The recently released CBRE report, “Shaping Tomorrow’s Cities,” points to findings that offices and other properties in vibrant mixed-use districts in cities have fared significantly better compared to office-dominant districts. The model for “reinventing U.S. cities after the upheaval of the pandemic and remote work — especially for revitalizing their urban cores — can be found within their own boundaries,” asserts the CBRE analysis.
CBRE defines vibrant mixed-use districts as “walkable urban areas including a mix of properties such as apartments, retail, restaurants, hotels and the highest quality office space.” The firm identified 68 such vibrant mixed-use districts in 19 U.S. markets analyzed for its report.
Office vacancies in those mixed-use districts were lower (18% average) than in their cities’ nonprime business districts (22%), which are mostly office parks that lack top-quality office buildings and live-work-play amenities. Office rents are higher in prime mixed-use districts, too.
“Reinvigorating city cores will be no easy task, but there are roadmaps for every city to consider,” said Julie Whelan, CBRE Global Head of Occupier Research. “Vibrant mixed-use districts provide a blueprint for vitality that cities can strive to foster in other neighborhoods.”
Recent Evolution Of U.S. Cities
The “Sharing Tomorrow’s Cities” report delves into the recent evolution of U.S. cities and the implications for real estate. Since 2000, population had migrated to urban neighborhoods of many cities, followed by a marked increase in construction of offices and apartments in and around those districts. But the urban exodus sparked by the pandemic in 2020 shifted some populations back to suburbs in many markets, leaving employees working more remotely and office districts languishing in many.
CBRE categorized the 19 cities in its report into four archetypes with similar strengths and weaknesses:
- Super Cities like New York and Los Angeles
- Mixed Majors such as Boston and Washington, DC
- Sprawling Darlings including Dallas and Phoenix
- Developing Destinations like Austin and Nashville
CBRE highlights varied attributes as strengths for some city archetypes and weaknesses needing improvement for others, including economic diversity, infrastructure quality, responsive governance, and cultural identity.
Keys To The City (Revitalization)
A key strategy for revitalizing cities struggling with high office vacancies and related challenges is to fortify those mixed-use districts and to encourage development of other property types in office-heavy districts, according CBRE. One way to do that is to convert obsolete office buildings to other uses, namely apartments, and to renovate or redesign some into better office properties.
CBRE’s analysis found that, in and around those 68 mixed-use districts, there is 43.5 million square feet of mostly vacant office buildings that could be candidates for conversion to other uses or upgrade to better office properties. That could yield up to 43,500 residential units across those districts if all buildings were converted, notes the report.
Beyond that, revitalization efforts could target obsolete buildings in cities’ nonprime business districts — which collectively account for 58% of total office space in the 19 cities analyzed.
Conversions aren’t the only solution, notes CBRE. Several influences beyond location are factoring into whether a given building can be converted to another use — namely the building’s structure, its value, cost of construction and financing, zoning, and city guidelines.
CBRE’s analysis identified six elements critical for cities’ evolution, including:
- Vitality and adaptability of the city’s economy
- Demographics
- Quality of life
- State of its infrastructure
- Identity as defined by its history, natural resources, and culture
- Responsiveness of city government
“Some of these elements can only be changed gradually, over decades. Others, such as responsive governance, can be addressed more quickly,” said John Stephens, Senior Director of CBRE Americas Consulting. “There are roles for every constituency to play in revitalizing cities. For example, building owners and developers can invest in redeveloping existing properties and contribute to placemaking of vibrant areas.”
The report maps out responsibilities for seven categories of stakeholders across the public and private sector — including the community itself — who can work together over the coming decade. The public sector, made up of federal, state and local government; and the private sector, made up companies, developers, property owners and local businesses each have a distinct set of responsibilities to help drive the fastest evolution of their city.
The “Shaping Tomorrow’s Cities” report is available for download on the CBRE website.
