The State of American Downtowns

Contrary to the ‘urban doom loop’ narrative, city centers survived the worst-case COVID scenario.

Aaron M. Renn is a senior fellow at American Reformer. His writing can be found at www.aaronrenn.com.

Big city downtowns have taken a beating in the last five years. The great 20–25-year bull run of urban center growth had already been abating prior to the pandemic. Then COVID essentially boarded up downtowns for a year or more, and inaugurated a new trend toward remote and hybrid (part time in the office, part time at home) work that seemed set to permanently reduce the number of office workers making the commute to downtown. Post-George Floyd riots damaged many downtown storefronts, while the subsequent movement toward depolicing and other soft-on-crime measures, rising homelessness, and the migrant crisis created major issues of public disorder. Transit ridership remains down from pandemic levels, and some agencies face major fiscal issues. Many residents fled this chaos during the pandemic, with a resulting demographic shift to exurban or smaller city locations.

All of this spawned talk of a so-called “urban doom loop,” in which falling building values would create fiscal problems that led to service cuts, which would then cause even more people and businesses to flee. Yet five years on from COVID, America’s downtowns, though still facing challenges, are far from dead.

While downtowns struggled, urban neighborhoods rebounded much quicker. In fact, remote work actually helped neighborhoods by allowing some of the people who lived in them to stay home during the day, thus adding to their daytime activity—people visiting coffee shops, restaurants, etc.—and producing a faster recovery. For example, a couple of years ago, there was angst in even some of Chicago’s toniest neighborhoods, like Lincoln Park, due to a spike in crimes like carjacking. Today that’s much abated and many of Chicago’s neighborhoods are thriving. While not all urban neighborhoods in America have rebounded to pre-pandemic levels, in general, neighborhoods that were doing well pre-COVID are still doing well now.

Tourism has rebounded as well. New York City had 65 million visitors last year, the second highest total ever. During COVID, several NYC hotels were converted to homeless or migrant shelters, leaving the city short on rooms. That drove a spike in rates, attesting to strong demand to visit the city. This has been true in cities across America. Even tertiary markets have seen strong tourism numbers, with Columbus, Ohio, reaching a record 51.2 million visitors.

Office workers have been trickling back in. Many companies went to a policy of permanent remote work during the pandemic The strong post-pandemic rebound limited employer leverage, with worker shortages as a result of the so-called “great resignation.” Today, the great resignation is over. A much weaker job market has allowed corporations to demand employees spend more time in the office⎯at least for now. Many of the poorest performing office buildings have already sold or been slated for redevelopment, with some observers suggesting the bottom is near for that market and that commercial real estate may not see prices fall much further.

And thankfully the violent crime spike that hit in the wake of depolicing has now disappeared in many places. And many cities have made moves to try to rein in some of the worst of public disorder.

Amid the doom-loop narrative, the real result is downtowns that are still down but far from dead. 

However, that experience isn’t uniform: there are widely varying results across regions. History suggests that it is likely that the most desirable downtowns in the most desirable cities will retain or regain their draw. It’s seldom proven a good idea to short New York City, which only lost 10% of its population from peak even during its nadir in the 1970s. Similarly, central San Francisco will likely ultimately come back in some form. That city is simply too unique, its status as a tech hub too strong. Indeed, the AI boom is already starting to reflate the office market, with 86 leases last year for AI companies in San Francisco alone. By contrast, some lower tier markets with significant problems may face a much harder road ahead. This could include places like St. Louis, Louisville, and St. Paul, which are all experiencing especially bad challenges. 

Many cities also face serious leadership and institutional challenges. There’s a widespread, if often unspoken, belief among many urban civic leaders that, in retrospect, the COVID shutdowns were too much and too long and that the post-George Floyd pivot toward BLM initiatives was also an overcorrection. But while major corporations can simply announce they are dialing back DEI, it will be much harder for civic organizations to follow suit. In effect, the central organizing principle of institutional life in many American cities became DEI. And there are powerful political constituencies who support or benefit from this in cities that are essentially single-party political environments. This makes any change difficult.

Also, remote work, cultural polarization, fears over spreading disorder, and the growth of suburban amenities have disconnected suburbs from downtown. While there’s always been a city-suburb divide whose intensity has varied from place to place, there was also a strong sense of regionalism as an imperative. But today, that city-suburb divide, or even hostility, has grown. America’s cities may well have passed peak regionalism. Suburbanites are simply going to be less invested in the health of downtowns than they used to be. 

The net result is that most American downtowns seem to have avoided the worst-case scenario, but they still face significant challenges in rebuilding, particularly in refocusing their institutions on mission, instead of DEI, and luring back business. Downtowns are often called the “central business district.” A downtown that loses its core function as a business center is fatally compromised, no matter how many tourists and residents it has. A loss of business undermines the entire premise of so-called “agglomeration effects” in making cities more productive. Addressing that and other challenges requires effective leadership and institutions.

The current environment poses significant risks to cities that are unable to grapple with the challenges they face. But these difficulties create considerable opportunities for novel approaches across the country. The good news is that those who are able to rise to the challenge will be able to set themselves apart from the competition. America’s downtowns will likely meet very divergent fates.