Sunset Strip development revs up as long-delayed project gets going

A long-delayed real estate development at the heart of Sunset Strip has finally emerged as builders step on the gas along West Hollywood's famous thoroughfare up and down the boulevard.

Demolition started this week on vacant structures at the busy intersection of Sunset and La Cienega boulevards to make way for an upscale hotel, apartments, shops and restaurants valued at more than $300 million.

The four-building project is part of the city's plan to boost the appeal of what is already one of the region's biggest leisure attractions for locals and tourists alike.

"The Sunset Strip is known internationally," Mayor Abbe Land said, "and we want to live up to people's expectations."

The intersection of Sunset and La Cienega, however, has been a downer for about a decade. Buildings on the south side of Sunset were shuttered to make way for what is now called Sunset La Cienega. For years, it was known as the "Sunset Millennium," and the development was approved by the city in 1999. But construction was postponed in part because of objections from neighbors, opposition lawsuits and, more recently, a weak real estate market.

The litigation is over and Hollywood developer CIM Group, which bought the property in late 2011, is launching the project as demand for hotel rooms and residences surges in Los Angeles.

Other projects in the pipeline along Sunset Boulevard include a hotel at Doheny Drive on a site occupied for decades by a fancy Scandinavian restaurant called Scandia. The 148-room hotel would be part of a mixed-use project with stores and 20 condominiums. The inn is expected to be operated by a division of Marriott called Edition that runs luxury boutique inns designed by hotelier-to-the-hip Ian Schrager.

"I believe the Marriott folks are pretty close to making something happen," Land said.

Just a few blocks to the east near San Vicente Boulevard is a vacant lot that recently sold for $28 million to an unknown investor, market observers said. The James Hotel property, as it is known, has city approval for nearly 200 rooms, restaurants and spaces for meetings.

On the site of the House of Blues nightclub at 8430 Sunset Blvd., the city has approved construction of a 149-room hotel, 40 condominiums and a parking structure.

Interest in building hotels has been sparked by a recovery in the local hospitality business, which has climbed out of the deep hole it fell in during the last recession, said John Strauss, managing director of hotels for real estate brokerage Jones Lang LaSalle.

"The last five years have been one of the longest spells in slow- or no-growth in new hotels," Strauss said. "Certain markets are now worthy of new development."

Los Angeles is the second largest hotel market in the country after New York and room rates and occupancy in the region rose by double digits from 2010 through 2012. West Hollywood is one of the strongest local markets, attracting business travelers in the entertainment industry and tourists.

Well-known hotels on the strip include Chateau Marmont, Mondrian Los Angeles and the London West Hollywood. The strip also has popular watering holes such as Eveleigh and the Skybar and is home to famous live concert venues such as the Whisky a Go Go and the Viper Room.

The strip has had its ups and downs as a music mecca. But it has held its cachet as a business address, commercial real estate broker Christopher Bonbright of Avision Young said.

Rents for offices in Luckman Plaza on the edge of Beverly Hills can top $6 per square foot per month, rivaling the cost of choice oceanfront space in Santa Monica. The posh members-only Soho House club on top of the 13-story Luckman building has one of the top-grossing restaurants in the region, Bonbright said.

The strip also has smaller buildings attractive to firms in creative businesses such as entertainment and a brace of popular restaurants, but the thriving hotel business is bringing people to the strip and driving the latest burst of development, the broker said.

"The foam on the latte is all these new hotels coming out," he said.

CIM Group's Sunset La Cienega development will have a 290-room hotel in two 10-story towers on the southeast corner of the intersection. Negotiations with a New York hotelier to operate the inn are nearly complete, CIM co-founder Shaul Kuba said, but he declined to identify the likely operator. He expects the hotel, which will also have restaurants and shops, to earn a four-star rating.

On the southwest corner will be two eight-story towers with 190 residences and ground floor spaces for stores and restaurants. CIM is building the units as high-end apartments but may sell them as condominiums if the housing market is still strong when the project is complete in about 30 months.