New Orleans Downtowns mean something in cities. Mayors can rise or fall on how they handle downtown development, especially if developers are the ones filling up their campaign coffers. Fortunes have been made – or lost – by the owners of giant central business district towers, and their decisions on whether or not business are building downtown or running to the suburbs, edge cities, and office parks. Now these same business owners and city managers are having to face an unexpected crisis as part of the fallout from the pandemic: huge vacancies.
Balloon payments, adjustable market interest rates, and the problems of refinancing at higher rates will pull some of them under, but the real big problem that commercial and political interests are having to confront is that in many areas remote work is here to stay. Downtown offices are seeing companies downsize their space or not come back. Vacancies rates are still 25-30% in many big downtown markets, and those aren’t levels that make the numbers work.
Six months ago, advocates and people like us said, hey, why couldn’t this crisis of empty downtown office space be an opportunity for retrofits to housing units. At the time, most owners dismissed the notion. It was too expensive. The layout of giant empty floors that corporates had built out didn’t have the infrastructure to make this work. Blah, blah, blah. Now some of them are changing their tunes, likely in desperation. Some cities, like Minneapolis, for example, are offering incentives for office-to-housing buildouts. There are still problems, it’s still expensive, but if there’s no choice for them to save their shirts, some are willing to try this on.
Rethinking downtowns, as some argue, is overdue and a good idea. I’m with them, but with a giant reservation. The vision doesn’t seem to include affordability, which should be the central concern. I get the fact that politicians worry about the ancillary smaller service, food, and entertainment businesses that bustling office workers supported with the buildings were brimming. Who are the new units for? Cities like Detroit are a good example of what happens when you make it easy for younger, upscale folks to come downtown, while the rest of downtown and the city is still dying. Where can the workers live who support the downtowns, when its nothing but condos and high-rent apartments? This isn’t a new vision some of them are talking about, but a rehash of an old vision at a different address.
If cities are going to support a different kind of downtown, why invest in semi-bailouts of commercial real estate bigwigs? The goal of saving and retrofitting needs to be a more equitable housing market and large scale, mass numbers of affordable units. Believe me, whether or not an apartment has windows or a view is less important to most families than whether they can afford the rent. Vacant space is an opportunity to take some giant steps forward, especially when some of the big players are on their knees.