5700 HANNUM REDEVELOPMENT PROJECT Market / Fiscal / Economic Analysis Prepared For: LPC West, Inc.
Prepared By:
1601 N. Sepulveda Blvd. #382 Manhattan Beach, CA 90266 www.kosmont.com August 2023
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 2 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
1.0 Executive Summary Kosmont & Associates, Inc. doing business as Kosmont Companies (“Consultant” or “Kosmont”) has prepared this Market, Fiscal and Economic Impact Analysis (“Analysis”) for LPC West, Inc. (“Client”) for proposed 309 multi-family apartments with 5,600 SF ground floor retail development (“Project”). Project is replacing a 30,672 SF office building built in the 1970’s, that is located at 5700 Hannum Ave. in Culver City. Residential and Commercial Market Assessment Kosmont’s Analysis indicates that the proposed multi-family mixed-use Project is the highest and best use of the subject Site. General office building owners have suffered tremendous setback from the work from home trend accelerated by the Covid pandemic. In the Los Angeles area, the vacant office space increased from 45 million to 65 million SF. In Culver City Fox Hills area, there is over 1.5 million SF that is vacant (22% of total inventory). Dozens of older office buildings are being demolished across southern California. Multi-family uses are the most economically viable reuse of old office building sites. With almost 60,000 people working in Culver City, the major employers are in desperate need of housing for their young workforce. The current apartment vacancy rate of 5% indicates significant demand from new households that will spend money locally and support the City’s economy and General Fund from new sales taxes. The site is ill-suited for retail uses, given its dimensions and relatively isolated location on a tertiary street with less than 8,000 average daily trips (“ADT”), compared to 30,000 ADT’s for normal commercial districts. Kosmont also notes that large amounts of ground floor commercial spaces within multi-family buildings do not perform well, except in dense downtown districts with heavy pedestrian traffic. Economic Stimulus of New Housing vs. Commercial With approximately 300 new households, Kosmont estimates the Project residents will infuse approximately $10 million in citywide spending. However, Kosmont estimates that the 30% local capture will only support 4,500 to 6,000 SF of new non-anchored retail centers, based on average sales of $500-$600 PSF. This commercial area is much less than the 39,600 SF required by City’s CCMC 17.400.065.D.2 Mixed Used Development Standards, that calls for 10% of gross building area to be commercial. 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 3 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
Annual Fiscal Revenue Increase The Project is estimated to generate an annual fiscal revenue of approximately $428,000 at full buildout in 2023 dollars thanks to a $100 million increase in assessed value, The Project is expected to generate five times greater tax revenue than the current use, which has an estimated tax revenue of $80,000, as shown in Table 1.1. Table 1.1: Summary of Fiscal Impact Source: Kosmont Companies, Culver City FY 2022-23 Budget The Project will provide significant tax revenues from a variety of sources and can provide a diverse level of revenue protection from future economic downturns for the City General Fund. Economic Benefits From Construction and Operations The Project will generate substantial economic benefits from both construction and operations. Construction This Project will yield substantial economic benefits to the City, L.A. County, and the region, as buildout is estimated at approximately $66 million in hard cost spending and $13 million in other capital expenditures (excluding land acquisition and financing costs). Per IMPLAN analysis, that spending is estimated to provide 604 Full Time Equivalent (FTE) jobs on site, with a total of 863 jobs Countywide (paying $66 million in wages), including indirect and induced impacts, and could yield an additional $50 million in indirect and induced regional economic output, totaling approximately $129 million Countywide. Operations At full buildout, the Project will support 20 jobs onsite for property management and maintenance, as well as in the commercial business. Resident spending from the Project is estimated to support 162 local jobs and ($12 million in wages).
Project Annual Fiscal Revenue
City General Fund Revenues
Proposed
Project Annual
As Is Office
Annual Total
Property Tax (Secured) $112,400 $3,000
Property Tax in Lieu of MVLF $53,500 $1,500
Sales & Use Tax (Direct On-Site) $41,900 $0
Sales & Use Tax (Indirect Off-Site) $130,000 $8,000
Utilty Users Tax $66,000 $6,000
Franchise Fees: Gas, Electric, and Cable $9,000 $1,500
Business Licenses $15,000 $60,000
Total Estimated General Fund Revenues: $427,800 $80,000 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 4 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
Other Benefits In addition to General Fund revenues and local job creation, the Project will provide indirect benefits to City, County and the Culver City Unified School District (“School District”) including: • The City will receive estimated one time permit and plan check fees in excess of $1 million • Other Development impact fees of $10.5 million • 27 apartment units dedicated affordable for very low income households • The School District will receive $1.5 million in one-time developer school fees estimated at $4.08 per square foot of habitable building area • Even though there will be few school age children living in the Project, the Unified School District will receive 23.6% of the basic 1% property tax levy, yielding an estimated $252,000 per year as shown in a following section. It is important to note that with dozens of similar low value office buildings in the area, the development of residential mixed-use at the subject site can spur more investment in the area. This can be a significant financial benefit to the City through increased property taxes, sales taxes, utility taxes and business licenses. The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this Analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions. 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 5 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
Table of Contents 1.0 Executive Summary ........................................................................................................... 2 2.0 Project Description ............................................................................................................ 6 3.0 Market Assessment ........................................................................................................... 8 4.0 Annual Fiscal Revenue ................................................................................................... 11 5.0 Economic Benefits - Construction and Operations ...................................................... 15 6.0 Appendix Data .................................................................................................................. 16 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 6 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
2.0 Project Description The Project is planned to be developed on the 2.23 acre Site at 5700 Hannum Ave. at the SWC intersection of Buckingham Parkway in the Fox Hills neighborhood of Culver City (“City”), California. The Project is located on the eastern edge of the Business Park, adjacent to multi-family development along Buckingham Parkway, approximately 1 mile southeast of the Fox Hills Mall. Figure 2.1 Aerial Photo of Site and Immediate Neighborhood
2.2 Project Summary The Site is currently occupied with a 30,672 SF Class B office building on 2.23 acres with 108 parking spaces, built in 1979. The proposed redevelopment Project will consist of 309 multi-family apartment units with 27 dedicated to very low income households and 5,600 SF of ground floor retail. Figure 2.2 on following page show the conceptual site plan on the long narrow parcel.
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 7 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
Figure 2.2: Site Plan
This Analysis critically examines the market viability of continued office use and examines the Fox Hills retail market and the suitability of the subject site for new retail development. The Analysis also evaluates the stabilized annual fiscal revenues expected for the City’s General Fund for both the existing office use and the proposed Project at completion. Fiscal revenue estimates were derived from estimating the various taxes associated with the Project including property taxes (secured and unsecured), business taxes, utility and franchise taxes, direct and indirect sales taxes. The Analysis also examines the construction period jobs and wages, as well as the ongoing jobs from commercial operations and indirect/induced jobs from the future resident spending.
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 8 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
3.0 Market Assessment Kosmont prepared a summary evaluation of Culver City area retail, office and apartment market historic data on inventory, absorption rates, lease rates and vacancy rates, as well as other factors that impact development feasibility. 3.1 Retail Market Trends Brick and mortar retailers across the U.S. face dramatic decline in retail sales as the digital economy transforms the lifestyles and social patterns of every generation. Today’s consumers use online websites for purchasing many hard and soft good commodities. E-commerce retail sales increased by more than 30% in 2020 and growth is expected to continue, particularly in clothing and general merchandise purchases. Even the most vibrant communities are facing a reduction in retail footprints, format sizes, and are seeing bankruptcies of major retail store chains. Consumers are purchasing retail goods through multiple vehicles known as Omnichanneling. E-Commerce sales, which have increased steadily over the past 10 years, grew to $1.04 trillion in 2022. E-commerce retail sales represented 14.5% of total sales, and are projected to increase by 9% in the next five years, impacting new retail development feasibility. These structural changes have accelerated and were solidified by the COVID-19 pandemic. Multi-Family Resident Demand for Retail While the average annual MF household spending is estimated by ESRI at $30,000 per year, annual retail spending potential for restaurants, apparel, household goods, personal care, gift shops, hobbies and pets is estimated at $12,000 per year. With 300 new households, a 75% capture by local shops would be $2.7 million, which based on average sales of $500 - $600 PSF, would support 4,500 to 6,000 SF of new commercial space, far less than the 39,600 SF per the City MU standards. Local Retail Market There is approximately 2.5 million SF of retail in close proximity to the Project site. For this analysis Fox Hills Mall was excluded because it is a different retail type than could be built on the Project site. According to CoStar, the local serving retail (excluding Fox Hills Mall) is a substantial 1.6 million SF with a vacancy rate currently at 5.9%, and CoStar data reflects no new construction in a decade. Annual rents in the submarket fell to $34.64 PSF, the lowest level since 2015 as shown in Table 3.1 on following page. 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 9 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
Table 3.1: - Retail Market History – 1 Mile Radius (Excludes Fox Hills Mall) Year Inventory SF Vacant SF Total Vacancy Rate Net Absorption NNN Rent Overall 2023 YTD 1,638,424 96,109 5.9% 12,319 $34.33 2022 1,638,424 106,628 6.5% 19,607 $34.64 2021 1,641,562 129,373 7.9% (3,839) $38.55 2020 1,637,562 121,534 7.4% 27,556 $36.40 2019 1,615,649 127,177 7.9% (48,287) $41.22 2018 1,647,619 110,860 6.7% (26,127) $39.51 2017 1,647,619 88,433 5.4% (64,073) $42.68 2016 1,667,923 40,956 2.5% (2,103) $38.56 2015 1,667,923 38,853 2.3% 76,949 $30.97 2014 1,652,923 100,802 6.1% 31,696 $29.91 2013 1,652,923 132,498 8.0% (54,969) $26.49 2012 1,651,035 75,641 4.6% 6,531 $21.59 2011 1,651,035 82,172 5.0% 12,848 $21.23 2010 1,651,035 95,020 5.8% (13,659) $25.56 Source: CoStar (2023) 3.2 Office Market Trends The U.S. office market is faced with multiple problems including rising interest rates forcing assets to reprice down, combined with a structural decline in occupancy rates and aging assets. The country witnessed a staggering decline in office demand in 2022, with occupancy going down by approximately 19%, relative to pre-pandemic levels, with L.A.’s statistics representing a greater decline of 21%. This shift can be attributed to various factors, including changing work preferences, technological advancements, and the impact of the global pandemic. Recent reports confirm that these trends continue to persist in 2023. Blackstone (BX) has unloaded two 13-story buildings in southern California at a big discount, specifically 36% less than what it paid to acquire the site nine years ago. The Greater Los Angeles (GLA) area witnessed a substantial decrease in office occupancy, with negative absorption rising to 2.1 million SF in the first quarter of 2023, and totaling a loss of 15 million SF since 2019. Landlords have countered by offering extensive concession packages in order to stimulate leasing activity. These statistics are clear signs of a weakening office market. A recent Savills report says “with rising interest rates, worsening property fundamentals, and decreasing building valuations, there will be more office property loan distress around Los Angeles in 2023 as many owners find 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 10 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions. themselves underwater on their properties. With the exception of only a few submarkets such as Century City, the overall Los Angeles office market is forecasted to see more distress and tenant-favorable fundamentals as office owners aggressively compete for occupancy in an uncertain economic environment.” Culver City vacancy rate is historically high at 17.7% due to the completion of three projects comprising almost 400,000 SF that were 100% vacant. The City has been a hotbed for construction in recent years due to significant demand from technology and entertainment firms expanding near downtown and the Hayden Tract. While current activity is relatively modest, with 240,000 SF of projects expected to deliver later in 2023 or the first half of 2024, the submarket has seen major development. Kosmont examined data provided by CoStar to understand local lease and vacancy rates for the Class B/C office market which is consistent with the subject Site. Key market indicators are summarized below: • Vacancy rates for Class B/C office properties are 17.6% for 2023 and are expected to increase to 22.6% in 2027. The availability rate is 22.4%, reflecting substantial space that is leased but unoccupied. • Annual gross rents for Class B/C office properties are $49.42 PSF, essentially flat since 2021. • Office properties (all classes) are seeing vacancy rate of 22.3% in 2023, and CoStar expects it to reach 26.1% by 2027. See Appendix Table 6.1 and Table 6.2 for detailed historic data trends. 3.3 Multi-Family Market Trends The residential market in southern California is particularly robust, due to the high demand for housing. Renter demand in the Greater Culver City Submarket (which includes Baldwin Hills and Playa Vista) has been relatively strong compared to other locations in the Los Angeles (L.A.) metro area. Over the past 12 months, 260 units have been absorbed. The addition of 580 units in the past year has led to a slight increase in vacancy rates, which is still favorable when compared to historical averages. Rental rates on a year-over-year basis has seen a modest gain of 0.3%. The average asking rent in the submarket is $2,760 per month, a 35% increase over 2013 levels. The submarket has experienced some softening in rental conditions; however, the submarket's favorable location and amenities will continue to attract renters. See Appendix Table 6.3 for detailed historic data trends. 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 11 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
4.0 Annual Fiscal Revenue The Analysis is based on information provided by the Client, City, County Property Tax Auditor-Controller’s Office, California Department of Finance (“DOF”), California Board of Equalization (“BOE”), and ESRI. 4.1 General Assumptions Given the uncertainty of actual development timing and future inflation rates for revenues and expenses, Kosmont has focused this Analysis on the estimated annual revenues and expenses at full buildout. Other assumptions include: • Fiscal impacts are estimated at stabilized occupancy. • All estimates are 2023 $ 4.2 Fiscal Revenue Analysis 4.2.1 Property Tax Property tax revenues are based on the anticipated assessed value of the Project upon full build-out and the applicable City property tax rates. The General Fund receives approximately 10.5% of the annual 1.0% secured property tax general levy placed by the County. Based on the land acquisition cost of $31 million and expected construction cost of $79 million, the Project is estimated to generate $112,000 in property taxes to the City and the School District receives 23.6%, or $252,000 as shown below. Exhibit 4.2.1 Property Taxes Source: County Assessor, Kosmont Companies
Full Buildout
Baseline: Existing Assessed Value 3,000,000$
Estimated New Assessed Value $110,000,000
Net Assessed Value $107,000,000
Total Secured Property Tax General Levy 1.00% $1,070,000 Total Estimated Secured + Unsecured Property Tax $1,070,000 Distributions to Taxing Entities
Culver City General Fund 10.5% $112,400
School District 23.6% $252,500
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 12 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
4.2.2 Taxes in Lieu of VLF Prior to 2004, a percentage of State of California motor vehicle license fee (“VLF”) was distributed to cities. In 2005, the State instituted a revenue swap, guaranteeing that municipalities within California receive a distribution equal to the VLF collected, plus a percentage equal to the annual increase in assessed value, which is equivalent to approximately 5% share of the basic levy, or estimated VLF revenues of $53,000 in 2023 dollars. 4.2.3 Sales Tax (On-Site / Direct) California cities receive 1% of the taxable retail sales occurring within the City. Culver City has passed two separate sales/use tax ordinances (Measure C and Measure CC), which added a 0.75% additional tax on local purchases, plus out of City auto sales by City residents. The Project plan has 5,600 SF of designated retail/restaurant space. For this Analysis, Kosmont assumed that onsite businesses generate an average of $500 per square foot in gross sales with taxable sales of $400 per square foot or $2.2 million annually. Based on the basic 1.0% sales tax allocated to cities, direct sales tax revenues from the Project to the City General Fund at stabilization are estimated at approximately $22,000 per year. With Measure C and CC and Use tax included, the City annual revenue is estimated at $41,900. Exhibit 4.2.3: Sales Tax Source: BOE, Culver City, and Kosmont Companies 4.2.4 Sales Tax (Off-Site / Indirect) Off-site / indirect sales tax revenue projections are estimated based on the taxable sales generated by the spending of Project residents, businesses and employees within the area. Employee spending is based on average household incomes and BLS Consumer Expenditure Survey data. Annual Use Tax is given to each City based fair share allocation of online sales taxes through County Pools, averaging over 12% of the local sales taxes generated. At stabilized occupancy, the total annual resident retail spending is estimated at $average of $30,000 per household, or Stabilized
Retail SF 5,600SF
Estimated Taxable Sales - Retail $400 PSF $2,240,000
Sales Tax to City 1.00% $22,400
Measures CC/ & C 0.75% $16,800
Use Tax as % of Sales Tax 12.00% $2,688
Total Direct Sales & Use Tax to City: $41,900
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 13 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions. $9.3 million. Based on the Project’s location, the Analysis assumes 75% Citywide capture rate for annual spending, yielding sales and use tax revenue to the General Fund estimated at $130,000 per year as shown below. Exhibit 4.2.4: Sales Tax (Off-Site/Indirect) Source: BOE, Culver City, and Kosmont Companies 4.2.5 Other Tax Revenues The City collects a variety of taxes from residents and businesses. These include Utility Taxes, Franchise Fees on utility charges, and Business license fees summarized below Utility Taxes The City charges an 11% tax on all utility costs, with exemptions for senior households. Assuming utility costs of $200 per month at 95% stabilized occupancy plus $3.00 PSF for retail, it results in $600,000 of annual expenditures, yielding $66,000 per year to the General Fund. Franchise Taxes The City franchise fees equal to approximately 1.5% of utility costs, which yields an estimated fees of $9,000 at stabilized occupancy. Business License Taxes The City charges a gross receipts tax on all businesses based on a schedule that ranges from $1.00 per $1,000 to $3.50 per $1,000. • For apartment rentals, the tax rate is $1.30 per $1,000. • For retail the tax rate is $1.50 per $1,000. • For professional office the tax rate is $2.50 to $3.00 per $1,000. Kosmont estimates Project annual business license at approximately $11,700 per year for apartment rentals and $3,300 for retail sales for a total of $15,000 to General Fund.
Full Buildout
Estimated # Households 309
Estimated Annual Taxable Retail Spending / HH $30,000
Estimated Taxable Retail Spending by New Residents $9,270,000 Estimated Capture within City 75.0% $6,952,500
Sales Tax to City 1.00% $69,525
Measure CC/C 0.75% $52,144
Use Tax as % of Sales Tax 12.00% $8,343
Total Indirect Sales & Use Tax to City: $130,000
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 14 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
4.3 Office Use To demonstrate the benefits from the proposed new multi-family development, Kosmont estimated the annual revenue to the City from the existing 30,000 SF office use. • The 10.5% City share of Property taxes based on $3 million assessed value yields approximately $3,000 per year plus MVLF of $1,500 • The indirect retail sales tax from $5,000 in local spending by estimated 90 employees on site yields approximately $8,000. • Utility taxes and franchise fees on utility costs of $2.00 PSF yields approximately $7,500 • Business taxes are estimated at $60,000 per year, or $650 per employee. In total the existing office use generates an estimated $80,000 per year. 4.4 Fiscal Revenue Comparison As shown below, the proposed Project is expected to generate gross annual revenue of approximately $428,000 at full buildout, before inflation. The major contributors to City revenues are property tax and VLF In-Lieu at $166,000 or 39% of the total, and potential onsite and offsite sales tax with 45% of the total revenues. This compares to a total of $80,000 in revenue estimated from existing office use, despite significantly lower business license fees. Exhibit 4.4: Fiscal Benefit Comparison Source: Culver City, Kosmont Companies
Project Annual Fiscal Revenue
City General Fund Revenues
Proposed
Project Annual
As Is Office
Annual Total
Property Tax (Secured) $112,400 $3,000
Property Tax in Lieu of MVLF $53,500 $1,500
Sales & Use Tax (Direct On-Site) $41,900 $0
Sales & Use Tax (Indirect Off-Site) $130,000 $8,000
Utilty Users Tax $66,000 $6,000
Franchise Fees: Gas, Electric, and Cable $9,000 $1,500
Business Licenses $15,000 $60,000
Total Estimated General Fund Revenues: $427,800 $80,000 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 15 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
5.0 Economic Benefits - Construction and Operations 5.1 Construction Cost The estimated hard and soft costs for the Project are approximately $79 million. Land acquisition and financing costs are not referenced, as they do not impact the economic benefit calculations. 5.2 IMPLAN Modeling The Analysis uses the IMPLAN (IMpact analysis for PLANning) econometric input/output model developed by the IMPLAN Group to quantify the economic benefit to the local region from Project construction and ongoing operations. This proprietary model estimates the economic benefits on the industries in a given geographic area based on known economic inputs, such as construction costs. The model estimates direct, indirect, and induced benefits expressed in terms of increased economic activity (“output”), earnings (“labor income”), and job creation. Direct Economic Benefits: Direct benefits refer to the short-term business activity of general contractors involved in Project construction and the ongoing business activities of Project tenants. Indirect Economic Benefits: Indirect benefits will result when local firms directly impacted by the Project purchase materials, supplies or services from other firms. Examples would include increased sales of building materials as a result of construction activity, and increased sales of inputs related to the business operations of tenants within the Project. Induced Economic Benefits: Induced benefits relate to the consumption spending of employees of firms that are directly or indirectly affected by the Project. These would include the goods and services associated with household consumption (e.g. housing, retail purchases, services). Inputs for the IMPLAN economic benefit analysis include the development budget provided by the Client and permanent on-site employment information estimated by Kosmont. The permanent full-time employment estimates were derived from similar projects and industry standard per-square-foot employment densities for corresponding land use types. During construction, the Project is expected to produce 604 direct FTE construction jobs, and 259 indirect and induced jobs, $66 million in labor income, and approximately $129 million of economic output are expected to be captured within the County (see Appendix Table 6.4). At Project’s completion, it is projected to support 20 on-site jobs. In addition, local spending by residents is expected to support approximately 162 indirect and induced jobs, for a total of 182 jobs and $12 million of labor income (See Appendix Table 6.5). 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 16 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
6.0 Appendix Data OFFICE MARKET DATA Table 6.1: - Office Market History – Class B/C Properties within 2.5 miles of Site Year Inventory SF Vacant SF Total Vacancy Rate Availability Rate Net Absorption SF Total Gross Rent Overall 2023 6,882,444 1,214,464 17.6% 22.4% (132,126) $49.42 2022 6,882,444 1,082,338 15.7% 21.6% 226,737 $49.23 2021 6,787,557 1,214,188 17.9% 21.6% (380,668) $49.57 2020 6,785,173 831,136 12.2% 22.2% (234,444) $45.26 2019 6,805,719 617,238 9.1% 13.1% 23,086 $45.18 2018 6,844,957 679,562 9.9% 11.9% (39,300) $40.46 2017 6,738,559 533,864 7.9% 10.8% (27,943) $37.46 2016 6,736,960 504,322 7.5% 9.7% 154,048 $39.22 2015 6,692,444 613,854 9.2% 9.3% 192,132 $34.96 2014 6,484,514 598,056 9.2% 11.1% 49,468 $28.20 2013 6,488,902 651,912 10.0% 10.5% 274,961 $26.29 2012 6,476,705 914,676 14.1% 15.3% (78,494) $27.16 2011 6,480,985 840,462 13.0% 16.3% (196,593) $25.03 Source: CoStar (2023) Table 6.2: - Office Market History – Los Angeles Market Year Inventory SF Vacant SF Total Vacancy Rate Availability Rate Net Absorption SF Total Gross Rent Overall 2023 437,056,952 65,584,915 15.0% 18.2% (1,601,537) $41.42 2022 436,232,441 63,158,867 14.5% 17.6% (2,740,777) $41.74 2021 434,752,884 58,938,544 13.6% 16.5% (3,401,171) $41.31 2020 431,475,263 52,252,204 12.1% 16.0% (7,438,399) $40.46 2019 431,087,901 44,453,992 10.3% 12.5% (2,139,842) $38.76 2018 430,431,635 41,760,719 9.7% 12.8% 1,255,438 $36.94 2017 430,611,481 43,188,872 10.0% 12.7% 22,605 $35.28 2016 428,980,178 41,571,292 9.7% 13.1% 3,948,231 $34.22 2015 428,460,392 44,961,263 10.5% 13.8% 2,328,520 $32.14 2014 427,835,920 46,686,290 10.9% 14.2% 3,032,594 $30.46 2013 428,304,116 50,169,524 11.7% 14.1% 693,083 $29.00 2012 427,988,361 50,546,852 11.8% 14.6% 1,303,391 $28.21 2011 427,550,172 51,414,511 12.0% 14.6% (390,743) $27.72 Source: CoStar (2023) 5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 17 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
MULTI-FAMILY MARKET DATA Table 6.3: Greater Culver City Multi-Family Market History Period Inventory Units Vacancy Units Vacancy Percent Absorption Units Asking Rent Per Unit Asking Rent Per SF 2023 YTD 41,533 2,116 5.1% 122 $2,767 $3.39 2022 41,456 2,158 5.2% 410 $2,769 $3.40 2021 40,667 1,768 4.3% 1593 $2,626 $3.22 2020 40,317 2,987 7.4% (382) $2,451 $2.98 2019 39,766 2,052 5.2% 288 $2,531 $3.09 2018 39,371 1,937 4.9% 274 $2,482 $3.03 2017 39,045 1,882 4.8% 100 $2,407 $2.94 2016 38,926 1,855 4.8% 1171 $2,323 $2.83 2015 37,892 1,992 5.3% 840 $2,252 $2.75 2014 36,590 1,526 4.2% 507 $2,139 $2.61 2013 36,112 1,553 4.3% 246 $2,055 $2.50 2012 35,972 1,658 4.6% 265 $1,988 $2.42 2011 35,725 1,675 4.7% 20 $1,936 $2.35 2010 35,691 1,662 4.7% 168 $1,902 $2.31 Source: CoStar (2023) CONSTRUCTION ECONOMIC BENEFITS Table 6.4: Economic Benefits from Construction Values in 2023 dollars. Source: IMPLAN, Kosmont Companies (2023) During the construction period, the Project is expected to produce approximately 604 direct FTE construction jobs, and combined with indirect and induced impacts, a total of 863 FTE jobs, $66 million in labor income, and approximately $129 million of economic output are expected to be captured within the County (see Exhibit 5.3.1).
Economic Benefits from Construction (One-Time / Short-Term) Employment Labor IncomeEconomic Output
Direct (On-Site) 604 $48,041,000 $79,000,000
Indirect 80 $6,114,000 $15,904,000
Induced 179 $12,284,000 $34,630,000
Total Countywide 863 $66,439,000 $129,534,000
Estimated City Capture 617 $48,960,900 $81,526,700
5700 Hannum Project Market / Fiscal / Economic Analysis August 2023 Page 18 of 18 The analyses, projections, assumptions and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results may differ from those expressed in this analysis, as results are difficult to predict as a function of market conditions, natural disasters, pandemics, significant economic impacts, legislation and administrative actions.
ONGOING OPERATION ECONOMIC BENEFITS Table 6.5: Economic Benefits from On-Going Operations Source: IMPLAN, Kosmont Companies (2023)
Economic Benefits from Ongoing Operation (Annual)
Employment Labor IncomeEconomic Output
Direct (On-Site) 20 $869,000 $1,810,000
Indirect 3 $282,000 $752,000
Induced 159 $10,902,000 $30,724,000
Total 182 $12,053,000 $33,286,000