For several years now, I have been arguing that a New Normal has emerged for our downtowns and that the business operators, landlords, developers and district leaders who do not recognize that they must adapt to that fact are likely to face severe economic losses. My recently reported research on multichannel retailing (see my last blog posting below) combined with some some recent news items about movie attendance, housing and office development have strongly confirmed my argument. This posting will focus on office development.
For much of the 1970s and 1980s office development was seen as the economic engine that would drive downtown revitalization in such major cities as Richmond VA, Charlotte NC, Cleveland OH, Philadelphia PA, Seattle WA. Los Angeles CA, etc. Office development primed revitalization efforts were also mounted in smaller cities such as New Brunswick NJ, (population 55,181) and White Plains NY (population 56,853) and in suburban communities such as Morristown NJ (population 18,457), and Garden City NY (population 22,371).
Many of these office driven revitalization efforts failed to achieve their goals and the downtowns had to add residential, retail and entertainment components to their revitalization strategies. Nevertheless, office development has remained a critical revitalization asset for many downtowns.
A recent article in CoStar’s e-newsletter reported on the major findings of a symposium of office development experts convened by BOMA. A summary of their findings should put downtown leaders on notice:
Increased telecommuting, flexible work schedules, the untethering of workers from desks to enhance collaboration and increase face-a-face client contacts have combined to increase employee density in major office buildings and reduce the demand for office space. For today’s office worker, according to one of these experts, the ideal situation may be:
The potential negative impacts of the New Normal’s static demand for office space are:
- Fewer new downtown office buildings will be built
- Existing downtown office buildings that are not configured to meet the new work habits of office workers will have languishing leasing efforts. A lot of existing downtown office buildings may have to be renovated if they are to be competitive
- Downtown retailers and eateries will have a significantly reduced office worker market because the telecommuters and flex-timers will spend much less time in the district.
Of course, downtowns also too often suffer from the fact that major office tenants provide incentives (cafeterias, subsidized meals and concierge services) and work pressures to keep their employees from leaving the building at lunchtime. Furthermore, the retailing many downtowns is often too weak to motivate substantial office worker patronage.
But, there is a potential upside for downtowns that can provide a dynamic, experience-rich environment. As the CoStar article notes:
Dynamic downtowns will consequently continue to have a distinct advantage in a highly competitive office market, while listless downtowns will probably be weaker competitors than ever.
The CoStar article can be found at:http://www.costar.com/News/Article/Will-We-Need-Any-More-Office-Space-/134483?ref=100&iid=261&cid=DC6077B43E67ACADB224FF6D0AF89AB6
N. David Milder 011312