Even as the effects of the recession recede, residential development in downtown L.A. still faces challenges, said Richard Green, director of USC's Lusk Center for Real Estate. He pointed out that, unlike Manhattan, skyscrapers in California have to adhere to strict earthquake codes, and that can make construction particularly costly in downtown L.A.
“When you get done with the construction cost of a luxury building, it’s more expensive than buying a really nice house in a really nice neighborhood that’s pretty close to downtown," Green said.
Also, Green said, those with enough money to buy a luxury condominium have other options.
"Even in Southern California, $2.7 million can get you a really nice house in a really nice neighborhood," Green said. "San Marino — you could buy a really nice house for a million and half, something like that."
Green said even though living conditions in downtown L.A. have improved over the last 20 years, the neighborhood still isn't in a position to charge a premium.
"It's still not the highest amenity place to live in the L.A. area. There are places with more bars and restaurants and theaters and so on," Green said.
At The Ritz-Carlton Residences, a furnished two-bedroom condo that's 2,222 square feet can cost $3.7 million.
Green estimated that for roughly $3 million you can get a 2,556 square foot house with four bedrooms and four baths, on a roughly 8,300 square foot lot in Beverly Hills.