Leadership Council and the LA County Economic Development Corporation estimated between $28 billion to $53.8 billion in property damage from what’s being called the Eaton and Palisades fires. Business disruption could see economic losses up to $8.9 billion in Los Angeles County over the next five years.

Rebuilding the burned-out areas could take five-to-10 years, according to analysts.

For now, LA County is overseeing a two-stage debris removal program. Phase one is hazardous waste removal; phase two will be general debris removal.

What It Could Mean for City

Michael Bohn, a partner at the Studio One Eleven architecture firm in Long Beach, has been pleased to see Gov. Gavin Newsom commit to expediting the California Environmental Quality Act (CEQA) and California Coastal Commission review procedures. That will facilitate the process for local officials, building inspectors, architects, construction contractors and land developers to get these reconstruction projects up to current regulatory and safety standards for completion as soon as possible.

It’s been estimated that more than 95% of all the homes in Altadena and Pacific Palisades were built before 2009, which will bring in needed upgrades for roofs, rain gutters, attic vents, doors, siding and landscaping. The building code will also require new homes built after 2011 to have indoor fire sprinklers.

Gov. Newsom in January also ordered state officials to recommend by March 13 which parts of the building code should be suspended to speed up reconstruction.

While wildfires won’t be a likely cause of destruction in Long Beach, the city has to be prepared for two other natural disasters – flooding and earthquakes, Bohn said.

The anticipated sea-level rise from climate change is expected to bring ‘king tides’ and flooding to Naples, the Peninsula and Belmont Shore in the years ahead.

Long Beach being built on the Newport-Inglewood fault line and the devastating 1933 earthquake, taught the city a great deal about disaster prevention, Bohn said. It used to be that wood-frame houses were built on concrete foundations that could just slide off during a major earthquake, he said.

Long Beach is also working on strengthening its resources to get through future stormwater flooding.

“The city is making significant investments in our stormwater system including through LBMUST, the Municipal Urban Stormwater Treatment plant, and investments in tree planting and green infrastructure are important to address flooding as well,” said Alison Spindler-Ruiz, planning bureau manager with the City of Long Beach.

“We have embedded sea level rise and flooding projections into our development review and planning processes, from how we review Local Coastal Development Permits to how we are planning for the future of the Downtown Shoreline area, incorporating adaptation strategies such as planning adaptable public and open spaces near the water’s edge, prioritizing natural solutions such as additional wetlands near the coast, and designing plans and improvements for the city’s municipally run marina system,” Spindler-Ruiz said.

One of the challenges of building housing and commercial development projects is how much longer it can take – and the additional costs that can be added – when city officials are being extremely strict in their onsite inspections, Bohn said. 

“They can be silly about it,” he said. “The paint could be one-sixteenth of an inch off and you’re given an order to redo it. You might not have the labor available on the project to bring it to that level of precision.”

Younger city staff can be very restrictive and unyielding, Bohn said. They need to get to an attitude of ‘Let’s get things done,’ he said.

However, Long Beach is doing better than many other cities this size in dealing with city delays on construction projects, Bohn said.

A Bright Spot for Long Beach

One area that Bohn and his architecture firm see vast opportunities for Long Beach is embracing what his profession calls ‘adaptive reuse.’ That means for the office buildings in downtown Long Beach that are sitting empty or only partially filled, converting the rest of the building over to housing can be a practical solution to some of the housing crisis.

These locations, also known as mixed-use properties, offer excellent opportunities for the city. Along with reducing carbon emissions 60% to 70%, bringing in more housing can bring down the rental prices and offer more opportunities for low-income housing, Bohn said.

Long Beach and cities around the U.S. have gone through a difficult time since COVID-19 hit and employees started working from home. Through 2019, downtown Long Beach was seeing 80% of the commercial properties leased out and sometimes up to 100% of the offices filled in certain buildings. In recent months, that has dropped down to 25%-to-30% filled, which has had harmful effects on restaurants, hotels and other local businesses, Bohn said.

Going over to housing conversions is solving that problem for property managers going that route. You need a lot less people to fill out and utilize the building space if most of it is for housing; and it makes the area much more appealing for visitors who get to enjoy an active community with more places to go and things to do – rather than an empty part of the city that visitors don’t want to be anywhere near, especially at night.

One of the cultural benefits of going this route is that more people will become what Bohn calls ‘stakeholders’ in the area. People living there, along with business owners, will be expecting a lot from the City of Long Beach and the service providers that they go to and spend their money with.

What Local Economy Looks Like

Brandon Carrillo, a principal at commercial real estate firm Lee & Associates, says that the state of the local economy and real estate goes on a case-by-case basis. Overall, Long Beach and surrounding cities are seeing stable market conditions, but it can vary.

The market saw a peak in 2022 before the central bank started raising interest rates to bring inflation down. That could mean commercial real estate properties would be sitting empty on the market for a long time as loan rates went up, Carrillo said.

“Landlords who are savvy enough to make deals are getting the business,” he said.

Lee & Associates has been seeing that property owners like the Irvine Company are spending money to take the property to Class A level – to differentiate the location for potential clients.

“They’re going beyond the conference room,” he said.

They have scenic office buildings with WiFi, almost like the ‘Starbucks effect.’ It’s a secure, comfortable place to do business, Carrillo said. They’re doing things to get employees and their clients outside their offices and to engage with each other.

The overall economy and real estate market will be affected by recovery from the LA wildfires and what happens next, Carrillo said. Efforts by the U.S. Environmental Protection Agency to clear out contaminated soil from the wildfires is becoming a complex scenario for local governments and landowners. Where to haul and dump that contaminated soil is the problem, Carrillo said.

One waste management company has been helping with their efforts, but the system isn’t set up to resolve the matter, he said. There are liability issues and the need to test the soil. Future buyers of the land and properties will want to see that it is clean and safe, he said, and it will be an expensive cost of doing business for landowners.

Another challenge will be finding insurance carriers for commercial and residential properties in the wake of huge payouts for wildfire damages, Carrillo said. More of them are likely to leave the state over it.

Insurance companies are feeling the squeeze, and they might be raising rates for businesses and individuals to offset some of the huge payouts going to victims of the wildfires. State Farm and the state program for last-resort fire insurance – called the FAIR Plan – have gone to the California insurance commissioner’s office to work out salvage plans.

State Farm told Insurance Commissioner Richard Lara that it’s spent more than $1 billion for just a few thousand claims from the wildfires; and that it will be putting restrictions on policies. The company expects it will eventually pay out about $7.6 billion total. FAIR Plan said that so far it will have to impose a special charge of $1 billion on insurance companies – which will in turn pass the costs along to homeowners – the first such move in more than three decades, according to media reports.

There is a paradigm shift underway for the insurance industry – much the same way that local and state government has had to adapt to sales tax revenue declining significantly in recent years, Carrillo said.

“Amazon has upended the sales tax model,” Carrillo said, as consumers and businesses opt into the online sales and delivery model over face-to-face onsite sales in retail stores and commercial markets.

The great advantage that Long Beach and other Southland cities have is location, location, location, he said.

“We sell a lifestyle” in Southern California,” Carrillo said. “When companies leave Long Beach, Torrance, or Huntington Beach, other companies will move and take over that space.”

Bohn would also like to see more property developers and city leaders encouraging landowners and renters to move into parts of Long Beach that would greatly benefit from land development improvements. That would make the market more competitive and bring down the price for renters and homeowners.

Quality public transit stops, such as what you see along Long Beach Blvd., is also making these areas more attractive for people to move into, he said.

It would also increase quality of life on the west and north sides – as more trees are planted, parks established, and supermarkets and other retail locations move in to serve local businesses, homeowners and renters. Those living and working in these sections of Long Beach will be expecting more, which will drive positive change, Bohn said.

Jon LeSage is a resident of Long Beach and a veteran business media reporter and editor. You can reach him at jtlesage1@yahoo.com.