Surprising trend could save cities
It’s a gloomy time for America’s biggest cities. Most have a glut of empty offices as white-collar workers prefer to stay home. Fire sales have begun for outdated buildings.
An office in San Francisco that used to be worth over $60 million just sold for $6.5 million. A tower in Manhattan reportedly sold for $150 million, a steep discount from the $500 million sale price in 2014.
An office building in D.C. sold for nearly 75% less than its last sale price.
These are extreme examples, but they typify what is to come: more price cuts and significantly less tax revenue for city budgets.
But a surprising trend is emerging that could revive cities: the YOLO economy, as in “you only live once.” Americans are spending eagerly on concerts, vacations, wellness days and other splurges. It’s becoming a lasting impact of the pandemic.
If the Great Depression caused a generation to save and hoard for the rest of their lives, the pandemic is causing millennials and Gen Z to prioritize memorable experiences. City leaders need to lean into this. Part of the solution is turning some offices into condos and apartments.
But reviving downtowns will also require new experiences that draw people in and keep them there, whether for a weekend or to live.
There are encouraging signs that this is starting to happen. Many cities now find they have more people downtown after hours and on weekends than they did in 2019, before the pandemic.
It’s a big contrast to what remains a tepid scene during typical work hours (8 a.m. to 6 p.m., Monday to Friday), when many cities are still only seeing about 60 to 70% of the 2019 activity. This is according to cellphone data analyzed by the University of Toronto’s School of Cities.
“Many large downtowns struggling to bring back activity during the workweek are booming after hours. San Francisco, Chicago, Detroit, Minneapolis, Houston and Dallas all experience after-hour activity at least 35% higher than during the workweek,” write Amir Forouhar, Karen Chapple and Jeff Allen from the School of Cities.
D.C. is one of the places still languishing during the workweek, but it’s surging after hours with an influx of tourists, new residents and suburbanites looking for a special night out. Weekend bus and Metro rail ridership is now above 2019 levels.
Restaurateur Masoud Aboughaddareh has seen this firsthand. He opened Lima Twist on K Street NW — not far from the White House — in the summer of 2022, when hopes were high that the world was getting back to normal. He quickly realized that downtown wasn’t anything like the pre-COVID days. Work lunch was a bust.
Even happy hour was a struggle. But what is drawing people now are special events. “Latin nights” where people can dine and then learn to bachata are a hit; so was the drag queen brunch on Saturdays.
After 30 years in the restaurant business, he’s shifting his normal recipe for success in the experience economy. He’s about to open another restaurant downtown, Darvish Kitchen, which he’s dubbing a “Persian experience.”
This kind of thinking needs to blossom in city halls, corporate offices and small-business hubs. It’s notable that the School of Cities analysis found warmer cities — San Jose, Tucson, Los Angeles, Tampa, Jacksonville — are the most likely to be more than 100% recovered after hours and on weekends. But Cleveland is also almost fully back after hours thanks to a strong push to convert offices into housing and a major renovation of Public Square park so it’s now a hub of performances and yoga in the summer and an ice rink in the winter. It’s become a place people stop by en route to a game, museum or dinner.
Another promising idea emerging from Canada is converting office space into “toboggan flats” — co-living spaces aimed at young people. It’s easier and cheaper than converting buildings into condos because it doesn’t require a kitchen in every unit: Similar to a college dorm, there are communal kitchens and bathrooms down the hall. In addition to costing less, it’s also an easier configuration for staging group experiences such as learn-to-cook-dal night or Japanese drumming day.
Meanwhile, it’s not all gloomy during weekdays. Numerous data sources show improvement there, too. In April, Miami, D.C., Dallas and Atlanta all had their busiest month in-office since the pandemic, according to cellphone data analysis by Placer.ai. Almost every city is up from the same time last year.
There have been a lot of scary headlines about urban “doom loops.” The fire sales reinforce the fearful narrative. But what makes this very different from the home market crash in the Great Recession is that this is a slow-moving problem telegraphed well in advance. City leaders have time to plan and act. They can learn from reinventions in Cleveland and Detroit, which largely started with developers taking a chance on cheap downtown properties. And they can use cellphone data to see in real time what’s successful in drawing people back.
The YOLO economy is here. Young people don’t want a mundane happy hour; they want event hour.