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Laka has been the source of two unusually successfull projects which attracted many people to these lovely sims near the Volcano. The Laka Lounge & Resort, covering the Laka bay, is a beautifully designed "resort", really well integrated into the landscape. It was a source of many events which were hosted there, and, for a while, owning property near the Laka Lounge & Resort has been very fashionable. The residents usually came together at the resort itself for a piece of chat :)
Then the first Plush erotic club was built in Laka. Plush is currently a large "institution" in SL, featuring a brand which is used for clubs, merchandise, a lingerie end erotic clothes line, with several establishments around SL, and one of the largest groups in existence. Since the sims at this part of the world are old, the lag in Laka became intolerable, while Plush slowly became a 24/7 club due to its success. At the peak, people couldn't even log in to Laka, and even sometimes the queue on the neighbouring sims was high enough for those sims to be blocked as well.
The result was a decline of the Laka Lounge & Resort's own events - there simply wasn't enough CPU power to hold two events on the same sim! And slowly most of the Laka residents sold their land and moved away. After a few months, the only buildings in Laka were the Lounge & Resort and the Plush club - the rest being empty wilderness.
Since Plush went away to its own private sim, Laka retained much of its former glory. The Laka Lounge & Resort attracted (and welcomed!) new residents and expanded its operation, being currently well back on its way to become - once more - one of the loveliest resorts in SL!
It should not go without mention that Laka originally had beta terraform limits which allowed users to dig basements, making it very unique and desirable land. The land peaked in value just before the construction of the main area of Laka Lounge & Resort. After many users had already created basements and other terraform-dependent structures, Laka was changed to impose the standard terraform limits of other new sims (4m). Those who paid inflated prices for land there were outraged, and formed a protest group. No resolution was ever officially reached. This essentially doomed Laka Lounge by making it impossible for the owners to alter the terraform without destroying the buildings. Eventually, the entire resort was torn down and most of the land was sold, bringing an end to one of the most memorable eras in SecondLife.
So far the only explanation from Lindens is that the original terraform limit was merely an "oversight" which somehow went unnoticed for the months preceding these changes. No compensation was ever made to the users who overpaid for "highly terraformable" land.