What once made many major downtowns or central business districts (CBDs) attractive to many has changed since the pandemic, with countless cities struggling to attract tenants and residents into the epicenter of each city. However, the appeal of a centralized place where the suburban communities can come together still exists. People need the social and professional opportunities that come from being together along with the comfort of knowing they are doing so in a comfortable and safe space.

In the first of this two-part exploration of CBDs, “Recapturing the Vitality of Central Business Districts,” we examined down cycles, doom loops and the detrimental effects on office-heavy city cores. Now we look to the future and how downtowns can return to being the center of attention. How are property owners, businesses and local governments working to improve safety and appeal to residents, workers and visitors, working together on planning and design in order to achieve urban renewal and sustained vitality.

Reimagining the Central Business District

For downtowns to be attractive, compelling and ultimately thriving, Gensler states that they must be places that are flexible, multiple in their uses and offer a diverse mix of property types. The goal is to create CBDs that are more inclusive, resilient, equitable and, perhaps above all, safe and secure.

Consumers and businesses need a reason to come and stay. Popularity is gaining around mixed-use properties, those that offer users good live-work-play options and flexibility.

Cities have to “recalibrate” downtowns to achieve a balance of offerings other than work locations. This not only means mixed-use on the property level, but on the bigger planning level embracing the concept of the “20-minute city” where residents can access a wide range of needs and interests within that radius.

More diverse retail offerings, including grocery and food supply outlets, increase convenience and connectedness, while also providing enhanced amenities to non-resident consumer populations in the CBD. With this comes walkability and green space, which adds spatial variety for residents and visitors as well as a healthier, more hospitable city, according to the Gensler City Pulse Survey. Continued investment in such space is important.

Establishment of a public realm that fosters interaction and exploration. As with the Forum of ancient Athens — or the AT&T Discovery District of present-day Downtown Dallas — people are drawn to places offering new possibilities and fresh connections.

“Connecting urban amenities, immersive media experiences and people themselves creates a catalytic and differentiating space for exploration and connection only achievable within a CBD,” notes Gensler.

Repurposing & Refurbishing Offices

One person’s challenge is another’s opportunity. Or, in the case of downtown revitalization, rampant office vacancy could be used to fill a persistent need: urban housing. Call it a win-win or merely a market correction, but many are looking at office conversions as a solution to unlock CBD potential post pandemic.

However, the physical process of conversions can be difficult — if not cost and logistically prohibitive — with many considering the political process to be just as problematic. Zoning is often a hurdle, and political backing often comes with strings attached, such as affordable housing requirements that developers, already facing costly execution, can’t afford.

According to Goldman Sachs, “For the top 5 metropolitan areas that are most affected by remote work, we estimate that office acquisition prices would need to fall almost 50% for conversion to be financially feasible. This suggests that most of these offices will likely remain underutilized in the near term.”

On the plus side for office, tenants continue to demonstrate a flight to quality, which benefits both new and improved products. JLL calls the delta in demand from old to new “a complete bifurcation in office market performance based on building age.” The refurbishment play for downtown office gives property owners and district planners another option.

“Architecturally significant historic buildings that have been extensively and thoughtfully refurbished attract high levels of tenant demand,” according to JLL’s 2023 The Future of the Central Business District report. “This strategy will be particularly useful in cities that are pursuing ‘renovation-first’ policies.”

“Buildings that are catering to people — making it exciting to come back to the office or easy to come back to the office — are winning,” said Jason Alderman, the head of Hines’ New York office.

For example, KBS’s Accenture Tower in downtown Chicago has undergone $22 million in renovations and the implementation of new amenities. Occupancy increased from 80% pre-pandemic to nearly 100% after the addition of 70,000 square feet of retail and more than 20 fast-casual and dine-in restaurant options, a contemporary tenant lounge with an outdoor terrace with two fire pits in a garden-like setting and more.

One of the features of Accenture Tower that makes it successful as a safe, bustling “destination” is its direct, in-building light rail access via Chicago’s Ogilvie Transportation Station. Built atop the historic Northwestern Station in 1987, Accenture Tower is accessible to those in Chicago’s northern and western suburbs by rail. Visitors and tenants can travel into the city and dine, play and work without ever the leaving the building.

Given that building construction produces 11% of global carbon emissions, according to the World Green Building Council, and that even a new, energy-efficient building can take up to 80 years to offset its own carbon emissions, according to a study by the National Historic Preservation Fund’s Preservation Green Lab , the action of real estate reuse and the design commitment to adaptability may be a viable option for the future of CBDs. Sustainable development is essential, along with key priorities such as public transportation-enhanced accessibility and green spaces and energy.

“That mentality, that thinking about flexible, adaptable space has to be integrated into everything we construct into the future,” said the fund’s former sustainability director, Patrice Frey. “Because we’ve got to be designing for centuries, not for decades.”

Collaboration is Crucial

Call it a reimagining, reinvention or transformation, but the big task ahead of CBDs will take teamwork. JLL says such a massive effort requires “an ecosystem” of policymakers, local and state authorities, investors, developers and major tenants working together.

One such group that’s been helping to reimagine their CBD in the pandemic’s wake is the Minneapolis Downtown Council, of which, Ann Rainhart, COO of law firm Fredrikson & Byron, is a member. Located at KBS’ 60 South Sixth office building located in downtown Minneapolis, the Fredrikson COO has been involved in the Downtown Council; a group that’s helped spurn a renaissance by striving to restore the city’s downtown.

In short, the relationship between people and the built environment has radically changed in CBDs, demanding that public and private stakeholders commit to implementing and adapt best practices in the realms of planning, infrastructure, sustainability and wellness investment.

Conclusion 

The shift by CBDs from serving primarily as places of work to being multi-purpose destinations is a big one, but there’s already good news: there’s evidence that its’ possible.

Salt Lake City, Utah, for example, has taken significant measures to make its downtown more available to all while addressing homelessness. In 2020, Salt Lake removed its largest homeless shelter, which was negatively impacting the surrounding area. The shelter was replaced by three new, gender-specific homeless resource centers: two 200-bed centers in Salt Lake City and one 300-bed center in South Salt Lake. In turn, the downtown has enjoyed a revitalization while rebuilding their system to better serve the homeless problem.

Downtowns will continue to shift from their office-heavy makeup in favor of more connectivity, flexibility and diversity of uses and attractions. Giving more reasons for people to frequent it will unlock new potential in Salt Lake’s CBD.

Learn more about the latest in commercial real estate, visit KBS.com/Insights. Read the first article in this series, “Recapturing the Vitality of Central Business Districts: Part One” here.