The Curious Comeback Of U.S. Downtowns

Perhaps nothing better illustrates the notion of urban revival in America than the comeback of many downtown districts. Yet if these areas have recovered some of their vigor, they are doing so in a manner that hardly suggests a return to their glory days in the first half of the 20th Century.

Instead what’s emerging is a very different conceptualization of downtown, as a residential alternative that appeals to the young and childless couples, and that is not so much a dominant economic hub, but one of numerous poles in the metropolitan archipelago, usually with an outsized presence of financial institutions, government offices and business service firms.

The good news: after an era of population declines, these areas are growing again: From 2000 to 2010, the downtown cores of the nation’s 51 metropolitan areas with populations over a milliongained slightly over 200,000 residents, or 1.3% of all the growth in the nation’s major metropolitan areas. However, 80% of that growth took place in just six cities — New York, Chicago, Philadelphia, Washington, D.C., Boston and San Francisco. In 18 of the 51 downtowns populations declined. Meanwhile, the population in the outer fringe of the 51 metro areas, 10 miles beyond downtown, grew by some 15 million.

These trends appear to have continued into the initial stages of the current economy recovery. In a survey of 2011-2012 patterns, Trulia found a similar pattern of higher growth near the center, but even stronger growth rates on the fringes. As we have noted since 2000, the slowest growth took place in the close-in neighborhoods adjacent to the urban core.

The better numbers reflect then not a mass “back to the city” movement but an uptick in the market appeal of city centers. And it’s unlikely that the old urban cores will ever come close to recovering the economic preeminence they once enjoyed. In American Community Survey data from 2006-08, the central business district of the New York metro area was the only one across the country that accounted for over 20% of regional employment; downtown’s share topped 10% in just six other metro areas: Chicago, Boston, Washington D.C., Richmond, Chicago and Hartford. This contrasts with the kind of employment dominance seen in the 1950s when Manhattan’s commercial core accounted for more than 35% of employment in the New York area. Of course, the decline is a natural outgrowth of the massive physical expansion of the New York area during the past half century, a pattern seen in other major regions.

From 2000 to 2010, the share of jobs dropped somewhat in the nation’s biggest urban cores, but employment declined far more in the inner ring suburbs, according to an analysis by demographerWendell Cox. In contrast the fastest job growth was in suburban and exurban areas, paralleling their gains in population. This has become clearer since the recession ended; the consultancy Costar notesbetween 2012 and 2013 office absorption grew quicker in the suburbs than the core, accounting for 87% of new office demand. Overall suburbs account for nearly 75% of all office space in our metropolitan areas.

We can see this pattern even in two of the hottest office markets, San Francisco and Houston. Overall, despite all the blather about tech moving into the core, San Jose, Calif., has almost 50% more new office space under construction than San Francisco. San Jose, it should be remembered, is essentially a giant suburb, with a very small downtown, and very low levels of transit ridership. It may be next to San Francisco but in urban form, it represents its direct opposite.

In Houston, easily the nation’s leader in new office construction, downtown has fared well in the boom but the vast majority of new growth is located in the ‘burbs, including the largest project — the new ExxonMobil campus, with 20 buildings that will host 10,000 employees. In both places population growth in the suburbs has been approximately four times that of the core cities between 2010 and 2013.

These patterns can be seen even in areas where there have been strong improvements in residential growth. In 2010, Chicago’sDowntown Loop Alliance reported that private sector employment in the Loop fell 20% during the last decade. Perhaps more telling, the number of jobs and resident workers (the “jobs-housing” balance) in the city of Chicago are converging toward equality. According to American Community Survey data, there are 1.1 jobs in the city of Chicago for each working resident. In contrast, two of the three large suburban corridors have higher ratios of jobs to workers than the city of Chicago. The Interstate 88 corridor has 1.3 jobs per worker, while the North Shore has approximately 1.5 jobs per worker. The Interstate 90 corridor has slightly more jobs than workers.

How could this be given the much hyped migration of companies such as Boeing to the Windy City? One explanation lies with the rise of what urban analyst Aaron Renn has described as the “executive headquarters.” These relocations, he notes, tend to follow CEO preferences but cover only a small number of employees. Cost pressures, particularly from Wall Street, make securing space in central cities prohibitive if it involves large numbers of employees. A small, swanky office is one thing but putting 10,000 workers in expensive towers seems less common.

The recent move of Archer Daniels Midland’s headquarters, he notes, brought roughly 100 jobs while that of Boeing, at a cost of $63 million in incentives, was a net gain of 500. In both cases, far more employees, spanning research, development and marketing remained in the original locations. Boeing, for example, retains over 80,000 employees in its original home around Seattle.

What seems clear from these trends is this: downtowns are back, but not as dominant business hubs. Instead we continue to see not massive construction of new offices but the continued conversion of offices to residential buildings. This is particularly true in Chicago, where developers are adapting older office towers, malls, as well as hotels for apartments. In most cases, these are rental properties designed to serve a generally younger, and childless market.

In Manhattan, the rate of office construction is running at a multi-decade high, but some insiders worry that demand may not be there in the next four years to fill the 14 million square feet of spaceprojected to be built by 2019. The shift of jobs, particularly in financial services, to cheaper locales could have a negative effect, as does the trend of employers cramming workers into smaller spaces.

What about the wannabes like downtown Dallas, Atlanta and Los Angeles? These central cores have failed to recover their economic base, with vacancy rates approaching 20% despite a dearth of new construction. Nor has mass transit — often sold as the “magic bullet” to turn these central cores into thriving urban hubs — succeeded in reestablishing their economic centrality. In all three metro areas, despite multibillion-dollar expenditures on new rail lines, transit ridership remains at or even slightly below the levels of a decade ago.

None of this suggests that these cores are not important to their regions, and particularly to their often vulnerable self-esteem. The downtowns of Atlanta and Dallashave gained some residents, and there is more pedestrian traffic at night. Similarly Los Angeles, whose downtown attracted nearly half of all L.A. residents daily in the 1920s, according to Robert Fogelson, continues to fade in economic importance. Today it represents about 2% of the vastly expanded metro area’s jobs. At least four other regional job centers are as larger or larger ).

Yet despite this, it’s legitimate to see some revival of the area, largely due to a rash of residential conversions and some new apartment building. This has brought some new life, as well as some restaurants and some shops, as the population within two miles of City rose by an impressive 23,000 since 2006. But this hardly represents a full-scale return to the center city as the population of the surrounding areas — two to five miles from City Hall — has dropped by a similar number. Almost all the new construction in downtown is either for residents or hotels; very little new office space is being produced.

Los Angeles’ downtown recovery, notes real estate analyst David Shulman, is “more about sports and entertainment venues, restaurants and bars, loft conversions, and hotels than it is about companies that need a lot of floors in tall buildings. Nightlife and streetscapes trump florescent light and cubicles.”

This resurgence in L.A., and elsewhere, is no mean accomplishment, but it also does not constitute sea-change in fundamental economic geography. Downtowns are back, but more as a lifestyle option than as a dominant feature of the metropolitan landscape.

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Lead photo of 432 Park Avenue in New York by Louis B (Own work) [CC-BY-3.0 or CC-BY-4.0], via Wikimedia Commons