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The health of businesses, real estate and tax revenues is on the line. But some see an opportunity in reimagining city centers as places less dependent on office workers.
Leaders from cities as large as New York and as small as Greenville, South Carolina, are realizing that the popularity of remote work will likely outlast the pandemic, so they are turning their attention to attracting other types of people to their downtowns.
“City leaders recognize we are not going back” to the pre-pandemic model of busy downtowns that bustled with office workers from 9 a.m. to 5 p.m. and all but shut down after quitting time, Clarence Anthony, CEO and executive director of the National League of Cities, said. “There is no new normal. They’re looking forward … so residents have a vibrant community where they can work and also raise their families.”
Economists predict that post-pandemic, about 30% of the workforce eventually will settle into telework rather than return to in-person stations.
For some, that could cement the problems that began in city centers during the early days of the pandemic: near-empty office buildings and hotels; loss of population to suburbs and smaller cities with more manageable costs of living; and boarded-up stores and restaurants.
“When people are not coming downtown for the day for work, then they won’t come downtown for lunch or coffee or meetings,” said Adam Ozimek, chief economist at Economic Innovation Group, a think tank founded by entrepreneurs. “It has a major impact on businesses that cater to office workers.”
It also has a major impact on the amount of property and income taxes cities can collect. Tracy Hadden Loh, a fellow at Brookings Metro, pointed to long-term estimates showing that cities could take an average 25% tax hit from the declining value of underused office buildings alone.
In the average downtown, 71% of the buildings are offices, she said. In large cities like Chicago and Washington, D.C., that number soars to 90%.
Cities “have essentially lost their daytime population,” she told Route Fifty. “That has an impact on the small businesses located near the central districts. It has an impact on the transit systems. It has an impact on the operating income generated by office buildings for owners, [so] then there’s an impact on the tax-assessable value of the buildings.
"So we arrive at a number of negative fiscal impacts for cities coming from … office real estate and lost tax revenue from economic activity in downtown.”
But Anthony said some mayors are finding a silver lining: “It really gives us a chance to reimagine our communities” as more than hubs of employment, he said.
Anthony said he is hearing city leaders “paint … a picture of vibrancy and the notion that we are open for business, and we want you to come downtown or into my neighborhoods … even if it’s not for work.”
“That’s what cities should be asking: How do we make this a good place to live?” Ozimek said. “The fact that we are asking that question as if it’s newly important shows how this is good for governance.”
Some city leaders asked the same question after the recession of 2007-2009, Loh said. In response, Nashville and Austin grew their populations by encouraging mixed-used, walkable developments that combined homes, stores, restaurants and offices. At the height of the recession, Greenville, South Carolina, worked with private investors to repurpose a huge parking lot near a river for artist studios, homes, offices, hotels and restaurants.
Anthony said multiple cities have directed their American Rescue Plan Act funds—federal grants designed to soften the pandemic’s economic blow to cities, businesses and citizens—to amenities that might lure tourists and residents back to their downtowns.
New York, Atlanta and Washington, for example, supported restaurants that spilled onto streets and sidewalks as diners resisted eating indoors during the pandemic. Detroit used ARPA dollars to convert a high-rise office building into senior housing.
An effort in Denver to re-energize its downtown replaced some traditional retail space with pop-up stores, which have attracted tourists, Anthony said. Madison, Wisconsin, pumped funds into brick-and-mortar retailers to upgrade their spaces.
A number of cities have upgraded broadband services to create more reliable internet access to remote workers who might move downtown and work from home. And Tulsa is offering $10,000 grants to remote workers who relocate to the city and work for businesses located outside of Oklahoma, a program that began before the pandemic.
“Those are new ideas perhaps brought on by the pandemic but [are] being implemented as a long-term strategy by local governments and businesses and communities,” Anthony said.
Those cities, Loh suggested, could have an easier time recovering from the pandemic’s hit to downtowns than others.
“It involves building a more resilient mix and diverse mix of land uses downtown,” she said. “Cities that were already ahead of the game in terms of growing residential population downtown are in a stronger potion to start with.”
As cities turn their attention to luring tourists, diners, shoppers and new residents, they’re also looking for employers—but not necessarily those with in-person workplaces.
In a study from Princeton University, researchers suggested that cities go after businesses whose employees typically cannot work remotely, like those in the energy, construction and transportation fields.
A McKinsey & Co. survey noted that more than half the U.S. workforce cannot work remotely because the work requires the use of specialized machinery or, making deliveries, for example.
Ozimek said the efforts of cities to upgrade social and other amenities are likely to entice people to move downtown, whether they work at nearby offices or from their homes.
But he noted that city life especially attracts young singles, who can benefit from the nightlife and the dating market. Young residents, Ozimek added, often are just starting their careers and have modest incomes, so they pay lower income taxes and limit their spending.
And he said that aside from competing for employers to fill empty office buildings, cities now have to vie for residents.
“This is going to affect places that previously didn’t have to compete that hard because they had lots of big employers,” Ozimek said. “Suddenly, they’re going to have to do more to retain people. … This is competition that will affect everyone.”
Sharon O'Malley is a freelance writer based in Maryland.
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