How JLL Proposes to Save CBDs

City planners and developers are wrestling with the question of how to bring new life to moribund or stagnant central business districts when the pull of the suburbs is strong. One question is whether a little spit and shine can give new life to old buildings grown shabby or out of date. 

The issue has become urgent as remote work expands, leaving much CBD office space vacant and shops, restaurants and other businesses that depend on office workers as customers without clients. 

A new report from JLL says cities are at an inflection point. CBDs, in particular, face a fundamental need to reinvent themselves to remain attractive and competitive. 

“CBDs will require proactive engagement from owners, developers and authorities on the location of future growth and proximity to demand pools, the quality and age of buildings, the viability of any repositioning or conversion, and meeting regulatory requirements regarding energy efficiency and sustainability,” the report states. 

The report says the capacity for change is “immense” given cities’ stock of economic, cultural, educational and innovation hubs. It cites cities’ comparative advantages in infrastructure, accessibility, underused real estate, and the ability to scale growth.

Cities, it claims, can be transformed through a balanced mix of uses and shifting from a focus on offices to a multi-purpose destination.

At the same time, the report recognizes that one size will not fit all. “The current distribution of land uses and density of commercial property will be critical in determining the intensity of this disruption as well as the direction of future growth and the potential for redevelopment of the existing CBD.”

Large numbers of aging buildings in downtown areas make opportunities for city renewal more complex. Finding alternative uses where possible is key. The report notes that building obsolescence in CBDs presents a major challenge for both occupancy and capital value preservation, especially in an environment where tenants prefer new space. Another challenge is to modify buildings to meet tougher energy efficiency and emissions regulations.

Converting uncompetitive offices to residential uses is one option, depending on zoning laws. “Even small amounts of conversion can lead to sharp rises in residential supply; just 10% of city center property older than 30 years could yield thousands of critical units to deal with affordable housing shortfalls,” the report states.

Another solution is to renovate aging office properties for continued office use. The report claims the environmental cost of refurbishing is less than for new developments, and carbon impacts are lower, helping cities move toward carbon neutrality. Furthermore, “architecturally significant historic buildings that have been extensively and thoughtfully refurbished attract high levels of tenant demand.”

Renovations done in this way have seen 10.7% rental growth since the onset of the pandemic – higher than the 7.3% seen in new supply in the same period, the report states, “underlining the resilience that can be found in traditional CBD locations.”

Bringing about the transformation of cities will involve considerable disruption, the report cautions. It will require greater flexibility from local governments on land use and financial mechanisms like tax credits. Investors will also have to be strategic in their site selection to account for future trends. And there will need to be a greater focus on locational strategy and ESG considerations, “which will set the new standard for success in CBDs.”

Still, add in pedestrian areas, green spaces, a variety of businesses and plenty of tree cover, as the report recommends, and CBDs could one day be locations of choice rather than necessity.