Traditional Downtowns Are Dead or Dying in Many US Cities. What's Next for These Zones?

Arthur T Knackerbracket has processed the following story:

The hollowing out of U.S. cities' office and commercial cores is a national trend with serious consequences for millions of Americans. As more people have stayed home following the COVID-19 pandemic, foot traffic has fallen. Major retail chains are closing stores, and even prestigious properties are having a hard time retaining tenants.

The shuttering of a Whole Foods market after only a year in downtown San Francisco in May 2023 received widespread coverage. Even more telling was the high-end department store Nordstrom's decision to close its flagship store there in August after a 35-year run.

In New York City, office vacancy rates have risen by over 70% since 2019. Chicago's Magnificent Mile, a stretch of high-end shops and restaurants, had a 26% vacancy rate in spring 2023.

A recent study from the University of Toronto found that across North America, downtowns are recovering from the pandemic more slowly than other urban areas and that "older, denser downtowns reliant on professional or tech workers and located within large metros" are struggling the hardest.

Over more than 50 years of researching urban policy, I have watched U.S. cities go through many booms and busts. Now, however, I see a more fundamental shift taking place. In my view, traditional downtowns are dead, dying or on life support across the U.S. and elsewhere. Local governments and urban residents urgently need to consider what the post-pandemic city will look like.

U.S. downtowns were in trouble before the COVID-19 pandemic. Today's overhang of excess commercial space was years in the making.

Urban property markets are speculative enterprises. When the economy is booming, individual developers decide to build more-and the collective result of these rational individual decisions is excess buildings.

In the 1980s, the Reagan administration allowed a quicker depreciation of commercial real estate that effectively lowered tax rates for developers. With financial globalization, foreign money flowed into the U.S. property sector, especially to very big development projects that could absorb large pools of liquid capital looking for relatively safe long-term investments.

Years of low interest rates meant cheap money for developers to finance their projects. City governments were eager to greenlight projects that would generate tax revenues. In many downtowns, office space now takes up between 70% and 80% of all real estate.

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