Downtown Office Still Plays a Key Role in Cities

The future of the downtown office building is not bleak as some have imagined it would be after the COVID-19 pandemic; however, it does require rethinking and reimagination on the part of property owners, developers, and public sector leaders. 

Perhaps even, the term “downtown business district” has become an anachronism, said panelists this week at NAIOP’s CRE.Converge conference taking place in Chicago with 1,600 attendees.

“We just have to think differently about our offices,” said Melissa Roman Burch, chief operating officer of the New York City Economic Development Corporation (NYCEDC). “You have to think longer term. Employees have choices.”

In fact, she said that a “flight to quality” is seeing increased demand for New York City’s “trophy” or Class A buildings, which are commanding premium rents in the $150 to $200 per-square-foot range, and in some cases, even more.

These buildings have the amenities that today’s workers are demanding, including a significant focus on health and wellness.

“Everything from air quality in the building, access to views, and to sunlight, the overall quality of the office space, gyms and fitness amenities,” she said. Premium buildings are also offering conferencing facilities, including shared resources among tenants that give smaller firms additional ways to convene people in their building.

But older buildings will be more difficult to fill, Burch said, and the public sector will need to step up efforts to bring them in line with what people are expecting.

One of the ways that the NYCEDC is supporting these buildings is by enabling residential conversion. Having more residential spaces and creating more mixed-use projects will ultimately help the business districts in the city.

NYCEDC is also finding ways to support compliance with green building and environmental mandates, which, while well-intentioned, create yet another challenge for older buildings.

And the public sector can also help the urban office building to thrive by working with developers and owners to recognize that these buildings are part of a larger ecosystem in downtowns, said Michael Edwards, president and CEO, Chicago Loop Alliance. And that, he said, is the function of improvement districts, which are typically public-private partnerships.

In Chicago, for example, the Chicago Loop Alliance has organized Sundays on State, a new event that draws 80,000 people downtown on the weekends, and other events that are geared to the city’s artistic community.

Everyone has a role to play in making sure that areas surrounding office buildings are clean and well-maintained beyond the property lines of the building itself.

He said that tenants have come to expect a safe and clean walk to the building from the parking lot or the train, and that if they have to step over homeless people or feel less than safe, they’ll decide that it’s much more pleasant to work from home.

And Roman Burch said that the uses of city streets need to be reimagined, as in New York City, where Amazon delivery trucks, pedestrians, those on scooters and on bicycles are all competing for space on streets that have not been modified for all the new uses.

Ultimately the pair was bullish that downtowns would reemerge strongly.

“People are going to get sick of being at home,” Edwards said. “Eventually, what I’m finding is that people want to be comfortable: not have fluorescent lights (in the office), and to have it feel a little more like home with the equipment they need to also work from home.”

“People want to be around people and stimulated,” Roman Burch said. “We’re going through a technological disruption. People have the technology. It’s there. The tech works but is that all that we’re wired to do as humans?  We’re there for relationships, and impact, and socialization and culture.”

Fear of missing out is what will bring people back to downtowns, Edwards said. And that might mean that the traditional office building becomes more of a flex space, and that the “central business district” could be the wrong term.

“Central business districts probably need a rebranding,” Roman Burch said, suggesting “social districts” or “mixed-use districts.”

“What a fascinating time for this asset class…this is front and center in the evolution of our cities…I think we’re going to see a lot more migration to flexibility even inside of the office,” she said.

She noted that one in 10 businesses in New York City were started within the last year.

“That makes me hopeful about the future and about cities,” she said.

Kathryn Hamilton is NAIOP’s Vice President for Marketing and Communications.