Downtown office districts vulnerable - even before Covid

Published Tue, Jul 13, 2021 · 05:50 AM

New York

THE modern downtown business districts of many large US cities were created through subtraction: First residents left the centre, then the craftsmen and wholesalers, then the museums, theatres and smaller retailers, and - the final blow - the department stores.

What remained at the heart of many cities in the 20th century were blocks and blocks of office buildings filled perhaps 10 hours a day, five days a week - a precarious urban monoculture. It was already susceptible to shocks and recessions before the pandemic.

And now, with the future of office work deeply uncertain, this moment has sharpened debate about what downtown should be, if not the domain of staid office real estate above all.

In some downtown business districts, 70 to 80 per cent of all real estate is dedicated to office space, according to a New York Times analysis with CoStar, a company that tracks real estate down to the individual building. That means there are few residents to support restaurants at night or to keep lunch counters open if office workers stay away, and few reasons for visitors to spend time or money there on the weekend.

And it means that a city's downtown tax base relies heavily on office property values, that streets grow quiet when workers head home, and that the most central and accessible part of the city - also often the hub of a transit system - is little used much of the time. Such is the case in parts of the San Francisco and Boston financial districts, and in stretches of downtown Washington and the Chicago Loop, where offices command the vast share of all real estate.

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"Any financial manager would tell you that's crazy," said Tracy Hadden Loh, a Brookings Institution researcher who has analysed office real estate. Downtowns, like investment portfolios, are more sustainable when they're diverse. The past year has made that plainly clear in places like midtown Manhattan, New York City, where property tax assessments, transit ridership and small-business revenue fell particularly far during the pandemic.

CoStar data going back to 2006 shows that many big-city downtowns have been evolving away from strictly office space, adding college dorms, apartment buildings and civic attractions. Cities where "downtown" has increasingly come to mean more than offices are likely to be more resilient as they emerge from the pandemic, researchers and downtown officials say.

"To think that we're going to make it in cities with just single-use office districts - that's not a formula for success," said Paul Levy, the longtime head of the Center City District improvement organization in Philadelphia. "And most cities have realised that for the last 20 years."

That recent story of downtown reinvention, however, is pushing against a century of history, as residents and retail left for the suburbs and as highways and parking lots took their place.

"We want to be the kind of complete neighborhood where your residences, your job, your dry cleaners, your bank, your childcare facility are all within walking distance," said Michele Van Hyfte, vice-president for urban design at the Downtown Austin Alliance in Texas.

The pandemic revealed that downtown Austin had not become that yet, even after 20 years of trying. Still, downtown Austin is among the districts that have changed the most since 2006, the CoStar data shows. Its skyline has been reshaped by new high-rises, many of them apartments, hotels or buildings that mix offices with other uses. Restaurants and entertainment spots have replaced vacant land and parking lots. In 2006, 53 per cent of real estate downtown was office space. Today, that figure is 41 per cent. NYTIMES

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