📰 What Happened: Facing persistent housing shortages and weakened retail demand, Los Angeles developers are repurposing ground-floor commercial spaces in mixed-use buildings for residential use. These conversions sidestep lengthy entitlement processes thanks to a California law that allows accessory dwelling units (ADUs) to be built by right in multifamily structures. Developers can add up to 25% more units this way without affordability restrictions.

🔍 A Closer Look: Notable projects include Dinerstein Cos.’ conversion of 20,300 square feet of retail at its Santa Monica complex into 18 new apartments, Acacia Capital wants to replace five retail bays with housing at its Woodland Hills property, and Morguard is eyeing parking and office space at its Lumina Hollywood tower for 36 new units. It’s all part of a broader shift due to sluggish retail leasing, office oversupply, and growing demand for multifamily housing.

🧠 Why It Matters: As demand for ground-floor retail softens in car-centric, post-pandemic Los Angeles, underused commercial spaces are becoming an untapped housing reserve. Notably, CA’s forward-thinking ADU regulations make all this possible. Modest adaptive reuse projects can offer a low-barrier path to add density and boost property value without new construction—a very attractive option in today’s uncertain property market.