Downtown Foot Traffic Returning, Especially During Weekends

In a promising sign for the many downtown landlords working to bring their customers and clients back to the office, pedestrian traffic strengthened in June 2022, according to Springboard.

The gap from 2019 has now narrowed by nearly a half from January 2022 when traffic was -42.9% below the 2019 level. For June, it was -26.3% below 2019 from -27.8% in May.

Monday through Friday numbers were a bit discouraging for the office contingent, which strengthened by about 25 percent from May.

“The appeal of larger downtowns for leisure trips is evident over the weekend,” according to the report.

Increased Exuberance for Live-Work-Play

Laura Dietzel, real estate senior analyst with RSM US LLP, tells GlobeSt.com that walkability is of paramount importance to commercial real estate property value. 

“Urban commercial real estate, particularly office and retail sectors, have struggled throughout the pandemic with lower property valuations as a result of decreased physical use and demand,” Dietzel said.

“The ‘live, work, play’ real estate investment thesis, which existed long before Covid-19, has seen increased exuberance as new opportunities are uncovered by investors looking to take advantage of the reimagination of the future of work by companies across the country.

“There is a strong, direct correlation between pedestrian traffic, including proximity to public transportation, and commercial real estate metrics. Improved pedestrian traffic results in increased property value, rents and retail sales.”

Urban Land Institute shows that a 10-point increase in walk score is associated with a 5% to 8% rise in commercial real estate values, she shared.

“Walkability/pedestrian traffic is also highly correlated with occupancy absorption/price resilience during periods of economic downturns and, recently, during a global pandemic,” Dietzel said.

Work-Live-Play Dynamic More Resilient During Pandemic

CoStar reviewed 300 urban neighborhoods to evaluate live/work/play dynamics that incorporated walkability ratings noting that neighborhoods with high scores (in the top 50th percentile) were more resilient during the pandemic, and recovered faster.

Over the last 12 months, neighborhoods with higher live/work/play ratings, and pedestrian traffic, experienced a compression of retail vacancies by 66 bps compared to 32 bps for those neighborhoods not scoring as favorably,” she said.

Residents of walkable places have lower transportation costs and higher transit access – helpful attributes during this period of inflation; however, they also have higher housing costs.

“Urban core retail has under-performed suburban retail by a significant margin during the pandemic as pedestrian traffic in urban cores focused on office workers were heavily impacted by the pandemic and the slow-to-return office working contingent,” Dietzel said.

“As the economic effects of the pandemic weaken, disparity of foot traffic is most prominent in major markets like New York and LA where weekend visits are more than 50% higher than weekday visits, CoStar reported in May.

“Downtown markets took a hit in 2020 during the pandemic for multifamily but by and large, the comeback has been swift as leasing activity and rent grow – a hopeful sign for the resurgence of pedestrian foot traffic downtown during the week.”

TOD Helps Save on Infrastructure Costs

One main aspect and advantage of the live-work-play apartments is that they are close to public transportation, Yardi Matrix’s Doug Ressler tells GlobeSt.com. “We see continued TOD (transit-oriented-development) as a cost/benefit alternative to reducing the city budget for increasing infrastructure costs.