“Ghost towns.” That is how Bloomberg reporters recently described London, New York, and San Francisco, all of which experienced significant decreases in workplace activity during the pandemic. Such a bleak scenario seems a logical outgrowth of a trend researchers at the Brookings Institution observed in the spring. They noted that “the pandemic pivot to telework has flatlined downtown activity and raised existential questions about its future.”
Nevertheless, there is hope for downtowns hit hard by the pandemic. Many experts believe that recovery won’t be simple or quick, but that it is entirely feasible.
The ultimate goal of recovery efforts is to create environments where people live, work, and play. In the view of Eric Northbrook, SIOR, executive managing director and partner at Voit Real Estate Services in San Diego, ideal downtowns operate 24/7. For city planner Karin Brandt, founder and CEO of the technology firm coUrbanize, they are walkable and accessible places where people can accomplish most of their tasks and activities. Frank Martin, SIOR, senior associate broker at Hall Associates Inc. in Roanoke, Va., emphasizes the need for vibrant retail and restaurant communities. He also believes that ideal downtowns house large populations of residents.
"Recovery won’t be simple or quick, but it is entirely feasible."
Downtowns that met or were close to meeting these criteria encountered major obstacles when the pandemic erupted, bringing with it an exponential rise in remote work. Remote work, in turn, prompted many residents to move from high-density areas—at least temporarily—and many companies to rethink their space needs and locations.
“Many metro areas are only starting to grapple with the pandemic’s aftereffects,” says Theresa Agovino, the workplace editor at the Society for Human Resource Management. In an article entitled “Pandemic Dims Big Cities’ Bright Lights,” she characterizes the exodus of companies and individuals from urban centers as “bad news for big-city economies,” explaining: “Fewer patrons for restaurants, bars, stores and services means fewer establishments can survive and fewer workers will be needed. It also means less sales tax is collected. Meanwhile, declining rents stifle building values, which, in turn, squeeze property taxes, which are based on appraisals.”
Brian Zrimsek, industry principal at the proptech firm MRI Software, believes that cities largely dependent upon public transport were affected to a greater extent than others. The “ghost towns” of New York, London, and San Francisco serve as cases in point. All three are reliant upon public transport, and all three, according to the Bloomberg article, are experiencing workplace activity about 50% below their usual levels.
Meanwhile, the appeal of smaller cities and suburbs, where cars replace subways and density is lower, has risen significantly. “Main Streets gained prominence during COVID,” says Brandt. “People want to stay closer to home and they’re shopping locally.” Accordingly, she expects to see a development boom in these areas along with an influx of co-working facilities.
In an essay in The Wall Street Journal, Richard Florida and Adam Ozimek elaborate on the trend of “Zoom towns” competing with “superstar cities” like New York and San Francisco. They suggest that “Over time, the competition for talent could shift to places that offer the best combination of quality of life, affordability and state-of-the-art ecosystems to support remote work.”
But don’t write off big-city downtowns yet. Some are already recovering. Some are reinventing themselves. Indeed, it is possible that some will end up stronger than they were before the pandemic.
Remote work may be here to stay, but it’s not for everyone. Many employers—and even employees—see the benefits of working on-site, at least part of the time. Employers want people under one roof so that they can pass on institutional knowledge and company culture, and provide mentorship, says Martin, who remarks, “That’s not achievable via Zoom.”
He adds that employees who benefit from brainstorming, efficiencies, talking to people around the water cooler, and those who want to grow their position within a company will want to go into the office. That bodes well for central business districts.
Landlords can encourage returns of office tenants by demonstrating flexibility. For example, Northbrook reports that in San Diego, landlords are agreeing to shorter-term deals, and are happy to do so.
Creativity has fueled recovery on the retail front. Brandt offers the examples of restaurants and stores extending into the streets, retailers adopting curbside pickup, and malls that are incorporating more open space outdoors and setting aside space for programming and outdoor games.
Zrimsek believes that “experiential retail” is the key to success, especially with goods that are less commoditized. As he points out, “It is unlikely that someone’s going to buy a bridal dress online.”
Retail is not the only sector that is getting creative. Many landlords and municipalities are exploring the adaptive reuse of buildings to attract companies, workers, and residents alike. One way in which San Diego is weathering the pandemic storm is by supporting development of life science facilities, many of which are housed in former industrial spaces, says Northbrook. Today, he calls the city a “life science mecca,” and notes that rent is rarely a top concern for life science companies, which typically have research and development budgets that make rent expenses pale in comparison.
Some owners and developers are converting downtown hotels into much-needed affordable housing, and retail spaces into micro-fulfillment centers. Opinions are mixed on the appropriateness of the latter. Brandt, for one, finds the high density and narrow streets of cities like New York and Boston an opportunity to rethink last-mile delivery approaches. She recommends sustainable options that offer alternatives to large delivery trucks, which can cause traffic jams and obstruct the pedestrian experience.
It’s too early to determine which methods of reinvention and repurposing will have the most impact, but they all have great potential to boost the recovery of downtowns. Another boost is on its way from people tired of pandemic-related restrictions. “Everyone’s pent up,” says Zrimsek. “It’s like we’re coming out of Prohibition. We’re going to flock to sporting events, theater, restaurants, and bars. The Roaring Twenties are about to pop.”
Frank Martin, SIOR
Eric Northbrook, SIOR