The Cockamamie Conclusions andAssumptions of the Downtown Doom Loop Analysis

Posted on October 13, 2023 by DANTH

By N. David Milder

I have really had it with the Doomers, those who argue that our large downtowns are doomed to failure and diminishment.[1] It’s time to call them out for being the downtown ignorant Chicken Littles that they are.

Their Covid crisis instigated doom loop analysis has been a considerable worry for many municipal business and political leaders, since it predicts not just the decline, but the end of our large downtowns’ ability to be thriving business districts. It also has been almost as good a story for grabbing public attention for many media outlets as fires, riots, and other serious calamities. Of course, it also has been raw meat for some authors who seek greater notoriety. The legitimacy of this argument seems to mistakenly be seen as deriving from the fact that academics and wannabe urban pundits have been its leading proponents and some even used real data analyzed by sophisticated statistical tools. However, the most worrisome parts of the argument are really based not on any data or fancy statistical tools, but on the Doomers conclusions and assumptions. The Doomers thinking displays an enormous ignorance about what downtowns are really like and how they operate. The media writers and their editors who bought the Doomers’ analysis are little better.

The Conclusion of a Downward Spiral. Doomers cite the very low occupancy rates found in the office clusters in our largest downtowns – too often based often on questionable data, mind you — and predict consequent enormous losses in lease revenues and building values. This they then argue will mean the failure of lots of office buildings. Investing in downtown real estate and leasing downtown spaces consequently will be much less attractive, and this will have very adverse effects on other downtown sectors such as retail and personal services. City tax revenues will also drastically fall, with a consequent reduction in essential services, precisely when quality of life problems are surging. Overall, these downtowns will thus become much less attractive in a continually degrading manner.

Frankly, much of this part of the Doomers analysis is valid. Major downtown office sectors have undeniably been hit hard by the pandemic, and many outmoded buildings are indeed doomed. But that has happened several times in the office sector since the 1980s, if not as strongly. Quality of life problems have surged both in frequency and visibility during the crisis. However, the Doomers turn the current office sector downturn into a unique event by making an unwarranted analytical leap, based on little to no probative evidence: they claimed that these downtowns would fall into an unstoppable downward spiral, AKA the doom loop. They did not entertain any possibility of a recovery of any kind such as:

The downtown’s office sector does indeed shrink, maybe even by 20% to 30%, but then it stabilizes at this new equilibrium point that is still a very consequential 70% to 80% of its prior size. But downtown growth is now engined by other sectors such as housing, personal services, entertainment and culture.
After stabilizing, the office sector starts to grow again.

The Doomers’ data have no probative value for determining whether the doom loop scenario or one of the recovery scenarios is the more probable outcome.

Their major justification for predicting the doom loop seems to have been that quality of life issues — e.g., rising crime rates, more homeless – were occurring along with fewer downtown visits and lots of business closures were occurring early in the crisis. Yes, in the past these issues did cause downward spirals in many downtowns. What is interesting is that these problems often emerged in the 1970s and 1980s in fairly large downtown office clusters that stayed successful in spite of them. Ironically, the fortress designs of these clusters often induced the very fear of crime they were meant to protect against. In time, many districts overcame these problems and the downtowns office sector became more prosperous than ever before! Downtown Manhattan and Charlotte’s CBD are two examples that come to mind.

The Doomers choice of the gloomy scenario also shows an ignorance about many characteristics of our large downtowns and it keeps being eroded by hard evidence of downtown recoveries, some of which appeared early in the crisis:

Historically, large downtowns have proved to be amazingly resilient. They survived the Great Depression, and some like Midtown Manhattan even had trophy projects like the Empire State Building and Rockefeller Center developed during that very stressful era. Many also came roaring back after the mid 1990s after having struggled during the 1970s and 1980s.
Downtowns in some states, such as Texas, have long had their office sectors go through serious boom and bust periods because of overbuilding, exhibiting a kind of cyclical resiliency.
Back around the Great Recession the growing appeal of open offices was supposedly making many older office buildings outmoded, much as remote work is said to be doing today. That was supposedly causing great havoc within the real estate industry. If memory serves me, office growth soon returned with a happy vengeance. The office sector, just like other sectors, will experience periodic serious disruptions caused by capitalism’s process of creative destruction. This process is one of both mass disruption and strong recovery.
Nonresident office workers only account for a relatively small proportion of downtown visits. Almost two-thirds of these visits are accounted for by visitors who neither work nor live in a downtown. These visitors were quick to stay away from our downtowns as Covid became a national emergency, and accounted for a far greater proportion in the drop of downtown visitation than did the office workers, BUT they were also the quickest to return in very substantial numbers.[2] This quick return indicates that the causation of this decline in visitor visitation was situational in nature, not structural. In contrast, the slow return of office workers is consistent with structural causal factors being present. By October 2021, data from Placer.ai was already showing strong signs of recovering downtown visitation. Still, Doomer gloom continued to be published.
Office workers also account for a relatively small portion of a downtown’s retail sales. Tourists and residents are the big retail shoppers and spenders. Many downtown retail problems were existing precrisis, caused by the strong wave of creative destruction that industry has been experiencing for about a decade.
So the ability of a declining office sector to hurt retail sales and decimate downtown pedestrian activity is far more modest than the Doomers suggest.
Downtown return to office rates (RTOs) have risen from about 30% early in the crisis to a median of 65% in our large downtowns. That’s not evidence of a downward spiral, but of a significant partial recovery, though the extent of the final recovery is still uncertain.
Midtown Manhattan, once thought to be a potential victim of an office generated doom loop recently was the “hottest office market” in the US in the first half of 2023 that had “far and away” the most absorption of office space.[3]
In downtown San Francisco, the process of wringing out excessive values from troubled office buildings seems to have started, with prior owners and bankers taking their losses and the new owners attracting new tenants with lower and more affordable rents.[4] This process promises to help increase downtown office occupancy rates, as well raising office worker foot traffic and consumer spends.
Greater downtown visitation is known to help reduce the fear of crime, and drive bad uses out of the area. This is something about which the Doomers appear to know nothing. A recently released terrific report by a Paul Levy led team at the Center City District in Philadelphia found that: “The cumulative average of visitors across the (nation’s largest) 26 downtowns by the end of Q2 2023 back at 79% of Q2 2019 levels; workers of all kinds back at 66%; and residents at 120%.”[5] The direction of downtown visits is obviously strongly upward, not downward. That will help make these areas seem more activated and alive, while helping to reduce the fear of becoming a crime victim. The quality of life conditions in these downtowns are not on any definitive downward spiral, though serious issues certainly remain unresolved.
The title of the CCD’s report, Downtowns Rebound, sends a very important message about our large downtowns. They may not have fully recovered, but they are definitely rebounding. There’s no downward spiral. They are not doomed or dying.
Downtown Doomer proponents seem to mistakenly identify the process of creative destruction that downtown office sectors are going through as a downward spiral to doom.

What does seem to be in a genuine doom loop is the doom loop argument itself!

The Assumption That the Economic Health of All Downtowns is Dependent on the Strength of Their Office Clusters.

The focus of the Doomers is on downtown offices and, in their eyes, the failure of that sector drags the rest of the downtown into a downward spiral with it. Such an analytical connection is perhaps easy when the terms Central Business District or CBD and downtowns are frequently used interchangeably, and CBDs are seen as dominated by large office clusters.

In fact, most downtowns are far more complicated and have three sets of major functions, as displayed in Figure 1: Central Business Functions, Central Social Functions, and Central Support Functions.[6] The Central Social Functions (CSFs) are given short shrift by the Doomers, if they are noticed at all, but they are essential in many ways. First, strong CSFs can help assure that downtowns will keep appearing well activated and magnetic, in spite of any diminished office worker presence.[7] In turn, that helps assure that quality of life problems will not push an office sector downturn into the feared death spiral.

Second, in many small and medium sized downtowns, large office clusters are not their strong points, but CSF venues such as restaurants, bars, hotels, churches, public spaces, arts and cultural venues are.[8] Some of our largest downtowns, if admittedly too few of them, have significant amounts of the venues associated with CSFs such housing, retail, public spaces, entertainment and culture. The CCD in Philadelphia is a great example of this. But the fact that most visitors to our largest downtowns, both precrisis and today, are not coming there to work, means they are coming to shop or visit many CSF type venues, and these venues have a significant presence. Residents are also frequent visitors to CSF venues. Indeed, their presence help make living downtown attractive. That strongly suggests that should a downtown have a failing office sector, it could be offset to a significant degree by developing and growing venues associated with CSF functions. That is contrary to the Doomers’ postulation that if a large downtown’s office sector is badly hurt, the whole downtown must not only hurt, but fail.

The leisure, entertainment and hospitality sectors are filled with CSF venues. The CCD study found that the top three cities in terms of overall job recovery—San Antonio, Nashville and San Diego—are also the three cities with the highest share of leisure and hospitality employment. That’s a very impressive example of downtown resiliency given that in the early part of the crisis they probably suffered the largest employment losses. In these downtowns, non-office CSF functions and venues have a lead economic role. Doomers do not acknowledge the possibility of this type of downtown.

In contrast are the type of downtowns the Doomers focus on with employment largely in office prone sectors – e.g., information technology, finance, insurance, and professional and business services, They have had a lower rate of job recovery, if still a substantial one that the Doomers seem to ignore. One explanation for this may be that their major sectors have high proportions of jobs that can be done remotely.[9] An issue that has emerged in these downtowns is can they become more multifunctional, as evidenced most frequently by discussions about adding more housing to the downtown. Some serious efforts are underway in several of these, e.g., in Chicago and Washington, DC. Doomers when they opine on this argue such efforts are likely to be too small and ineffective or unlikely to happen.

[1] There are many Doomer analysts/authors, here is just one well know Doomer article: Gupta, Arpit and Mittal, Vrinda and Van Nieuwerburgh, Stijn, “Work From Home and the Office Real Estate Apocalypse” (October 5, 2023). Available at SSRN: https://ssrn.com/abstract=4124698 or http://dx.doi.org/10.2139/ssrn.4124698. Its first draft was in May of 2022. In the media, even the Wall Street Journal, The New York Times, and The Washington Post have had Doomer articles.

[2] Center City District. “Downtowns Rebound: The Data Driven Path To Recovery.” Oct 5, 2023. Page ??. https://centercityphila.org/downtownsreport. N. David Milder. “More Visitors, Not the 100% Return of Office Workers, Are the Key to the Full Recovery of Our Downtowns.” The Downtown Curmudgeon Blog ,September 5, 2023. https://www.ndavidmilder.com/2023/09/more-visitors-not-the-100-return-of-office-workers-are-the-key-to-the-full-recovery-of-our-downtowns

[3] Justin Fox. “The Hottest Office Market in America Is … Midtown Manhattan?” Washington Post July 25, 2023. https://www.washingtonpost.com/business/2023/07/25/the-hottest-office-market-in-america-is-midtown-manhattan/b9517c7c-2ad7-11ee-a948-a5b8a9b62d84_story.html

[4] Peter Grant. “San Francisco Office Market Shows Signs of Life: Sales slowly materialize as some sellers finally accept much lower prices.” WSJ Sept. 17, 2023. https://www.wsj.com/real-estate/commercial/san-francisco-office-market-shows-signs-of-life-93a95515

[5] Center City District. “Downtowns Rebound: The Data Driven Path To Recovery.” Oct 5, 2023. Page 14. https://centercityphila.org/downtownsreport

[6] N. David Milder. “A Search for a Clearer and More Useful Vocabulary for Talking About and Analyzing

Downtowns.” The Downtown Curmudgeon Blog. December 2021. https://www.ndavidmilder.com/wp-content/uploads/2021/12/A-Search-for-a-Clearer-and-More-Useful-Vocabulary-for-Talking-about-and-Analyzing-Downtowns.pdf

[7] N. David Milder. “Strong Central Social Districts: The Keys to Vibrant Downtowns.” The American

Downtown Revitalization Review, Volume 2, 2021. https://theadrr.com/wp-content/uploads/2021/07/Strong-Central-Socia-LDistricts-__-the-Keys-to-Vibrant-Downtowns__-Part-1-FINAL.pdf

[8] N. David Milder, “How Our Downtowns’ Three Most Important User Groups Can Help Their Sustained Recoveries.” IEDC’s Economic Development Journal. Forthcoming.

[9] Center City District. “Downtowns Rebound: The Data Driven Path To Recovery.” Oct 5, 2023. Page 22. https://centercityphila.org/downtownsreport

THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

Posted on April 7, 2020 by DANTH

FOR IMMEDIATE RELEASE

Online version available at: www.theadrr.com

Contact:
N. David Milder, Editor
The ADRR — The American Downtown Revitalization Review
718-805-9507 [email protected]

THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.

This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.

How to Subscribe to The ADRR

Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).

How Issues of The ADRR Will Be Distributed.

New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.

The Content We Are Aiming For.
Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.

Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.

Who Will Write the Articles?

Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.

Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!

Article Length and Author Responsibilities.

There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.

Publication Schedule:

Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.

How It Will Be Organized.

The ADRR will be published by an informal group for its first year, with no person or group having ownership.

Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.

The Advisory/Editorial Board :

Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University

Articles in our first issue that will be published in June 2020

Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
- Katherine Correll, Downtown Colorado, Inc.
- David Feehan, Civitas Consulting
- Isaac Kremer, Metuchen Downtown Alliance
- Errin Welty, Wisconsin Economic Development Corporation.

The Affordable Rents Problem: A Sign of the Fragile Success of Many of Our Largest Cities and Downtowns

Posted on March 18, 2020 by DANTH

By N. David Milder

Introduction

Many of our most successful large cities are also ailing and fragile in very essential ways, whether or not their leaders and stakeholders are open to acknowledging that reality.

Yes, by many economic measures, lots of our major cities such as NYC, San Francisco, Seattle and Washington, DC,, and especially their CBDs, are more successful than ever. The value of their real estate continues to soar. As do their employment levels and their ability to attract large numbers of the creative/knowledge workers that are so essential to economic growth and success. Affluent people are eager to live in and near their flourishing downtowns. Pedestrian flows are strong. Tourist are flocking to their arts, entertainment and cultural venues as well as their hotels, restaurants and shops. Their streets are active at least 18 hours a day.

Yet, in 2017, Richard Florida published a book with a very revealing title: ” The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class—and What We Can Do about It.” Increasingly, the core areas of our major cities have become places where only the very wealthy can live and play. The middle class can still work there, but even those with $1 million to spend on housing too often cannot find desirable units. Affordable housing is a major issue in these cities. Dinners for two in their restaurants can easily cost hundreds of dollars. While movie tickets may cost about $9 to $13, admission at their museums can run about $25, and tickets to prime arts event venues can run over $125 in the primary market, and over a thousand in the secondary market. Their downtowns are no longer everyone’s neighborhood, but devoted to very wealthy locals and affluent tourists. If NYC is any indicator, half of the most expensive new residential units are unsold, and the other half of the units are occupied by part-time residents, and usually vacant.¹ For most city residents, their city’s downtown is no longer really theirs.

**Some signs of disorder, sure to evoke disgust if not fea**r.

Added to the financial and spatial equity issues are the very significant return of problems of public disorder, such as homeless vagrancy and aggressive panhandling. The situation in downtown San Francisco has grown quite out of hand, with many sidewalks being blocked and pedestrians forced to run a narrow gauntlet of aggressive panhandlers, reclining/sitting vagrants, litter and human feces.² Similar, if less egregious situations can be found in several other large West Coast cities. Closer to home, one BID manager in Manhattan recently told me that dealing with problems of disorder was now his organization’s highest priority and that this also is the case with many other BIDs in the borough. Center City in Philadelphia is also making a renewed effort to deal with the problems of disorder.³Those of us who were around to see how the problems of disorder strangled downtowns during the 1970s and 1980s are very concerned about these flare ups of the problems of disorder. Will their resurgence strengthen? Have the tools we used to successfully cope with them in the recent past now lost their efficacy? Do local politicians and public at large have the required political will to do what must be done?

Also, the very success of our downtowns is causing several other problems. One that goes unnoticed until it isn’t, is that our pedestrian densities often have reached such high levels that they have significant adverse impacts on the pleasure of walking, i.e., they diminish an area’s walkability. Measures to relieve auto congestion have in some places, e.g., Midtown Manhattan, provided some pedestrian decompression by converting traffic lanes to pedestrian use. The potentially disruptive impacts of small vehicles – e-scooters, e-bikes, delivery robots, etc. — and AVs are on a rapidly closing-in horizon. For all their wealth, many downtown retail corridors in these superstar downtowns have surprisingly high vacancy rates reaching sometimes over 30%.

Creative Job Growth and Affordable Housing.

For some time now, economic development professionals have known that affordable housing is a serious and growing problem, especially those active in our large and successful cities – see table above.

Nationally, the relationship between the strong growth of high paying high tech employment and the seriousness of the affordable housing problem was also well-known. Large increases in highly paid creative workers leads to rising housing prices. The new housing products sparked by that increased demand will be largely upscale market rate. The emergence of the affordability issue suggests that one way or another the demand of upscale creatives is pushing up the costs of housing in what were middle income units.

The situation in San Francisco has already reached such severity that $1 million might buy you a home constructed from a former cargo shipping crate. An attempt even was made to smother office growth in the city in order to shift more resources to housing development. Several high tech firms have committed billions to solving this problem: Google will invest $1billion, as will Facebook, and Apple recently said it would commit $2.5 billion to the issue.⁴ I doubt they would be making these investments if the problem was not very serious.

Seattle shows what can happen to the housing market when there is a very large infusion of creative jobs by just one firm. By 2017 Amazon had eight million square feet of office space, occupying 19% of Seattle’s office space, and tens of thousands of office workers. While other major national high tech firms were also adding employees, an article by Mike Rosenberg and Ángel González in the Settle Times proclaimed: “Thanks to Amazon, Seattle is now America’s biggest company town.”⁵ It’s huge presence and growing workforce had fostered the following conditions:

By 2017, apartment rents were 63 percent higher than in 2010, and Seattle became the fastest-growing city in the country.
Home costs rose faster in Seattle than anywhere in the nation, doubling in five years, and pushing the middle class to surrounding, less expensive towns.
Seattle had the nation’s third-highest concentration of mega-commuters — people traveling at least 90 minutes each way to work. Their numbers grew 72 percent in five years.
Buses were more packed than ever, and lines running along the Amazon campus often were standing-room-only during rush hour. Metro drivers at times have to leave commuters waiting outside an Amazon office because their buses were full. Local officials even added buses to accommodate the crush of Amazon interns that arrived during the summer.⁶

Even the mere announcement of a big development project that will bring thousands of new creative workers into an area can raise prices by attracting real estate speculators and convincing homeowners to keep their homes off of the market so they can benefit more fully from the rising values of their homes. For example, Amazon’s impact on the housing market in and around Arlington, VA, it’s remaining HQ2 town, was swift, starting with the announcement of the deal. A year after the deal, with no construction completed and much not even started, Redfin reported home prices in Arlington were up nearly 18% year-over-year. That far outpaced the 2.7% price change in the D.C. metro area.⁷

Will New Expensive Housing for the New Creative Workers Help Make Housing More Affordable for Middle and Lower Income Households? One possible counter argument that has been offered by some colleagues is that the expensive new housing triggered by the new creative job holders will increase overall supply and thus help lower housing costs throughout the city. That has the prima facie validity of reflecting very basic economic principles, and there are some recent economic studies that at first blush seem to support that argument. However, I think that when you look more closely at their analyses and conclusions, their ability to really support this top down path to housing affordability becomes far less certain.

Evan Mast, in an interesting recent study using migration data found that:

Migrants “to new central city multifamily buildings come from neighborhoods with slightly lower incomes, and migrants into these neighborhoods come from areas with still lower incomes, and so forth.”
“Using a simulation model, (he found) that 100 new market-rate units ultimately create 70 vacancies in middle-income neighborhoods. New construction opens the housing market in low-income areas by reducing demand. A simulation model suggests that building 100 new market-rate units sparks a chain of moves that eventually leads 70 people to move out of neighborhoods from the bottom half of the income distribution, and 39 people to move out of neighborhoods from the bottom fifth. This effect should occur within five years of the new units’ completion.
These openings should lower prices, but the effect may be small in the least expensive areas where prices are close to the marginal cost of providing housing” (Italics added).⁸

Looking at Mast’s findings from the perspective of cities with severe housing affordability problems, the issue of the marginal cost of providing housing raises questions. In these cities the problem is precisely that the marginal cost of providing housing is beyond what middle income households can afford, not just the lowest income households. Moreover, the new units are not just market rate, but relatively high market rate. Consequently, one might reasonably ask if these cities were looked at separately, would “the effect” also be found weaker further up on the income scale? My reasoning suggests the answer is very probably yes.

In another very interesting recent study, Liyi Liu, Doug McManus, and Elias Yannopoulos at Freddie Mac looked at filtering, “the process by which properties, as they age, depreciate in quality and hence price and thus tend to be purchased by lower-income households. This is the primary mechanism by which competitive markets supply low-income housing.”⁹ They found that:

“(T)here is a wide range of filtering rates both across and within metropolitan statistical areas (MSAs) for owner-occupied properties. Notably, in some markets, properties ‘filter up’ to higher-income households”
“After 40 years, average real incomes increased by 12% for Washington, DC (implying an average annual increase of 0.28%) and by 14.5% for Los Angeles (implying an average annual increase of 0.34%). Thus, properties in these markets were filtering up to higher- income households as homes aged. It is not surprising that these markets are ones with affordable housing challenges (italics added). In contrast, Detroit and Chicago show rapid downward filtering rates. For Detroit, the income index level drops 34.5% over 40 years (implying a rate of filtering of -1.1% per year). In Chicago the income index level drops by 23.7% over 40 years (implying a rate of filtering of -0.67% per year).” ¹⁰

These findings suggest the dynamics of residential real estate in markets with affordable housing challenges diverge from what basic economic theory might suggest. The size of the upper income housing deficit then is an important determinant of the degree to which new upscale housing just goes to upscale residents or does add to units filtering down to less affluent households. If the deficit is large, then there are more units filtering up, not down. If the deficit is small, and more easily met by new construction, additional units can filter down. Reducing large deficits require comparably large amounts of appropriate new housing, and until that is achieved, unit filtration will be upward in direction. It is reasonable to conclude that the entry of 25,000 new high income workers into an area probably will significantly increase the upscale housing deficit. It is sort of like a garter snake trying to swallow a bullfrog – it can be digwested, but the snake is literally stretched to the breaking point and very exposed to its predators. What happened in Seattle and Arlington provides some evidence to support that conclusion. In Arlington. just Amazon’s announcement significantly raised housing prices and reduced the number of units for sale.

Another more general relevant national trend is the fact that while the number of middle-income households has shrunk over the past decade, the number of more affluent households has increased (the number of low income households also increased).

To my mind, the above suggests that in our cities where affordability is a serious problem, a very large amount of new upscale housing is needed for them to reduce price pressures in less expensive areas and reduce the upward filtration of units. Moreover, the constant recruitment/creation of new highly paid creative workers only adds to the amount of new upscale housing that must be built in order to foster general housing affordability. Large upscale housing deficits, by reversing the normal downward filtration of units, creates a significant demand for the construction of so-called “affordable” units. That demand is real and felt, and politically can take on a life if its own. Local citizens may not want to wait, at best, five years for affordability to trickle down from the top, or even much longer when the upscale housing deficit is large and not quickly being reduced.

Billionaire Row type housing projects that are at the top of the price ladder with units that are either largely unsold or usually unoccupied do not help reduce the upscale housing deficit. They are not targeted to be purchased by the creative/knowledge workers. To the contrary, they make it more difficult by absorbing desirable development sites and diverting investment funds and entrepreneurial talents from the construction of the more needed “normal” upscale units.

The situation in Seattle suggests there is some merit to my analysis. After Amazon shifted its office growth to Bellevue, 15,000 new jobs, the growth of housing costs in the city plateaued, though costs did not decline. Successful downtowns and their nearby neighborhoods may need to be sure that they, like the snake eating the bullfrog, have fully digested any large influx of highly paid workers so they can move on again to ingest more creative/knowledge workers.

Furthermore, this is perhaps the regional creative job growth path that other ailing successful cities should follow until their upscale housing deficits are sufficiently reduced.

Also, while the top down, trickle down approach may sound good to economic theorists, from a politician’s point of view it’s probably useless. It has no immediate concrete visibility. It’s more like mumbo jumbo economics for a whole lot of their voters. It takes too much time to produce real, observable affordable housing units on a sufficient scale.

ENDNOTES

1. Derek Thompson. “Why Manhattan’s Skyscrapers Are Empty.” The Atlantic, January 16, 2020https://www.theatlantic.com/ideas/archive/2020/01/american-housing-has-gone-insane/605005/

2. Heather Mac Donald, “San Francisco, Hostage to the Homeless.” City Journal, Autumn 2019.https://www.city-journal.org/san-francisco-homelessness

3. Paul Levy. “Two-Handed Solutions,: Center City Digest. Winter 2019. https://centercityphila.org/uploads/attachments/ck3op2c300jze01qd29bjoghw-ccdigest-winter-2019-web-2.pdf

4. Natalie Sherman. “Why US tech giants are putting billions into housing.” BBC News, 17 November 2019, https://www.bbc.com/news/business-50295130

5. Mike Rosenberg and Ángel González. Thanks to Amazon, Seattle is now America’s biggest company town Seattle Times. August 23, 2017 at 5:00 am Updated November 30, 2017https://www.seattletimes.com/business/amazon/thanks-to-amazon-seattle-is-now-americas-biggest-company-town/

6. ibid.

7. David McCabe, Erica Pandey, “Arlington sees housing boom before Amazon HQ2 even arrives AXIOS May 24, 2019 https://www.axios.com/arlington-virginia-sees-housing-boom-ahead-of-amazon-hq2-cf7bfffc-9ea7-4c76-ade4-b12355cbd463.html

8. Evan Mast, “The Effect of New Market-Rate Housing Construction on the Low-Income Housing Market.” Policy Brief. July 2019. W.E. Upjohn Institute. Pp 51. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3426103

9. Liyi Liu, Doug McManus, and Elias Yannopoulos. “Geographic and Temporal Variation in Housing Filtering Rates.” Freddie Mac, January 2020. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3527800

10. ibid.

About the Dynamics Within the New Normal for Our Downtowns — in about 1,525 words

Posted on August 5, 2018 by DANTH

By N. David Milder

Introduction

I have been working in the field of downtown and urban revitalization since 1974. Back then, the riots of 1968 had brought considerable attention to our urban distress. Many civic and business leaders became much more aware of the cascading erosion their downtowns were facing. The white flight of shoppers and residents living in the downtown and close-in neighborhoods, disinvestment by landlords and businesses, spreading physical decay, soaring fear of crime, badly tarnished public images, and widespread frustration about not knowing how to reverse this situation were common problems in downtowns across the nation. Today, many of our downtowns have been thoroughly revitalized and become very popular places for people to live, play and work. Scads of other downtowns are in the process of doing so. These days, the expectation that downtowns can and will be revitalized has replaced the fears of the 60s, 70s, 80s and early 90s that downtowns were doomed to be places of failure, despair and decay. Downtown leaders now can tap a large and growing knowledge base that includes an array of tools and techniques they can use to solve the problems that had previously plagued our downtowns. Among them are: place-making, improving walkability, transit-oriented development, mixed-use residential development, niche marketing, BIDs, TIF, PILOTs, community policing, etc. This success — both actual and expected — and the knowledge base and leadership pool that support it, are some of the defining characteristics of the New Normal for Our Downtowns.

The Downtown Residents – CSD Connection

Successful downtowns, however, are not stagnant socio/economic/geographic organisms. Indeed, some of the factors that explain their success have also both changed the way they operate and generated a new set of problems that now need attention and solutions. For example, though it is generally agreed among downtown revitalization experts that the significant growth of housing in and near our downtowns has been a primary engine for their recent rejuvenations, questions recently have emerged about downtowns being turned into ghettos for the affluent. Still, the significant presence of these residential units are themselves an important and new phenomenon. Moreover, these new residents have created a significant new demand for services, amenities and merchandise that are not typically associated with the Central Business District (CBD) functions and venues that dominated our downtowns in decades past. These CBD functions and venues also have long dominated our understanding of how successful downtowns should operate and been the focus of most downtown revitalization strategies (e.g., retail growth, office development, job creation, transportation improvements). While many of these new downtown residents may also work in the district, their demand for and consumption of opportunities to socialize, relax and be entertained has driven the development and/or use of strong restaurant and bar niches, public spaces and parks, libraries and community centers, movie theaters, museums, PACs, churches, senior centers, etc. These venues are associated with a downtown’s Central Social District (CSD) functions.

Another defining characteristic of the New Normal is that successful downtowns have very strong CSD venues and, with increasing frequency, they are as important or even outshine those associated with its CBD functions. Some types of CSD venues have long been present in some downtowns, but the appearance of a bolus of downtown residents has generally sparked their significant growth while broadening the kinds of venues present. In turn, by strengthening these venues, the downtown residents have helped them be stronger magnets for people working in the district as well as daytime visitors from the district’s largest trade areas and for tourists from even more distant places.

The presence of these residents and the strength of these CSD venues also has changed the way a downtown operates. Most importantly, they widen the range of a downtown’s multi-functionality, increasing the reasons why people will use the downtown. By doing so, they also provide a steady and significant flow of pedestrians and customers that helps assure the district does not close down on weekends or weekdays after 6:00 pm. Strong CSD venues also make the downtown “stickier,” keeping visitors in the district for longer periods of time.

Strong CSD venues also make working in a downtown more appealing. In a labor market where many job offers now find no takers, firms located in strong CSDs are likely to find it easier to recruit quality employees. Moreover, many of the quality of life needs of creatives/knowledge workers are met by strong CSD assets. In smaller towns, strong CSDs can help attract quality independent retailers and Lone Eagle business operators.

But CSD Development Can Be Very Bumpy

Nevertheless, CSD development and growth does not always have clear sailing. Many communities may opt for CSD development projects that are ill-suited for their demographics, geographic locations, or industry trends, while they could have instead undertaken projects that were cheaper to build and operate and capable of attracting many more users. For example, advocates for new arts events venues such as PACs, theaters, and museums as well as for arenas and stadiums often badly over-estimate their potential economic impacts on the downtown, while underestimating construction and operating costs. In larger cities, major organizations in the opera, ballet, symphony orchestra and nonprofit theater fields are badly stressed having to cope with significant declines in paid attendance and financial contributions. In smaller communities, the impacts of new arts events venues on their downtowns are too often grossly exaggerated, and operating costs badly underestimated. Consistently, between 40% and 50% of arts nonprofits are financially in the red.

The most effective strategic path is to first focus on the strengthening and/or development of well-activated parks and public spaces, restaurants and watering holes, and movie theaters. They are usually the easiest to create and operate and have the fewest user frictions or are asset treasures that need to be improved and saved.

Though a lot of strategic planning is done for CBD functions and venues, strategic plans for CSDs are rare, but equally needed. While attention may be given to individual CSD projects, too many of such studies are marred by advocacy induced puffery. Very unfortunately, little attention is being paid to the CSD as whole entity.

Technology Is Creating a New Set of Problems

The impacts of technology are also strongly defining the New Normal. This is most apparent in the way the Internet is forcing the whole retail industry to search for a new operating paradigm and electronic consumption has reduced the brick and mortar consumption of the arts. How and when people shop is consequently changing in significant ways. They first research online and then shop the store for the targeted item(s). Strolling and browsing shoppers subsequently are on the decline. Many Americans are time-stressed, so many shoppers want quick, convenient retail transactions. Yet, many others want more interesting, more meaningful and more socially appealing shopping experiences. Shoppers have also become much more careful and deliberate when making purchases. While this is most strongly apparent among middle-income consumers, affluent shoppers are also showing signs of greater caution.

Changed consumer behavior, combined with growing online sales, have reduced the demand for downtown store locations and the amount of space retailers want for their new stores.

While downtown retail shops will not disappear, they almost certainly will change in the way they operate, the amounts of space they each need, as well as the types of locations they will want.

Yet, as my discussions with potential clients demonstrate, many downtown organizations still see retail as a key element in their downtown’s future, while largely disregarding improvements to their CSDs.

The appearance of app-driven car services such as Uber and Lyft have already impacted on traffic congestion and the use of public transportation in several large downtowns. The imminent use of automated vehicles – e.g., by Waymo soon in Phoenix – will likely have important impacts on traffic congestion in a host of additional downtowns. What these impacts will be remains uncertain- as do the possible remedies to those that are harmful. The transition to automated vehicles will probably take 20 to 40 years, with different issues dominating downtowners’ concerns at each stage of its progression.

Success Can Create Problems

The very success of our downtowns also has created its own set of problems. For example:

High housing demand has created a very serious affordability problem for many downtowns and their nearby neighborhoods.
Downtown success usually means more pedestrian traffic. For example, from 2009 to 2015, pedestrian growth in Manhattan’s economically healthy central business district grew by about 18 to 24 percent. At what point does the density of downtown pedestrian traffic become uncomfortable and unappealing for pedestrians and detrimental to an area’s image and popularity? The uncomfortable density of users is already occasionally being felt in such famed public spaces in NYC as Times Square, Bryant Park and Central Park. Will those instances of pedestrian congestion increase? Some of the managers of these public spaces seem unconcerned about pedestrian congestion. Indeed, they seem to be committed to having the largest number of visitors possible.
As a recent study of Center City in Philadelphia has shown, greater downtown development density increases traffic congestion.

Postscript.

This is part of book proposal I am writing. I’d appreciate hearing if you would be interested in a book that expanded upon the above content. Please let me know at [email protected] .

The New Normal For Our Downtowns Cheat Sheet

Posted on February 1, 2017 by DANTH

By N. David Milder

Since 2008, I have been writing about the New Normal for our downtowns. Recently, I have been asked on several occasions if I had a relatively brief summary article. I didn’t, so it seemed the time to write this one.

Downtowns Are Now Expected To Succeed

Success stories abound everywhere you look. Not every downtown has made it, but many have, and many more are well on their way. Today, laggard downtowns really stand out.

Downtowns Are The Place To Be

Today, lots and lots of people seem to want to be downtown, not to flee or avoid it. They are easily attracting people to visit, work and, especially, live. Importantly, this is increasingly happening organically. That’s a significant paradigm shift from a few decades ago.

In fact, downtowns have become so popular that many are now facing problems of high pedestrian congestion and how to get all these people in and out of the downtown quickly, comfortably and affordably via mass transit, vehicles, bikes and on foot. Success does not always mean the end of all problems; sometimes it brings along its own set of new ones.

The Negative Impacts of the Fear Of Crime And Actual Crime Rates Have Diminished Significantly

Downtown streets at night are less likely to be empty and fear-inducing.

In most large cities, crime and the fear of crime have fallen so significantly that they have fallen out of sight as an issue. There are several strategies that appear to be effective. However, drug use and drug trade induced crime has increased dramatically in many smaller and more rural communities.

Our Ability To Revitalize Downtowns Has Vastly Improved Since The 1980s

We may not be able to solve every problem, but we have a lot of real knowledge about how to revitalize and manage downtowns. Moreover, we now have in many places the professionally staffed organizations to use that knowledge, e.g., BIDs, SIDs, Main Street organizations.

Downtown Housing

Most downtown leaders and experts would agree that the development of significant amounts of market rate housing has been the most important force in successful downtown revitalization efforts. Housing placed in walkable urban contexts, especially near downtown workplaces, has sparked large district revivals. Housing near commuter rail and subway stations also have helped power suburban downtown and neighborhood district revivals away from the urban core.

Mixed use housing in downtown Cranford, NJ

Since the Great Recession, new condo and coop projects have been eclipsed by new rental projects in many downtowns as a result of changing consumer preferences and the impacts of “deliberate consumer” behaviors.

In many medium-sized downtowns, retail has become a less viable component for mixed-use projects because of the reduced demand for retail space and the retail chains’ greater preference for proven locations.

Market rate downtown housing seems more and more to be only for the affluent and very wealthy. As a result, projects with “micro-units” are being built to provide an affordable solution.

Will downtowns stop being everyone’s neighborhood? In the 1970s and 1980s, many feared downtowns were destined to house only our poorest, most disadvantaged residents. Now, will they be ghettos of the wealthy? Should policies be put in place to assure economic diversity in our downtowns?

Nevertheless, the value and viability of downtown housing as a growth engine continues.

Deliberate Consumers

These consumers display much more deliberation about their expenditures than their pre-2008 counterparts, are much more liable to be concerned about needs than wants and tend to focus on a product’s price, quality and/or value. Many have come to expect steep discounts.

They include the vast majority of middle income households, especially those whose incomes have not increased meaningfully for many, many years. Also, this behavior pattern is seen even in customers of luxury markets, where about 30% of the sales are “off-price.” Economic recovery seems to have increased consumer expenditures somewhat, but the cautious consumer decision-making seems to have continued on in full force.

These consumers are everywhere, careful, want their money’s worth, and are here to stay.

E-commerce

Though more than 90% of all retail sales are still in traditional brick and mortar stores, e-retail sales for specific lines of GAFO merchandise have passed 25% to 50%. If current trends hold, they will pass those levels in several other merchandise lines within a few years. But, e-retailing’s biggest impact comes through how it has changed consumer behavior. Most Americans now make an online product and store search before shopping in traditional shops. They browse less inside shops and more often go directly to the merchandise they want and then leave after a purchase. They use smartphones inside stores to find competitive prices online. Some pay with their phones.

It is highly unlikely that brick and mortar shops will disappear. The vast majority of Americans still prefer shopping in them to shopping online. Even online born retailers – e.g., Amazon, Warby Parker — are also opening brick and mortar stores because they see potential benefits resulting from customers being able to use both channels together.

Nonetheless, traditional retailers have to change their business formulae to better integrate the internet into their brick and mortar operations. This probably means that their legacy stores will become less important in the initial stages of the retail sales transaction process, though often more important in the later stages. They will have to take on new functions like pick up points for online orders, storage for quick local deliveries of online purchases or the venues for special attention and pampering for customers filtered out by retailers for making significant online purchases and how they navigated the store’s website.

Retailing In Various Types Of Downtowns

The emergence of deliberate consumers, the growing power and influence of e-commerce and the prior building of too much of retail space have combined to create large upheavals in the retail industry. Retailers are looking for fewer and smaller new spaces in very low risk locations where other retailers are doing really well.

Different kinds of downtowns have been impacted in different ways and to varying extents by the Great Recession. Here are some examples:

Districts with large luxury markets came through the Great Recession the least scathed and recovered the fastest. Their wealthy shoppers had the best recovery to pre-recession spending levels. Their luxury retail chains benefited from a growing global luxury market and were consequently financially better able to absorb any sales downturn in the US market
Very small towns with populations less than about 2,500, were among the least hurt downtowns because they had few if any national chain stores. Their retail prospects improved as the incomes of their deliberate consumers recovered
Many towns in the 15,000 to 35,000 population range have seen their malls badly falter or completely fail as their anchor department stores (e.g., Sears, Kmart, JCPenny) and specialty retail chain tenants closed.
These retail failures have created an opportunity for many small GAFO merchants to open and do well. The e-retailers and the local mass market merchants like Walmart, Target and Best Buy did not capture all of the market share that the closing department stores and specialty retailers had disgorged. The mass market retailers are typically also ignoring that disgorged share for the small retailers to capture by not increasing their presence in these towns, .
GAFO retailers in towns in the 2,500 to 15,000 population range also seemed to benefit from these closings. Their local trade area residents previously typically outshopped for GAFO merchandise in the struggling/closed malls
As many commercial districts in The Bronx, NY, have shown, moderate income ethnic downtowns and neighborhoods are attracting retailers under the new normal to the degree that they can accommodate the often very large space needs of the value oriented and off-price retailers, e.g., Target, Best Buy, Marshall’s and TJ Maxx. Sometimes this means the “factory store” or “outlet” formats of some very highly regarded chains such as GAP, Banana Republic, Ann Taylor and Nine West. Fitting the large format value retailers into these downtowns so as to retain their walkability and scale is a critical urban design issue. Unfortunately, too often the project solutions have been damaging or half-thought through.
Many downtowns in affluent suburban communities with large numbers of well-regarded specialty retailers, have seen many of them close. Among them were chains such as Chico’s, Coach, Eileen Fisher, Gap, Talbot’s and Ann Taylor. In many instances, the closed stores had under average sales for their chains. This made them vulnerable when their brand encountered strong sales headwinds nationally. In some instances, the stores’ subpar sales were due to more cautious spending by local shoppers. In others, the chain’s merchandise did not mesh with local lifestyles. For example, one expert has noted that Chico’s shoppers nationally had basically “aged out.” In any case, these downtowns are now faced with an unusually large number of vacancies of relatively large spaces that are located in highly desirable locations. They need a strategy to fill those space that will also maintain the strength and attractiveness of the downtown. A viable strategy for maintaining the downtown’s strength may have to look at non-retail uses, as well as subdividing large spaces.

Office Functions and Development

How firms now use office space has drastically changed, influenced by practices at successful high tech firms. With that change, many firms, large and small, are now looking for open spaces for “hot desks.” They have few if any private offices and are configured to stimulate worker interaction and cooperation. They are also using less office space per worker, because the workers are spending more time telecommuting from home or being out with clients.

Consequently, overall demand for office space is being constrained, while on the supply side many of the older downtown buildings are badly out of date and unmarketable. New or adaptively rebuilt downtown office buildings are needed that are configured for the no-office, hot-desk, interactive work environment. Many of the dated office building are either being torn down or converted into residential buildings.

Here and there, usually organically, but sometimes according to a plan, downtown office spaces are being used to stimulate new businesses. This trend is manifested in business incubators, co-worker spaces and buildings geared for start ups. Given the steady growth of the nation’s contingent workforce, many downtowns – be they urban or rural — may find significant economic growth if they can attract and nurture local contingent workers. However, to do that will likely require the presence of several kinds of county or regional level support programs.

Central Social Districts

Since antiquity, successful communities have had vibrant central meeting places that bring residents together and facilitate their interactions, such as the Greek agoras and the Roman forums. Our downtowns long have had venues that performed these central meeting place functions, e.g., churches, parks and public spaces, museums, theaters, arenas, stadiums, multi-unit housing, etc. They are all essential elements of the downtown’s Central Social District (CSD).

Greatly strengthened CSDs have been another important factor associated with the emergence of strong and popular downtowns. In an increasing number of downtowns, their CSD functions have become more important than their traditional CBD functions, e.g., retail and office based activities. Today, for most downtowns, be they large or small, their revitalization strategies must focus on strengthening and growing their CSD’s elements.

The housing element has been discussed above; here are some comments about other important CSD elements:

Formal Entertainment Venues. These include such venues as museums, PACs, concert halls, stadiums, and arenas. They often are held in great esteem within their communities and especially among the local social, business and political elites. However, they also tend to be relatively expensive to build, maintain and operate. Many are venues for types of arts events that have suffered significantly decreased attendance in recent years. There have been a substantial number of failures among these venues and a much larger number that struggle financially each year because their true costs for each admission cannot be sustained by their ticket prices. They consequently need to constantly ask for lots of donations and grants to remain solvent. Too often, it is not a sustainable business model.

Many of them are seriously underutilized: closed during the days and only “lit” some of the evenings. Most performance venues in medium-sized downtowns probably will have under 80 events a year. They can have positive impacts on local eateries and watering holes to the degree that they are active. Their impacts on retail, if any, have an overwhelmingly indirect and contingent route – through the new residents they might attract. Conversely, dark cultural centers can actually be detrimental to a downtown’s sense of vitality.

Ticket prices for these venues are usually relatively expensive – far above the price of local movie tickets, for example – so a substantial portion of middle income households are discouraged from attending their events.

There is little doubt that formal entertainment venues can be wonderful assets for a community. However, they demand a lot of resources and management expertise. Before a downtown decides to build one of these venues, local leaders must realistically assess whether they have the resources and management skills to not only build it, but also to maintain it and to run its programs without continued financial stress well into the future.

Restaurants. Restaurants are particularly important for downtowns not only because they are places where people can obtain needed nourishment, but also because they are places where folks go to have fun, be entertained and, most importantly, enjoy the company of other people. They are the essential driver of downtown vitality.

The growth of strong downtown restaurant niches and clusters has been another strong characteristic of successful downtowns of all sizes. They help bring downtowns alive after dark. Even though independent merchants are unlikely to be open during dinner hours and thus benefit from the restaurants’ customer traffic, they do benefit from the restaurant patrons’ lunchtime visits and their improved image of the district. Retail chains, with longer operating hours, are more likely to benefit directly from the restaurants’ customer traffic.

In small and medium sized communities, restaurants are relatively easy to start-up because of the relatively small market share they have to win to be viable as well as their districts’ comparatively low rents and labor costs.

The consumer market for restaurant fare is enormous: households in America spend relatively similar amounts for eating out as they do for meals prepared at home.

Any community that wants to build a strong CSD should first focus on strengthening its restaurant niche through recruitment and start-up assistance.

Movie Theaters. Though they have passed the digital projection/distribution divide that threatened to put many of them out of business, downtown movie theaters remain vulnerable. They are still threatened by home and electronic device movie watching – that is how most movies now are viewed. More importantly, they are vulnerable to some influential Hollywood execs who, because theaters provide such a small slice of their overall revenues, want same day release of new films through the theater and purely electronic distribution channels. Goodbye first run theaters.

Cinemart Theater in Forest Hills, NY,, its restaurant’s outdoor dining, with Eddie’s Ice Cream shop in background

For most downtowns and neighborhood commercial districts, cinemas are important parts of their CSDs. They have fewer user frictions than many other kinds of entertainment venues. They have comparatively reasonable prices; are open afternoons and evenings almost every day, and present frequent showings through the day. They also occupy large spaces, usually in highly visible locations. Failed cinemas are hard to redevelop and can be terrible eyesores.

When they get in trouble, there is usually not a lot of time available to save them. Savvy downtown EDOs should have an action plan ready to go, should their cinema face closure. In dealing with the digital divide many communities used new tools such as community based businesses and crowdfunding to save their theaters. These tools can be used readily by other downtowns should the need arise.

Parks and Public Spaces. These are not just green or open urban spaces where people can retreat for quiet relaxation. They are also places that are great for that most fundamental of entertainments, people-watching.

Bryant Park, once a festering venue for drug use and drug sale is now an exemplar engine of economic growth

Great parks and public spaces also usually have infrastructures and equipment that allow guests, at little or no cost, to engage in a range of leisure behaviors. Among them are a pond for sailing model boats; a boules court; a ping pong table; chess and checkers tables; a carrousel and an ice rink. The resulting activities constitute performances that other people-watching visitors can observe and enjoy.

Ice skating rink in Central Park Plaza in Valparaiso, IN.

Great parks and public spaces also often have performance spaces for events such as movies, plays, dance recitals, concerts, lectures, etc. The smart ones use temporary stages, so the same spaces can be used for multiple purposes over the year. For many small and medium-sized communities, this is the most cost effective venue they can have for entertainment and arts performances. But public space programming is not (at least initially) self-generating and government or some other entity must have the capacity to book and produce public events.

DANTH, Inc.’s research has shown that well-activated parks and public spaces are usually much cheaper to build, maintain and operate than any of the formal entertainment venues. Most communities already have them in key locations. Even where they are absent, the cost of a new build is generally far less that of a new enclosed venue. They have, by far, a lower ratio of operating costs per visitor/user. They also have the fewest user frictions. Access is free. Use of their infrastructure and equipment is either free or very affordably priced. They are open all day and often well into the evenings almost all year. No one has to make an appointment to use them or buy a ticket in advance of their visit. Visitors can stay 10 minutes or several hours.

Furthermore, successful parks and public spaces have a proven ability to increase values for properties from which they can be seen – even those 480 to 800 feet high and about 0.25 miles away. They also have a proven ability to improve adjacent property values to levels equaling the costs of initial construction or later renovation.

Downtowns of all sizes can have such successful parks and public spaces.

Downtowns that want to strengthen their CSD functions should make sure, early on, that they have an attractive, well activated park or public space. They can be very popular and produce the best bang for the buck of any type of downtown entertainment venue.

One note of caution. The success of a park or public space has far less to do with how beautiful it is – though it definitely should be attractive – than with how it is programmed by its infrastructure, equipment and events and the people it attracts. Unfortunately, this is not widely recognized.

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

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