The Downtown Office District Was Vulnerable. Even Before Covid.

At the heart of some big cities, office buildings prevail

The modern downtown business districts of many large American cities were created through subtraction: First residents left the center city, then the craftsmen and wholesalers, then the museums, theaters and smaller retailers, and — the final blow — the department stores.

What remained at the heart of many cities in the 20th century were blocks and blocks of office buildings filled perhaps 10 hours a day, five days a week — a precarious urban monoculture. It was already susceptible to shocks and recessions before the pandemic. And now, with the future of office work deeply uncertain, this moment has sharpened debate about what downtown should be, if not the domain of staid office real estate above all.

In some downtown business districts, 70 percent to 80 percent of all real estate is dedicated to office space, according to an Upshot analysis with CoStar, a company that tracks real estate down to the individual building. That means there are few residents to support restaurants at night or to keep lunch counters open if office workers stay away, and few reasons for visitors to spend time or money there on the weekend.

And it means that a city’s downtown tax base relies heavily on office property values, that streets grow quiet when workers head home, and that the most central and accessible part of the city — also often the hub of a transit system — is little used much of the time. Such is the case in parts of the San Francisco and Boston financial districts, and in stretches of downtown Washington and the Chicago Loop, where offices command the vast share of all real estate.

“Any financial manager would tell you that’s crazy,” said Tracy Hadden Loh, a Brookings Institution researcher who has analyzed office real estate. Downtowns, like investment portfolios, are more sustainable when they’re diverse. The past year has made that plainly clear in places like Midtown Manhattan, where property tax assessments, transit ridership and small-business revenue fell particularly far during the pandemic.

CoStar data going back to 2006 shows that many big-city downtowns have been evolving away from strictly office space, adding college dorms, apartment buildings and civic attractions. Cities where “downtown” has increasingly come to mean more than offices are likely to be more resilient as they emerge from the pandemic, researchers and downtown officials say.

“To think that we’re going to make it in cities with just single-use office districts — that’s not a formula for success,” said Paul Levy, the longtime head of the Center City District improvement organization in Philadelphia. “And most cities have realized that for the last 20 years.”

That recent story of downtown reinvention, however, is pushing against a century of history, as residents and retail left for the suburbs and as highways and parking lots took their place.

“We want to be the kind of complete neighborhood where your residences, your job, your dry cleaners, your bank, your child-care facility are all within walking distance,” said Michele Van Hyfte, the vice president for urban design at the Downtown Austin Alliance.

The pandemic revealed that downtown Austin hadn’t become that yet, even after 20 years of trying. And it showed that the area still isn’t home to enough residents, Ms. Van Hyfte said, as many restaurants and stores had to close their doors.

“If we had had more residents downtown, would they have been able to survive?” Ms. Van Hyfte said. “I don’t know if we can say that as a foregone conclusion, but it certainly would have helped.”

Still, downtown Austin is among the districts that have changed the most since 2006, the CoStar data shows. Its skyline has been reshaped by new high-rises, many of them apartments, hotels or buildings that mix offices with other uses. Restaurants and entertainment spots have replaced vacant land and parking lots. In 2006, 53 percent of real estate downtown was office space. Today, that figure is 41 percent.

The Chicago Loop depends more on offices, while downtown Austin is less dependent on them

There is no single definition for “downtown” or a central business district. And the boundaries we used here may differ from how some downtown business organizations or city planners define them, or how residents may draw “downtown” in their minds.

We adopted CoStar’s definition of the downtown or central business real estate market in each of the 50 largest metropolitan areas (for the biggest cities, we combined markets like the East, West and Central Loop in Chicago). We excluded cities where these boundaries encompass substantial nearby single-family housing, which CoStar does not track.

This definition generally produces a tight window on the most intensive job centers — or, those places most at risk when many jobs no longer have to be done at the office.

The data reflects all the square footage in buildings recognizable at street level: office towers with guarded lobbies, big banks with ground-floor A.T.M.s, nondescript facades with restaurants open for breakfast and lunch only.

In pre-pandemic times, the lack of diversity in the building uses could replicate itself in other ways, as in Boston’s Financial District.

“It feels like a very wealthy, very white, rather male place,” said Angie Liou, the executive director of the Asian Community Development Corporation in Boston, which is active in the Chinatown neighborhood bordering the Financial District. “During lunch hour, everybody’s in a suit and their fancy shoes.”

But even parts of broader downtown Boston have changed significantly since the 1990s. A generation ago, the nearby theater district (which sits outside our CoStar boundaries) was the site of abandoned theaters and a shuttered opera house. “It was not a place where people would think about block parties and outdoor dining taking place on the streets, or people living here,” said Rosemarie Sansone, the president of the Downtown Boston Business Improvement District.

Since 2000, her organization counts four theaters, four college dorms, three hotels and 1,600 units of housing that have opened (or reopened) in the area. A highway that cut through downtown was rerouted into a tunnel, and the former roadway was replaced by parkland.

The forces that had hollowed out central Boston were similar in many cities, where downtown was once home to housing, shops, entertainment, government offices, merchants and hotels. By the start of the 20th century, residents had begun to move farther out. But downtown real estate boosters believed this was progress at work: Residents would decentralize, but they would always have reason to come back to the city center.

“The people who thought they knew what they were talking about were really quite happy with the idea that downtown would be strictly for business,” said Robert Fogelson, a historian who has written a book about American downtowns. “They were very happy with this until it breaks down.”

Retailers and museums that couldn’t afford downtown real estate followed the residents who left. Suburban department store branches opened, anchoring new malls with ample parking. Eventually, jobs left, too. Downtown property owners and city officials responded by tearing down buildings for parking lots and erecting highways to lure white middle-class suburbanites back. Urban renewal projects better known for demolishing lower-income neighborhoods were also essential for developing in their place modernist, office-heavy downtowns.

Cities in increasing financial trouble came to see commercial office buildings as the most lucrative form of development (an office building, unlike a new apartment, is also less likely to bring demand for expensive public parks and schools). Those pressures were particularly acute in a city like Boston that has so many tax-exempt colleges, nonprofits and churches, said Karilyn Crockett, a professor of urban history, public policy and planning at M.I.T. As a result, the center city evolved into a place far different from the gritty waterfront of immigrant tradesmen, textile workers and shipping jobs.

“Now these towers and commercial spaces and office spaces tell the story of cities as opportunity areas for people who are senior executives, middle managers,” Professor Crockett said.

In the monoculture that formed in downtown Dallas, 45 million square feet of office space were dominated in the 1980s by just two industries, energy and finance, which then got walloped by an economic bust. By the late ’90s, 40 buildings were vacant.

The lesson that downtowns need more than offices is “not just true in this post-Covid world,” said Kourtny Garrett, the head of Downtown Dallas, Inc. “For us in Dallas, that’s been true since the big crash in the ’80s.”

Ms. Garrett had flashbacks to that era on the March day last year when Dallas County issued its pandemic stay-at-home order. She was vacationing with her family, and her staff kept sending her photos of office workers in the streets, carrying home their computers. It wasn’t clear in that moment if downtown would require another wholesale reinvention. But Ms. Garrett now believes the post-’80s plan still applies: Build more residences, diversify the economy, give people reasons to linger after 5 p.m.

The past year has also upended questions about who gets to shape the future of downtown. Historically — and even as recently as the national bidding war for a second Amazon headquarters — a handful of executives inside companies promising new jobs wielded outsize influence. Now decisions have shifted to individual workers, said Kristopher Larson, head of the Hollywood Partnership in Los Angeles. And they will be shaped by wider demands for racial inclusion and affordable housing.

Mr. Larson previously led the downtown improvement district in Raleigh, N.C., which has changed in 15 years from a quiet state capital to a more animated and populated downtown. David Meeker, a downtown Raleigh resident, said the transformation helped sustain business during the pandemic at a brewery he co-owns, Trophy Brewing. Even in normal times, he prefers the steady traffic of neighborhood regulars who come in on a weeknight over the boom-and-bust of convention visitors and business clientele.

“If there weren’t residents during the pandemic, it would just be ugly — really, really ugly,” he said, imagining the pandemic with the downtown Raleigh of 20 years ago. “It would be just … annihilation.”