A wrinkle on corporate headquarters: leaving the city as buildings age

State Farm four building complex in Richardson, Texas. Dallas Morning News photo.

In the late 1990s and 2000s there was for a time the move of corporate headquarters from the suburbs to the city such as Compuware and Quicken Loans in Detroit, Panasonic in Newark, etc.  

Plus Amazon's HQ2 quest focused on places well connected by transit, even if Arlington County, just outside of DC, is a suburb. GE to Boston ("Corporate headquarters relocating to the center city: GE chooses Boston," 2016), etc.

At the same time, firms still moved out of the city.  

For example, the wage tax in Philadelphia makes it hard to attract large businesses, although Comcast stays committed.  Plus, suburbs often lure city-based businesses with incentives ("Real Estate Giant CoStar Group Chooses Arlington for its Headquarters" Arlington County).

State Farm's suburban Dunwoody complex does have a subway connection, but most people get there by car.

And while Amazon was looking for an urban location, State Farm in Dallas and Atlanta built new complexes that were road-centric, given the small footprint of transit in those cities ("Businesses moving back to the center: not a universal trend," 2015).

Plus headquarters moving to city areas, but not directly in the city ("Boeing to move "headquarters" to Northern Virginia," ) but close to airports ("Do tax incentives pay off? : Illinois; Tennessee; Rosslyn + "The Airport Access Factor"").

In 2015, Mercedes-Benz moved to a suburban location in Atlanta--makes sense as they are a car company, but they still have a bus division (which isn't super active in the US compared to Europe).  They are further consolidating operations from around the country to Atlanta as well ("Mercedes-Benz relocating 500 jobs to Sandy Springs HQ, plus new R&D facility," Atlanta Journal-Constitution).

Downtown Dallas, with the Fountain Place building shown in the background, has the second-highest office vacancy rate of any downtown in the nation.

Dallas is seeing firms move to the suburbs to new buildings ("The reckoning: Downtown Dallas must wrestle with future after AT&T exodus," Dallas Morning News, "Dallas Is Booming—Except for Its Downtown," Wall Street Journal).

Companies are abandoning this neighborhood and its aging office towers. They are heading to the Uptown district or the thriving suburbs, often over concerns about crime and homelessness. Left behind are defaulted loans, foreclosures and deeply discounted property sales.

The building ATT is in today. 

Real-estate investors purchased $51.7 million worth of office property in downtown Dallas in the first three quarters of this year, compared with $1.8 billion in Dallas’s suburban markets, according to data firm MSCI.

The building ATT will be moving to is the former HQ campus of Electronic Data Systems. Although they may tear it down and build new. 

... Many of the forces weighing on downtown Dallas—from remote work to homelessness—are afflicting other urban core neighborhoods. Businesses and investors have fled the downtown districts of St. Louis, San Diego and Portland, Ore., for the relative tranquility of neighboring suburbs.

Also see "The reckoning: Downtown Dallas must wrestle with future after AT&T exodus," Dallas Morning News.

“If you look at the average large building, like something over 50,000 square feet, the median age is roughly 45 years old,” Triolet said. “The problem is in the (Central Business District) in the ’80s — people wanted the biggest and most glamorous. So, they made the floor plates bigger, and they wanted to make it a contest of who could build the tallest buildings.”

Corporate trends have swung another way. Toyota, American Airlines and now AT&T are examples. Companies want shorter and more horizontal buildings. Skyscrapers give way to campuses. It’s easier to sell smaller separate buildings than large high-rises, Triolet said.

Downtown buildings have aged, and more recently there hasn't been a lot of new construction, especially on a speculative basis, because of high interest rates and the discombobulation of the commercial office real estate market as a result of covid and the rise of work from home--although this is changing some, as more businesses are requiring workers to come back to the office, at least for a few days each week.

Cities have always had to deal with suburbanites fear of the city when it comes to working and visiting.  Covid related declines in quality of life and an increase in crime has also led firms to the suburbs, such as in Portland ("A Fire Sale of Portland’s Largest Office Tower Shows How Far the City Has Fallen," WSJ).  

After Digital Trends moved out of the U.S. Bancorp Tower in Portland, Ore., the technology publisher didn’t hold back about why it left. The property, once a premier address in the city, was afflicted with “vagrants sleeping in hallways of vacant office floors.” They were “starting fires in stairwells, smoking fentanyl and defecating in common areas,” according to papers the company filed in a lease-termination lawsuit.

Two years later, the city’s biggest office tower stands more than half empty. U.S. Bank, the largest tenant whose parent company’s name is on the building, pulled most of its employees out last year after more than a century in the city. The 42-story tower was recently put up for sale. The building affectionately known as Big Pink because of its pink-hued Spanish granite and pink glazed glass has an asking price of about $70 million, according to brokers. That is more than 80% below what the owners paid for it a decade ago.

Interestingly, the suburban office market still has problems, even though it doesn't in Dallas and certain other cities.  Large complexes, like the State Farm in Dallas, with the rise of work from home during and after covid, don't need so much space ("This company is trying to sublease over 400,000 square feet of office space in D-FW," Dallas Morning News). 

DC's office market is weaker because of the shrinkage of the federal government, so many buildings are being looked at for conversion to residential ("Washington D.C.’s Stockpile of Old Offices Makes It a Mecca for Housing Conversions," WSJ).  Could this be an option for cities like Dallas, St. Louis, and San Diego?  Salt Lake has one such building just opened ("A 1960s SLC office tower reopens as luxury apartments, showcasing reuse as path to new housing," Salt Lake Tribune).

Downtown D.C. BID seeks arts director to mold a theater, entertainment district

Warner Theater.

Article in the Washington Business Journal. 

The Downtown D.C. Business Improvement District hopes to mold the city's arts, culture and entertainment community into something akin to London's West End theater district, playing into a larger effort by the Bowser administration to recast the perception of D.C. as more than just home to the nation's capital.

The BID began accepting applications last week for a new director of downtown arts, culture and entertainment, with an advertised salary range of $105,000 to $125,000 and a start date as soon as Dec. 22.

The selected candidate will be charged with helping to position downtown D.C. as the region's premier destination for arts, culture, entertainment and sports, a move it hopes will boost visitation and position downtown as an appealing backdrop for companies looking to attract and retain workers. The individual will also be responsible for coming up with funding sources to sustain the effort, which could take the form of a dedicated fund, grants, sponsorships or even the creation of a stand-alone nonprofit to lead those fundraising efforts. In short, it's a big job, and somebody's got to do it, said Gerren Price, the BID's president and CEO.

Building and sharing audiences.  Interestingly, 20 years ago or so I applied for a marketing position at the Warner Theater in Downtown DC. 

At the time I didn't realize they were/are managed by LiveNation, the international arts management group, so I had no chance.

One of the points I made in my cover letter is that even if they compete nightly against the National Theatre for audiences, the reality was they needed to work together to build the audience for theaters in Downtown DC collectively. (E.g. + Landsburgh Shakespeare Theatre, Ford's Theater, Wooly Mammoth, etc.)

I later repeated this in my talk to the Literary Managers and Dramaturgs national conference in DC in 2009, summarized in my entry, "Arts, Culture Districts, and Revitalization." 

The overall point that it was up to theater as a discipline "to make their own plan(s)" that they shouldn't rely on real estate developers and even culture planners to do it for them.

And I made the point they need to share audiences and build the overall audience of people willing to go to Downtown DC to see theater.

Playhouse Square.

Pittsburgh and Cleveland as models.  For years, I've made the point that the Pittsburgh Cultural Trust and the Playhouse Theater Foundation in Cleveland are models for how the city could address development and operation of cultural facilities.

-- "The Howard and Lincoln Theatres: run them like the Pittsburgh Cultural Trust/Playhouse Square Cleveland model," 2012
-- "Pittsburgh Cultural Trust maintains diverse real estate portfolio to support arts," Pittsburgh Post-Gazette
-- "How the Arts Drove Pittsburgh's Revitalization," The Atlantic

London's National Theatre.  The recent entry, "Theater Roundup," about theater developments around the country, mentioned the trials and tribulations of the Kennedy Center, comparing it to the great success of the National Theatre in London.  

Director Indhu Rubasingham leverages the national and international place of London in the theater discipline ("National Theatre director Indhu Rubasingham: ‘If I wasn’t scared, I wouldn’t be doing my job’" "Indhu Rubasingham: the National Theatre’s new artistic director takes centre stage," Financial Times) and focuses on innovation and providing a diverse array of programs in part to reach a variety of demographics.  Also see "How to get National Theatre tickets for £10," IanVisits.

 “You can’t be all things to all people, but you can try to offer as broad a range as possible — whether that’s a western classic, an international classic, international new writing or promoting the brilliance we have around the country. The National is a flag-bearer as well as an innovator. It’s a provoker as well as populist. It’s brilliant when it’s doing all those things at once.”

The Kennedy Center hasn't really taken on this kind of role vis a vis the national theater ecosystem in the US. 

Graphic from the Pittsburgh Post-Gazette.

Theater as presentation versus theater as production.  The roundup piece also references discussion in Pittsburgh about the difference between theater companies that actively produce plays, versus organizations that present plays from the national circuit, like Hamilton, Cats, etc. 

-- "'Cultural coffin': Pittsburgh's thespians and universities react to theater woes," Pittsburgh Post-Gazette
-- "Survey Shows Chicago Small Arts Sector Thriving," American Theatre

Theater production companies contribute to the development and maintenance of the local arts ecosystem, by hiring and paying playwrights, actors, musicians, and back of the house production. 

A showing of Cats does not have the same kind of local impact.

If local colleges and universities have active theater programs, all the better.  For example, in Pittsburgh Carnegie-Mellon is particularly well known.  But DC has a great program and on campus theater at Catholic University too.

The Washington City Paper has reported on an element of this in how cutting back on house staff reduces the pool of local talent and economic benefits to the local economy ("What’s Lost When Theaters Lose Production Crews?").  

Tourists as an element of the market.  Like NYC and Chicago, at least in the past, tourists, not having access to the same array of programming back home, often took in a show as part of their trip to DC.  Of course, NYC has tourists who come to the city because it is a theater destination.  DC is not quite the same.  Except maybe regionally.  

A dissertation on DC's Arena Stage makes the point that it is the closest theater in the city to playing the kind of role National Theatre does in London ("Performing (Non)Profit, Race, and American Identity in the Nation's Capital: Arena Stage, 1950-2010").  

Another dissertation argued that the city's National Theatre played a more national role, when the city was more of a premier tourist destination, and there was less opportunity to consume theater in their own locales ("National theater or public theater: The transformation of the theatrical geography of Washington, D.C., circa 1970–1990").

In region visitors will matter a lot.  But tourists or DC residents aren't enough to fuel the creation of a larger theater ecosystem in Downtown DC.  Metropolitan area residents will have to make up a big proportion of the audience day in and day out in order to be successful.

London.

Peer cities review.  It behooves the BID to do peer case studies, on cities like London, Manhattan (Broadway Theaters: An economic engine for New York, Broadway League), Chicago ("Loop economy boosted by theatre and investment during fall and winter 2022," Chicago Loop Alliance, "Driven by arts and culture, pedestrian traffic in Downtown Chicago exceeds pre-pandemic levels, report finds," WBEZ/NPR), and Hamburg wrt musicals ("Broadway on the Elbe," New York Times), and figure out if the initiative, even though focused on Downtown, will provide assistance and marketing support to theaters and university programs outside of the core of the city.

Similarly, New York City's segmentation of theater productions as Broadway, Off-Broadway, and Off-Off-Broadway is a useful rubric for recognizing that all "theater" is not the same.  Again, presentation of programs in DC that were originally on Broadway has a different economic impact than locally-produced theater and building the audience for it ("Studies Show Big Impact of Small Theatres in NY, Chicago," American Theatre)

People aren't "hanging out" as much outdoors during the workday in the center city

The Financial Times, "Is it the end for hanging out?," reminds me that I meant to write about this when it was first reported, in "What happened to hanging out on the street?" in Bloomberg.  Researchers replicated the studies of William H. Whyte ("‘American Urbanist’ Review: Standing Out of the Crowd With William H. Whyte," Wall Street Journal), which formed the basis of the book, The Social Life of Urban Spaces, and the larger version, The City, which is a classic in urban design.  

Unhospitable space.

From the article:

Are city streets places for pedestrians to hang out, or are they routes to be traversed as quickly as possible? Americans are increasingly treating them as the latter rather than the former.

That is the striking implication of a recent interdisciplinary study published by the National Bureau of Economic Research. Applying modern artificial intelligence techniques to old video footage, the researchers compared pedestrian activity in 1980 and 2010 across prominent locations in Boston, New York City and Philadelphia. Their unsettling conclusion: American ambulators walked faster and schmoozed less than they used to. They seemed to be having fewer of the informal encounters that undergird civil society and strengthen urban economies.

... The researchers found a consistent evolution across all four locations. At each site, pedestrians walked faster in 2010 than they had in 1980, by an average of 15%. Time spent lingering in public spaces declined by roughly half, and fewer people were forming groups. In general, walkers appeared more atomized and rushed in 2010 than they had a generation before.

I e-talked with Anne Lusk about this, she is a researcher at Harvard School of Public Health, and wrote her dissertation on the community aspects of multi-use trails.

New picnic tables at the North Plaza of the Vancouver Art Gallery

I think the authors of the study, deep in "machine learning" and such, miss the point.  "Hanging out" is the dependent variable, while "flexibility with your time during the workday" is the independent variable.

People hang out less because they have more regimented work schedules, shorter lunch breaks, must be seen in the office, etc.

Furthermore, at least the suburban segment of workers, tends to be less familiar with their surroundings in the center city, mostly only between the garage if they drive or the transit station if they take transit, and their office destination.

Plus, as the FT article makes a point of more, while there has been an explosion of high quality public spaces downtown, there are lots of crappy ones still, making it less convivial to "hang out."

And yes, homelessness takeovers of park and other public spaces contributes negatively too.

=====

Also see:

-- "Extending the "Signature Streets" concept to "Signature Streets and Spaces," (2020, originally 2015)
-- "The layering effect: how the building blocks of an integrated public realm set the stage for community building and Silver Spring, Maryland as an example," (2012)

And the recent piece:

-- "An interesting public space development project in Downtown Pittsburgh: extends the range of after-work activities to keep office workers engaged"

An interesting public space development project in Downtown Pittsburgh: extends the range of after-work activities to keep office workers engaged

Pittsburgh Cultural Trust is developing a multi-faceted public space-park in Downtown Pittsburgh ("'Asset for the people:' Pittsburgh Cultural Trust unveils name, more details of Eighth Street block overhaul Downtown").  This is interesting for a couple reasons.  

First, it involves other public organizations focused on Downtown improvement, creating public spaces where consumption of food and drink is not necessarily a primary activity.  Second it looks to be addressing multiple demographics, including kids, when planning for children was never a priority before.  

Third, it takes daypart and attraction management to new levels (Planning programming by daypart, month, season: and Boston Winter Garden, DC's Holiday Market, etc.") whereas spaces like these were never really a priority, at least in terms of planning and programming--sometimes such spaces were created as part of development agreements, but then left to languish.

-- "The layering effect: how the building blocks of an integrated public realm set the stage for community building and Silver Spring, Maryland as an example," (2012)

It's a different way of staying Downtown compared to consumption of alcohol indoors after work, and is responsive to declines in alcohol consumption by younger demographics ("Why Gen Z Is Drinking Less," TIME)..  Although public beer gardens are a method chosen by Philadelphia Horticultural Society and later the Parks Department, alongside Milwaukee to activate spaces ("Cities Want Young Families to Play and Stay: New Features Include Parks, Playgrounds and Beer Gardens," Wall Street Journal, 2014).

Fourth, it reminds me of a point made in Learning from Bryant Park, that commercial district revitalization organizations should take a more active role in developing unique spaces that extend the range of activities available to patrons. 

Fifth, it extends the range of third places ("Third place issues") where consumer consumption isn't a requirement.  And it's close to the Allegheny River.

Pittsburgh, meet Arts Landing. That’s the name for the new $31 million Downtown gathering and play space being proposed by the Pittsburgh Cultural Trust on Eighth Street bordering Penn Avenue and Fort Duquesne Boulevard.

On Thursday, officials from the Cultural Trust, county and city dropped the name and more details about the four-acre spot, which will include a great lawn, a bandshell for concerts, a play area, a garden walk, pickleball courts and a small running track. “This will be a place for co-workers to meet after work, for families to bring their kids down to play — for people to go out on their first dates,” Allegheny County Executive Sara Innamorato said. “It’s really going to become an incredible asset for the people of Pittsburgh for generations to come.”

... “This is not a short-term fix or an incremental improvement to an existing space,” Mr. Holmberg said Thursday. “This is reimagining and building an entirely new destination that will delight and benefit our community.” The centerpiece of Arts Landing will be the “great lawn,” a one-acre green space along the Allegheny River and between the Andy Warhol and Rachel Carson bridges. A bandshell will be located in the northwest corner of the gathering spot near Fort Duquesne Boulevard. It will be used for concerts and performances.

... “It’s really meant to be a people-first focused space,” said Lisa Tziona Switkin, a partner at Field Operations, the architecture firm designing the project. Other Arts Landing features include a play area for children and families — designed with the help of a focus group of 8-year-olds, Mr. Holmberg said. A new visitor center will also be located on the ground floors of two Cultural Trust-owned buildings at 819 and 821 Penn near the Ninth Street intersection. The center will include public restrooms.

Note that past blog entries have referenced Pittsburgh Cultural Trust as national best practice.

-- "The Howard and Lincoln Theatres: run them like the Pittsburgh Cultural Trust/Playhouse Square Cleveland model" (2012)

Place breaking versus place making: Making people places | independent coffee shops, small business spaces, outdoor spaces

One of the major precepts of Jane Jacobs Life and Death of the Great American City is that cities need "a large stock of old buildings."  

East Ohio Street, Allegheny City, Pittsburgh.

This wasn't because she was a historic preservationist, but because old, mostly paid off buildings were cheaper to rent space from than new buildings ("Big Data Backs Jane Jacobs: Cities Need Old Buildings," Smart Cities Dive, Older, Smaller, Better Measuring how the character of buildings and blocks influences urban vitality, NTHP).

1. Older, mixed-use neighborhoods are more walkable. 
2. Young people love old buildings.
3. Nightlife is most alive on streets with a diverse range of building ages. 
4. Older business districts provide affordable, flexible space for entrepreneurs from all backgrounds. 
5. The creative economy thrives in older, mixed-use neighborhoods.
6. Older, smaller buildings provide space for a strong local economy. 
7. Older commercial and mixed-use districts contain hidden density.  

What she didn't anticipate is that in strong markets, either at the city-wide or sub-district scale, regional, national and international real estate actors would bid up the space and improve it, so that even "old buildings," became the equivalent of flashy and new and not cheap to rent.

Early on when I got involved in commercial district revitalization, I believed that only historic buildings were capable of supporting the kind of innovation that Jacobs wrote about.

But later I came to understand it was more about the building as an envelope.  I came across really cool businesses in 50s and 60s strip centers in Phoenix and West Seattle that were in "modern buildings" but older and cheaper, and that innovation was dependent both on rent pricing and the capacity of the business proprietor to be cool.

Place breaking.  Years ago, charlie commented on how gentrification changes places, business proprietors, businesses, amenities etc.  It's not a new concept but I didn't pay it enough attention.  Recently, I came across the term "place breaking" as opposed to "place making" in terms of maintaining vital and interesting places, neighborhoods and commercial districts ("How might the concept of ‘place-breaking’ challenge and support the practice of place- making?").

For example, there used to be a cheap Chinese quick service restaurant up from Dupont Circle Metro Station, where you could buy dinner, with extra rice, for less than $5.  (Yes, this was the 1990s.)  That space got bought by a national REIT and upscaled.

Supreme Taste is located at the corner of Broadview and Gerrard in East Chinatown. Nick Lachance Toronto Star.

Karon Liu of the Toronto Star makes a good point about how Chinatowns are defined in part by great Chinese BBQ ("This Toronto restaurant keeps Chinese barbecue alive").  That without it the experience and opportunity is lacking.  That's a simple example of place breaking.

I've come across a book on the topic, Upscaling Downtown: From Bowery Saloons to Cocktail Bars in New York City, although it's more about the process of upscaling a place and how its changed.  I do look forward to reading it.

It reminded me of the book It's Hardly Sportin' about Wrigleytown, the commercial district adjacent to Wrigley Field, where the Chicago Cubs play.  

The book describes how "capitulating" to night baseball changed the business mix towards nightlife and entertainment away from serving neighborhood residents.

Strip centers.  Unfortunately, strip centers can be a major real estate asset class owned by the same regional, national, and international actors, depending on the market, with costly rents, therefore mostly attracting chain businesses.  But thousands are still independently owned and capable of supporting independent business.

-- Ten Principles for Reinventing America's Suburban Strips, "The Future of the Strip," ULI

IN THE SUBURBS.  Because center city rents trend high, suburban strip centers can be a locus of innovation in the way that the center city no longer is.  You see this a lot in restaurant reviews, for example Tim Carman of the Washington Post and Karon Liu of the Toronto Star write a lot about great restaurants in suburban strip centers.

This strip center in Scarborough is working with the organization plazaPOPS to reallocate some parking spaces to pop up markets.

In Toronto there is also an initiative to work with Strip Centers to improve their place value ("Toronto-area strip malls are foodie havens. Here’s how this project is helping them become places for people, not just cars," Star).

Infographic: Independent Coffee Shops.  I suspect that the cities with a higher density of independently owned coffee shops have a greater amount of independently owned retail spaces still.  It hasn't all been rolled up by the big firms.

Infographic by OnDeck.

Sunset Strip, West Hollywood.  There is a superb article in the San Francisco Chronicle about the Sunset Strip in West Hollywood and how it has changed with the change of real estate ownership and upscaling of retail concepts so that it no longer has space for "hanging out" the way it did back in the 60s and 70s when it was known for eclectic and electric nightlife, including the club Whiskey A Go Go where The Doors band got its start.  ("Once LA's nightlife epicenter, the storied Sunset Strip has a murky future").  Also see "Then and now: See how much the Sunset Strip is changing," Curbed LA.

Ultimately, the Strip writ large has failed to produce more substantive scenes in recent decades because it’s no longer amenable to supporting a critical cornerstone of subcultures: the lost art of hanging out, where fun also comes with absorbing and exchanging ideas. The raucous venues of decades past lived alongside locales like Ben Frank’s, a now-defunct 24-hour coffee shop, where people could spend time together in a low-stakes environment. “Youth culture, even if it isn’t counterculture, needs people running into each other, physically, in space,” Rupert says. “And that’s not what the landscape of [the Sunset Strip] offers anymore. I can’t think of a single place you could just go and hang out without, like, an $80 bar tab.” 

Interestingly, the City of West Hollywood's Economic Development Strategy report acknowledges the "deficiencies" to small business and nightlife and affordability as the district is "upscaled" and calls for changes. 

Little Saigon in Annandale.  The Washington Post writes about a two mile strop in Falls Church being designated as "Little Saigon" in recognition of the Asian business enclave-cluster there ("East Coast’s largest Vietnamese cultural hub now sits on ‘Saigon Blvd.’" also "This ‘Little Saigon’ shaped their childhood. Now they fear for its future," 2023).

Eden Center in Falls Church, Va., contains the East Coast’s largest concentration of Vietnamese businesses. Local government officials are drafting a possible blueprint on how it might be enhanced. (Valerie Plesch for The Washington Post)

Interestingly, this cluster got its start in Clarendon in Arlington County, when post-war Vietnamese immigrants settled there, because it was cheaper.  This is an example of how later generations of immigrants migrate directly to the suburbs without an initial stop in the center city.

As Arlington implemented its "urban renewal" plan for the Wilson Boulevard corridor, the district moved west into Fairfax County and Falls Church.

There's been a couple year planning process on how to maintain the enclave without losing properties to large scale actors.  Like some of the other planning initiatives mentioned above, the University of Maryland planning school did a workshop and report on how to maintain the centrality of small businesses in this ecosystem ("New Tools for Keeping Immigrant-Owned Shops in Place," Maryland Today)  

Ironically, I remember them doing a similar report about Silver Spring in the early 2000s.  And more recently on the Purple Line corridor (Preventing Small Business Displacement in Six Neighborhoods Along Maryland’s Purple Line Light Rail Corridor, A Long Life for Long Branch: Tools to Preserve Independent Retailers).  It'd be interesting to compare.  (And frustrating, because probably, over 20+ years, the recommendations are pretty similar.)

-- Small Business Anti-Displacement Toolkit, 2024

Bars in Shinjuku’s Golden Gai.Photographer: Noriko Hayashi/Bloomberg

Tokyo.  Granted, my only knowledge of Tokyo comes from watching NHK.  But the metropolis, while it has plenty of tall modern buildings and big business districts, maintains a large stock of old and smaller buildings" located in what they call "shopping streets" as well as many districts across the city.  

Japan has both a strong retail chain system like 7-11 and independent businesses simultaneously ("Why 7-Eleven Is a National Treasure in Japan," New York Time).  In other words, Japan allows for a heterogeneous retail sector, partly because of how property ownership is organized, unlike the US where it is more homogeneous and oligopolistic and focused on large property owners.  (Plus, why are their chains like 7-11 better than ours?)

This allows for the creation and maintenance of all kinds of small businesses, although as the way work is organized affects the survival capability of some of these place ("Why Neighborhoods and Small Businesses Thrive in Tokyo," Bloomberg, "Last orders? Soaring costs and declining demand take toll on Japan’s legendary izakaya,").

Microspace and regulation in Tokyo.  The book Emergent Tokyo: Designing the Spontaneous City discusses ground up small business development in terms of microspaces and the regulatory regime which supports them, a regulatory framework that is much different from the US.  From the Bloomberg article:

There is an economic logic to these developments. If you’re developing something at large scale, you want to get a high return. So you’re looking usually at luxury condos, stacked over high-end retail and restaurants, maybe with some anchoring project like an art gallery, and also what’s called POPS, privately owned public space. 

 We’re not saying it’s all bad. There are reasons to have those kind of projects, but there are things that corporate urbanism can’t easily bring to your city like a sense of community, spontaneity, idiosyncrasy, surprise that really make our cities flourishing and exciting places to be.

... This is going to sound wild to anyone who lives in the US, but for any two-story rowhouse in Tokyo, the owner can by right operate a bar, a restaurant, a boutique, a small workshop on the ground floor — even in the most residential zoned sections of the city. That means you have an incredible supply of potential microspaces. Any elderly homeowner could decide to rent out the bottom floor of their place to some young kid who wants to start a coffee shop, for example.

... Of course, regulation at all different levels figures into that. It’s this incredibly dry topic, but actually how you regulate small business and spaces changes everything about the emotional color palette that your city can paint with. In Tokyo, for example, small businesses get a lot of interesting tax incentives. Liquor licenses are extremely cheap and easy. A liquor license in an American city can sometimes run up to $500,000. You’re not going to have a little four-seat, mom-and-pop bar for the locals. So those regulatory and policy choices that we make fundamentally determine what our cities are going to feel like.

Fullerton, California.  Is one of many cities ("Fullerton’s ‘Walk on Wilshire’ to permanently close at end of month," Orange County Register), small and large--Philadelphia, New York City, San Francisco, etc.--that are ridding themselves of street closure initiatives focused at providing business opportunities for restaurants and commercial districts in the face of covid and restrictions on how many people could be in a business at any one time.

A deadlocked vote by the Fullerton City Council means the city’s popular downtown promenade, Walk on Wilshire, will close permanently at the end of the month. Wilshire Avenue will reopen to vehicular traffic.

The 200-foot street closure on Wilshire Avenue west of Harbor Boulevard began in 2020 to spur outdoor dining during the peak of the pandemic. The road was closed to vehicles to create outdoor dining spaces intended to help local restaurants at a time when California imposed indoor dining restrictions and people were looking for more social distancing options. Over five years, the City Council extended the temporary street closure multiple times while launching a pilot program to permit business owners to rent and build parklets on the street space. A majority of Fullerton residents seemed to support the street closure, according to a city survey. Large crowds of residents urged the City Council to continue the program in October and again in January.

Still, a majority of the several restaurants along that stretch of Wilshire Avenue declined to participate in the parklet program due to its associated costs. Restaurants needed to lease street space from the city to build a parklet. Jung and Valencia argued it would be too expensive for the city to continue the program permanently. A staff report said the city invested $90,000 in the temporary partial street closure and would need to spend up to another $250,000 for a permanent closure. Staff estimated the city would recoup $60,000 per year in annual lease revenue from participating businesses.

A view along the tree-lined Wilshire Avenue from the intersection of Harbor Boulevard in downtown Fullerton Fullerton on Thursday, January 28, 2021. (Photo by Mark Rightmire, Orange County Register/SCNG).

I wrote a piece back then, "From more space to socially distance to a systematic program for pedestrian districts (Park City (Utah) Main Street Car Free on Sundays)," making the point that cities and commercial districts should have been focused already on making spaces attractive to potential customers--place making instead of place breaking.  But that it was good to take advantage of covid in terms of changing retail business practices.

Sadly, by going back to a focus on privileging the car, cities are diminishing one of their key potential competitive advantages--walkability.

-- "What is the competitive advantage for the post-covid city? Doubling down on place values" (2022)

-- "Pedestrianization of Newark Avenue in Jersey City"  (2022)

Know your market #2: DC commercial property incentives

In "Know your market" I commented on some pretty obvious disconnects between Utah and the products being hawked by some of the vendors.

Similarly, DC announces a tax freeze on downtown commercial space for "retail, grocery, or child care" ("D.C. launches ‘Office to Anything’ conversion tax incentive, commits millions," Washington Business Journal).

D.C. Mayor Muriel Bowser has opened up the application window for a new program aimed at revitalizing obsolete offices in or near downtown, offering developers a 15-year property tax freeze to convert their properties largely to nonresidential uses.

The program, dubbed “Office to Anything,” could create up to 2.5 million square feet in repositioned property, according to Bowser, who shared details Monday evening with members of the Business Journal's Power 100 list of influential area leaders.

“Operators were saying, ‘Well, what about us? We don’t want to do housing. We think that we have a different and better idea for a particular building. Can you work with us?’ So, that’s what Office to Anything is about,” Bowser said.

Office to Anything means just that: entertainment, hotel, retail and beyond. The incentive could also be used to renovate outdated offices into trophy space, a segment of D.C.’s office market that faces high demand but low supply. The program locks in a building’s real property tax rate for 15 years, starting either the year after the conversion is complete, or if requested by an applicant, the tax year the conversion is finished.

If because of WFH downtown visitorship is half of what it was, there's no market for retail or child care, until in 10+ years, there's more housing (note: I worked on projects in DC that took 13 years or 20 years or more to come to fruition.

Note: I have to acknowledge that given the fall off in the commercial property market, the Executive Branch is desperate for anything.  And this incentive program will have some impact.  OTOH, desperate projects as a way to fill up space isn't much better.  

The right project in the right space is hard to achieve but worth the wait.

Bait and switch in Philadelphia: 76ers basketball team won't move to Downtown, will remain in South Philly

An arena supporter is in the chamber Thursday, Dec. 19, 2024 as opponents are on the floor before City Council is scheduled to give final approval to the Sixers arena during its regular meeting. Tom Gralish / Staff Photographer

It's been more than a year that the Philadelphia 76ers basketball team has been pursuing a relocation to downtown, modeled after the Wizards in DC and the Celtics in Boston.  

The City Council just approved the move, and inducements, even after recognizing some serious deleterious effects on Chinatown and SEPTA, the transit agency ("City Council gives final approval to the 76ers’ Center City arena proposal," "Inside the 76ers arena agreement approved by Philly City Council members", Philadelphia Inquirer).

I was somewhat supportive, because I think it's better to have such uses downtown and proximate to high quality transit like the Knicks in Manhattan and the Nets in Brooklyn (and yes, the teams in DC and Boston).  

I think Chinatown has a lot more realizable strength than it realizes because it is still a destination for first generation immigrants, while in DC, first generation Asian immigrants move directly to the Virginia suburbs ("Richard's Rules for Restaurant (Food) Based Revitalization, Salt Lake City and DC's Chinatown").

But now the 76ers have announced they're not moving ("The 76ers have struck a deal with Comcast Spectacor to stay in South Philly and abandon plans for a Center City arena," PI).

Was this bait and switch to get a better deal from Comcast, the owner the complex where the 76ers play?

In any case, the city should negotiate for better transit connections for the Wells Fargo Center.

And given that Macy's has just announced they'll be closing their store in Downtown Philadelphia ("What we know about the Macy's closing in Center City," PI), it's clear that the City needs a new plan for energizing Downtown, Market Street East.

I was thinking that they could try to recruit Boscov's Department Store, which is based in Reading, Pennsylvania and still has stores in downtowns, but serves the Philadelphia area through suburban stores in PA and NJ, or Von Maur, which is based in Iowa, but recently opened a store in the Pittsburgh suburbs ("Pennsylvania's first Von Maur department store opens in South Hills Village," Pittsburgh Post-Gazette).   Nordstrom's doesn't seem interested in new downtown locations.

It's a stretch, I know, but large center city downtowns can still be places where department stores focused on experiential marketing, can be successful.

National office space market is very bad (reprint from Bloomberg)

Salt Lake Downtown Skyline at night

This isn't news, more of a reiteration.  This affects cities both in terms of urban, especially downtown, vibrance, but especially local government revenue streams, which tend to be dependent on commercial property taxes, especially in major cities.

There's lots of talk about office to residential conversion, but that will take a couple decades to have significant impact (Myths about converting offices into housing—and what can really revitalize downtowns, Brookings).  From Bloomberg:

Not long from now, almost one-quarter of all US office space may be vacant. And if work-from-home—the key culprit—persists, commercial-property values will be further decimated by up to $250 billion, Moody’s warns. When combined with the impact of lower rents and lease turnovers, the vicious post-pandemic cycle will reduce revenue for office landlords by as much as $10 billion. That in turn could translate into a quarter-trillion dollars of “property value destruction,” Moody’s officials said. The figures illustrate the gloomy prospects faced by property owners and lenders as employers continue to jettison square footage or shift from multiyear leases to shorter-term and more flexible co-working arrangements. A full 85% of North American organizations polled by brokerage Jones Lang LaSalle have implemented hybrid work, and occupancy across offices in major US cities is stuck at about 50% of pre-pandemic levels. Wavering demand and increased borrowing costs have slammed office valuations, especially among older buildings. “The argument for maintaining or even increasing remote work practices remains compelling for many businesses,” Moody’s said. “If productivity remains stable and costs can be reduced by forgoing physical office spaces, the rationale for mandating in-office attendance diminishes.”

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Small downtowns may have an advantage because the cities are less unbalanced ("From Owatonna to Red Wing, Minnesota's small downtowns see resurgence," Minneapolis Star Tribune, archive.ph copy).  Also see "Revamping Nicollet Mall as a 24-hour district is one idea for downtown Minneapolis," MST, archive.ph link).

-- Downtown Next Report, Minneapolis Foundation

Mayor Bowser gets shade for claiming every transit line serves Gallery Place | Capital One Arena and point about Downtown planning

Technically, Mayor Bowser is wrong because Galley Place is served directly by the green, yellow, and red lines, while nearby -- a few blocks -- Metro Center, has the blue, orange and silver lines along with red ("DC Mayor Muriel Bowser forgets which Metro lines service arena stop while defending keeping teams downtown," Washington Examiner).

But not many people seem to know it's easier and faster to get out and walk.  So they congest the red line between the two stations when going to games.

Although there has been talk for almost 20 years about creating an underground walkway between the stations (GALLERY PLACE / CHINATOWN - METRO CENTER PEDESTRIAN PASSAGEWAY TUNNEL STUDY, WMATA, 2006).

The last I remember the cost was going to be about $200 million and there wasn't the belief it was worth it.

HOWEVER, it does remind me of the late 1960s Urban Design Manhattan report by the Regional Plan Association, which called for more purposeful vertical and horizontal planning between Manhattan's transit stations, the street ground plane, underground entrances to buildings, and the first couple floors of buildings.

When MTA interlined a bunch of lines, they had the opportunity to build an integrated system of underground connections, comparable to Chicago's Pedway, Toronto's PATH network and Montreal's Underground City, but instead they just filled it in.

DC could have taken the opportunity with both a Metro Center to Gallery Place connection and a Farragut North to Farragut West connection, to begin to do a similar kind of pedway network, and strengthen the value of Central Business District.

Chicago Pedway

Other opportunities are presented by the proposed Downtown Maglev station ("DC, Transformational Projects Action Planning, and the Baltimore-Washington Maglev project") and in terms of vertical and horizontal connections, the NoMA station ("Public improvement districts ought to be created as part of transit station development process: the east side of NoMA station as an example," Revisiting creating Public Improvement Districts in transit station catchment areas").

DC hasn't been particularly forward on constantly planning and investing in maintaining the value and centrality of the Downtown Central Business District.  Given how voracious Northern Virginia is in recruiting DC based businesses, plus having other advantages (airport access, lower rents, cheaper and more land, but sprawl), this is extremely short sighted.

Brookfield Properties defaults on two properties in Los Angeles

Brookfield Properties is one of the largest US commercial property owners, with large holdings in major cities including NYC and Washington.  

With the impact of covid on working in central business districts--most cities have at best 50% of employees back in the office--the value of commercial property is taking a big hit.  Most companies are reducing their office footprint in favor of work from home, and this is devaluing property.

Cities haven't really started reducing property tax assessment values in response ("Real Estate Values in the Time of COVID," NBER).

Another way to see the impact is whether or not there is an increase in loan defaults, because the revenue from leasing isn't enough to cover the loan, especially as mortgage rates rise.  

That's why this loan default is big news ("One of the biggest landlords in Los Angeles just defaulted on $755 million in loans for two sky scrapers as remote work keeps offices vacant," Fortune).  From the article:

The two properties in default, part of a portfolio called Brookfield DTLA Fund Office Trust Investor, are the Gas Company Tower, with $465 million in loans, and the 777 Tower, with about $290 million in debt, according to a filing. The fund manager had warned in November that it may face foreclosure on properties. 

The company had the option to extend the maturity on the loans tied to the Gas Company Tower, but elected not to, according to its latest filing. It also elected not to get interest-rate protection that was required for loans for the 777 Tower property, which amounts to an event of default, the filing said. 

“We believe DTLA’s decision to default on these two assets increases the risk for the remaining loans in their portfolio,” Barclays Plc research analysts Lea Overby and Anuj Jain wrote in a note Tuesday.  Brookfield declined to comment. 

The values of comparable office buildings have broadly dropped, according to the Barclays analysts. Office vacancies have increased across the country since the pandemic made working remotely more routine. The vacancy rate in the Los Angeles central business district vacancy rate was 22.7% in the fourth quarter of 2022, according to a Jones Lang LaSalle Inc. report.