CBDs Well-Positioned to Reinvent Themselves Through Public-Private Partnerships

Public and private collaboration is helping central cities reinvent themselves in the aftermath of the pandemic, allowing them remain relevant for residents, visitors, businesses, and investment, according to a new report from JLL.

“The Future of the Central Business District” report explores how, despite short-term challenges, many central business districts are well-positioned to capitalize on their strengths.

Perhaps the biggest challenge is many mainstay companies’ return to office situation.

North America has faced the most intense adjustment, JLL reports. as return-to-office levels typically range between 45% and 65%, lower than 65% to 85% in Europe and 70% to 100% in Asia-Pacific.

Given the shifting demand for office space, more variable commuting and travel patterns, and a desire for “experience-based” spaces, downtown areas have “comparative advantages in infrastructure, accessibility, stock of underused real estate and the ability to scale growth, all of which underscore their resilience.”

GlobeSt.com last week reported on the importance of retail, multifamily, and office pulling together in this new age, based on a report from Moody’s Analytics.

It’s vital that they do, JLL said, given how traditional CBDs face competition from new, vibrant mixed-use neighborhoods emerging across the world’s largest cities and attracting a growing share of businesses, residents, and investment.

CBDs must look at how they can leverage existing buildings to create a balanced mix of uses, improve amenities, and invest in the public realm and sustainable design.

One benefit is that refurbishing buildings come at a lower environmental cost than new developments, JLL reported, as renovations can reduce carbon impacts compared to what new development can accomplish.

“This will be significant in helping cities move toward carbon neutrality, especially given more than 1 billion square meters of office space will need to be retrofitted on a global level by 2050,” according to the report.

Solving the lack of housing is another top priority. JLL estimates that converting only 10% of a city’s older office product could yield thousands of needed residential units.

That forecast is based on CBD assets 30 years or older, with 10% of RGB/GLA converted to residential with an average unit size of 750 square feet, JLL said.

The actual number of units realized will depend on engineering and financial viability, local planning regulations, and market demand

By converting to housing, CBDs will be better positioned to adjust to hybrid working patterns, an increasing focus on real estate decarbonization, competition from emerging neighborhoods, and fluctuating real estate demand.

Phil Ryan, Director of Global Research, City Futures at JLL, said in prepared remarks, “After three years of dramatic shifts to how we live and work within CBDs, significant opportunity exists to reimagine how we use and interact with city centers.

By creating this ecosystem of partnerships between the private sector, governments, and academic institutions, CBDs can maximize growth opportunities and accelerate the transformation of CBDs:

In turn, JLL said that governments must anticipate demand changes and provide greater flexibility to developers and investors, including through expanding tax credits to offset the cost of conversion and streamlining the planning process to reduce the lead time for delivery of new product.

CBDs also should focus on “improving the public realm and environment” by providing options that benefit pedestrians through retail and community businesses and green space and tree cover will provide more than upgraded aesthetics.