Post-pandemic, downtown recoveries continue to be uneven

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City officials are trying to revive their downtowns in myriad ways, whether it’s through office conversions in New York City, bonding programs in Chicago, or sports-related development in Pittsburgh and Salt Lake City.

Recovery Rates Vary

COVID-19 turned many once-vibrant city centers into ghost towns. Shops and local eateries closed, and office buildings sat empty as employees worked from home. 

The fates of downtowns since the pandemic have varied significantly, said David Stanek, a research fellow at the Penn Institute for Urban Research, and co-author of a forthcoming report for the Volcker Alliance about those recoveries.

On the one hand, San Francisco remains the “poster child” for post-pandemic difficulties, because much of its tech-focused workforce has not returned in sufficient numbers to downtown. Office vacancy rates are between 20% and 30% there and could grow higher over the next five years, compared to the current national average of 10%, said Stanek, a vice president at Econsult Solutions Inc., during a Volcker Alliance webinar this week. The Bay Area’s transit use is also at about 65% of pre-pandemic levels, the lowest of five cities Stanek and his colleagues examined in detail.

Miami, though, has bounced back much quicker. Its office vacancy rates remained steady at about 10% through the pandemic, commercial real estate values have increased, and transit ridership is between 80% and 90% of what it was before COVID-19 hit, Stanek said. The city has added 100,000 jobs since the pandemic.

Philadelphia and Chicago have fallen in between, Stanek said. Philadelphia’s economy is based on “eds and meds” of health care and universities, while Chicago’s is more dependent on manufacturing, financial services, insurance and professional and technical services.

On a typical workday in New York City, 56% of workers are in the office, compared to 72% before the pandemic, according to Kathryn Wylde, the president and CEO of the Partnership for New York City, a business organization. But the city has benefitted from new developments, like Hudson Yards near Penn Station, that have added office space for those workers. “Those have gone like hotcakes, and they’re charging the highest commercial rents we’ve ever seen in the city,” she said. “There’s been a flight from old dingy office buildings to brand new buildings, and employers have shown they’re willing to pay the price.”

Converting Office Space to Housing

A city’s office space occupancy is just one measure of vitality. Downtowns also need residents who can sustain the area even when commuters leave for the night or weekend. 

Many cities—including New York, Chicago and Washington, D.C.—are trying to encourage developers to convert existing office space into housing, much in the same way that old warehouses have now become trendy loft apartments. With offices going unused and housing prices climbing almost everywhere, the idea has found a lot of support.

Chicago, for example, is offering developers $150 million to convert four buildings in the heart of the city’s financial district to more than 1,000 apartments. A third of those units would be designated as affordable. The Wall Street Journal called the initiative “the most generous in the country.”

Meanwhile, state lawmakers around the country have been adding incentives to speed up conversions, too.

But there are many physical, regulatory and financial obstacles to converting office space into housing, said Stijn Van Nieuwerburgh, a real estate and finance professor at Columbia University, during the Volcker Alliance webinar.

The biggest challenge is making sure the finances work out. “Every building can be converted, it’s just a question of cost,” he said, citing the work of famed office conversion expert Nate Berman. New owners need to be able to buy an office building at a steep discount from its pre-COVID valuation—usually around 60% less than the pre-pandemic cost. They have to be able to keep the construction costs low and put the new rental units on the market when there is strong demand for apartments.

“There’s a narrow path towards a market-rate conversion, and to be clear, we’re talking about a luxury market conversion,” he said. Apartments converted from office space in old buildings might rent for $7,000 a month, which would only be affordable to the top 10% of renters. Making new apartments that are affordable to most of the market, at around $2,000 a month, is “not feasible without subsidies,” Van Nieuwerburgh said.

New York lawmakers approved subsidies for those kinds of conversions this April, he noted, with a 90% property tax abatement that would last for 35 years. That should help “level the playing field” when a developer is considering whether to produce all luxury units or to include 25% of the new units as “affordable” and get the tax benefits, Van Nieuwerburgh said. It might convince some developers to build affordable units, but might not have the impact lawmakers were hoping for, he said.

“I fear that, as well-intentioned as the policy is, it will fail to deliver a lot of affordable units in Manhattan,” Van Nieuwerburgh said. More all-luxury projects might come through, which would eventually bring prices down for everybody by reducing scarcity, he noted.

For now, there are 60 projects that have applied for help from New York City to get quicker regulatory approval, which could result in 20,000 new apartments.

The actual structure of a building can be a detriment to conversion, too. Only 10% of office buildings nationwide have the physical characteristics to allow them to be readily converted to housing, but that number is closer to 30% in cities like New York and Chicago with older office buildings, Van Nieuwerburgh said.

Finally, zoning regulations can stymie office conversions. For example, Midtown South in New York is full of office buildings, but residential use is not permitted by right there. Restrictions on building heights can also affect the viability of converting office space to housing, he said.

Those constraints limit how many offices can be repurposed, but Van Nieuwerburgh said it’s still a worthwhile strategy.

“I’m a conversion optimist,” he said. “I’m of the belief that we could deliver 10% of new houses in our urban environment, from office conversions. It’s not a panacea. It’s not a silver bullet, but 10% is not nothing either.”

Unconventional Approaches

Still, city officials are looking for new ways to entice people back downtown, beyond converting offices to apartments.

Norwich and other cities in Connecticut, for example, have been using money from the 2021 American Rescue Plan Act “to breathe new life into [their] hobbled Main Street businesses,” noted the CT Mirror recently.

“Two pandemic-era trends—the rise in entrepreneurship and new public and private housing investments in downtown districts—are beginning to drive change on Main Streets. Putting a small amount of ARPA funding toward things like helping commercial landlords bring their street-level properties up to code, so they’re ready for new storefront tenants, can be transformational,” wrote the Mirror’s Erica E. Phillips.

Pittsburgh officials hope hosting the 2026 NFL draft will be a catalyst for reviving downtown. They want to convert office buildings into apartments, create new public spaces, add more art and provide free entertainment and cultural events, reports CBS News. The initiative is based on a similar effort in Cincinnati.

Mayor Ed Gainey said the effort would encourage people who left the Pittsburgh area to return. “Whenever I’m outside of the city, outside of the state … I hear people talk about our city and how much they can’t wait to come back home,” he said. “They just needed a reason to come.”

Salt Lake City, meanwhile, is banking on the addition of a professional hockey team (lured from Arizona) to increase interest in its already bustling downtown. A new plan there centers on a sports and entertainment district that would include the stadium for the former Arizona Coyotes (along with the Utah Jazz basketball team). Local leaders have also promised to renovate the existing Abravanel Hall which hosts the Utah Symphony or build a replacement.  

"This project is an unparalleled opportunity to leverage Salt Lake City's reputation as an iconic cultural gathering place—fostering unity for all Utahns and visitors from across the world,” wrote local leaders, including Utah Gov. Spencer Cox, Salt Lake City Mayor Erin Mendenhall and Salt Lake County Mayor Jenny Wilson, in a public letter. “We fully support the goal of reimagining and optimizing downtown Salt Lake City.”

Stanek, the Penn Institute researcher, said cities that want to revitalize their downtowns should:

• Focus on industries that require in-person work, such as health care, renewable energy, manufacturing.
• Increase the speed of public transit and lower fares.
• Reduce the cost of housing by increasing the production.

“Making the transition from where somebody is living to where they're working—or to where people want them to work—means making the commute fluid, making it easy, and making it cheap. It’s not a small ask,” he said. “It’s making significant investments in ways that the United States typically hasn't done.”

Keep reading as there’s more news to use below, and if you don’t already and would prefer to get this roundup in your inbox, you can subscribe to this newsletter here. We’ll see you next week.

News to Use

Trends, Common Challenges, Cool Ideas, FYIs and Notable Events

• CLIMATE CHANGE: Vermont enacts first 'polluter pays' law. Gov. Phil Scott has allowed two of the session’s most consequential bills related to climate change to become law without his signature. One of those bills holds big oil companies accountable for the damage climate change has caused in Vermont. Modeled on the federal superfund law, it requires the world’s biggest oil companies to pay for damages that their products have caused in the state by way of climate change. The law directs money owed to Vermont to be calculated based on those damages and the corresponding percentage of emissions that the company was responsible for between 1995 and 2024. Then, the money would be deposited into a Climate Superfund Cost Recovery Program Fund, designed to pay for projects that protect Vermonters from climate change and help the state adapt to it. While several other states have introduced similar legislation, Vermont is the first in the country to enact such a law.


• POLICE: New Louisiana law will criminalize approaching police when told to stop. Critics of the new law, which makes it a crime to approach within 25 feet of a police officer under certain circumstances, fear that the measure could hinder the public’s ability to film officers—a tool that has increasingly been used to hold police accountable. Under the law, anyone who is convicted of “knowingly or intentionally” approaching an officer, who is “lawfully engaged in the execution of his official duties,” and after being ordered to “stop approaching or retreat” faces up to a $500 fine, up to 60 days in jail or both. The law goes into effect Aug. 1. Proponents argue it will create a buffer-zone to help ensure the safety of officers and that bystanders would still be close enough to film police interactions.


• ELECTRIFICATION: Schools to get $900M from EPA to fund electric school buses. The Biden administration has issued the next round of funding aimed at cleaning up the country’s school bus fleet. On Wednesday, the Environmental Protection Agency awarded nearly $900 million in rebates to help more than 500 school districts buy about 3,400 clean school buses—92% of them electric. With this new round, nearly $3 billion in funding has been awarded to date from a $5 billion program created by the 2021 infrastructure law. Almost all of the roughly 500,000 school buses operating in the U.S. are diesel-fueled. Replacing those with clean buses could eliminate about 8 million metric tons per year of carbon emissions.


• FINANCE: Are we in the midst of a climate housing bubble? Twenty years ago Dave Burt was working at BlackRock when he started worrying about the health of the U.S. housing market. Ultimately, he left the big investment firm and started his own company to short the subprime mortgage market—basically betting money on its collapse—a pretty lucrative decision, as it turned out. Now, nearly two decades later, Burt thinks the market is due for another correction, as homeowners in places with a growing risk of flooding and wildfire, due to climate change, have to pay more for insurance. Average premiums increased by nearly 20% between 2021 and 2023, according to the online agency Insurify, which projects double-digit increases in several states this year. Much higher insurance costs will make it harder for people to afford their mortgages, he said, depressing demand in those areas and reducing property values. Inevitably, Burt said, some will default.


• POWER GRID: 21 states join Biden administration in bid to modernize nation’s aging grid. The White House, which has set a goal of a carbon-free power sector by 2035, announced Tuesday that 21 states had joined what it called the “Federal-State Modern Grid Deployment Initiative,” which is intended to “help drive grid adaptation quickly and cost-effectively to meet the challenges and opportunities that the power sector faces.” America’s aging electric grid is under pressure from growing demand, severe weather and a changing power generation mix that includes lots of wind and solar. In exchange for federal technical and financial assistance opportunities, participating states will “prioritize efforts that support the adoption of modern grid solutions to expand grid capacity and build modern grid capabilities on both new and existing transmission and distribution lines.”


• HOUSING: Philadelphia’s eviction diversion program is set to become permanent. The city’s nationally lauded Eviction Diversion Program, which was created during the pandemic to keep people in their homes, has been extended several times—and now it’s set to become permanent. The city council on Thursday voted, 16-1, to approve legislation making the program a fixture. The bill now heads to Mayor Cherelle Parker, whose administration has expressed support for extending the program. The law requires landlords and tenants to seek mediation and rental assistance before going to court. Since its inception, an average of 10,000 fewer evictions have been filed each year in the city than before the pandemic. It was set to expire in June.


• BROADBAND: Another state repeals law protecting ISPs from municipal competition. Minnesota late last week eliminated two laws that made it harder for cities and towns to build their own broadband networks. The state-imposed restrictions were repealed in an omnibus commerce policy bill signed by Gov. Tim Walz, a Democrat. Minnesota was previously one of about 20 states that imposed significant restrictions on municipal broadband. The list has gotten smaller in recent years because states including Arkansas, Colorado and Washington repealed laws that hindered municipal broadband.


• FINANCE: Washington will require insurers to reveal reasons for rate hikes. Insurers will soon have to provide customers a clear explanation for increases in their auto and home insurance premiums at the time of renewal. Beginning Saturday, companies must do so in writing if a policyholder requests it. In 2027, that information must be provided automatically and in easy-to-understand language on policy renewal notices. The insurance industry objects to some of the requirements, arguing that the changes will needlessly drive up costs for insurers at a time when many premiums are already on the rise. 


• PUBLIC HEALTH: Is the strategic national stockpile ready for the next emergency? GAO says no. The U.S. Health and Human Services Department still has not resolved systemic issues that states experienced when requesting and receiving items from the strategic national stockpile during the COVID-19 and mpox public health emergencies, according to a recent report from the Government Accountability Office. The stockpile contains drugs, vaccines and other medical supplies that can be provided to states, localities, territories and tribes during emergencies. But, as one example, the watchdog said the main guidance document for the stockpile has not been updated since 2014 and does not reflect that the Administration for Strategic Preparedness and Response is the current agency responsible for it.


• TRANSPORTATION: Almost 70 cars with $604K in unpaid tickets towed in pilot. A new program in Washington, D.C., to get scofflaw vehicles, or those that have piled up unpaid tickets, off the streets has towed nearly 70 cars since the beginning of April. In addition, the enforcement teams also have booted an additional 777 vehicles with $1.5 million in unpaid fees. The city’s Department of Public Works identifies clusters of scofflaw vehicles through license plate recognition technology. The pilot program will be expanded to additional areas where data shows significant numbers of scofflaw vehicles. The initiative is part of ongoing efforts to enforce roadway safety and uphold traffic regulations under the city’s Vision Zero strategy. 


• CONSUMER PROTECTIONS: Colorado governor signs ‘right to repair’ law. Coloradans will soon have an easier time fixing their broken cellphones, gaming systems and other electronic devices under a “right-to-repair” law signed by the governor Tuesday that puts the state on the leading edge of a national movement. Under the new law, tech companies like Apple and Amazon will be required to provide software and physical tools to third-party repair shops and to individual consumers to fix cracked phone screens and malfunctioning equipment. The statute also prohibits companies from programming their equipment to work only with certain components, which limits third-party and at-home repairs. Though a few other states have passed versions of the state’s new law, only Oregon has a similar prohibition on “parts pairing,” according to Consumer Reports. The National Conference of State Legislatures, reports lawmakers in 33 states considered right-to-repair legislation last year, but only three states adopted such laws.


• CLIMATE CHANGE: Why no one knows how much old-growth forest we have left. In April 2023, under pressure from the Biden administration, the U.S. Forest Service completed its first-ever nationwide inventory of mature and old-growth forests found on federal lands. This inventory of older trees is part of an ambitious plan to harness the power of the nation’s forests as a nature-based solution to the climate crisis. The idea is simple: rather than cut older trees down, the Biden administration is proposing to  leave many of them standing, allowing them to take climate change-causing carbon out of the atmosphere and store it for long periods of time. The nationwide forest plan is expected to lead to revisions of local forest plans throughout the country. But whether the nation’s older trees will be enlisted in the fight against climate change and spared the chainsaw could depend on knowing where those trees are. And that, critics say, is not something the Forest Service’s current inventory and mapping can do, because these maps are just not detailed enough to be used for management purposes.


• ECONOMIC DEVELOPMENT: Michigan to expand 3D printing. In an effort to support the “infrastructure of innovation,” Gov. Gretchen Whitmer is committing funds from the American Rescue Plan Act to a shared network of 3D printers in three large counties. Project DIAMOnD, which stands for Distributed, Independent, Agile Manufacturing on Demand, was kickstarted in 2020 by a tech business association to provide manufacturers access to 3D printing and training. According to the governor’s office, the goal is to expand the project into all of Michigan’s 83 counties. The effort is part of the governor’s push to support the expansion of small businesses in the state through shared technology and resources. It is expected to help more than 9,100 small manufacturers across the three counties lower costs and increase their production efficiency.


• HEALTH CARE: Maryland is recruiting young dentists to work in ‘dental deserts.’ Maryland has about 70 dentists per 100,000 residents, according to data from the Centers for Disease Control and Prevention in 2020, but that doesn’t mean that they are equally distributed across the state. The Maryland Department of Health aims to change that with a new program urging dental students to launch their careers in areas with dental health care shortages. The Pathways to Bright Futures program, which launched Wednesday, will educate those students about the dentistry profession in hopes of easing shortage in targeted areas.

Picture of the Week

The Marshall fire, Colorado’s most destructive wildfire, killed two people and destroyed more than $2 billion worth of property in December 2021. The flames were driven by high winds and dried grass and brush, according to a 17-month investigation into the fire’s origin. Afterwards, Colorado municipalities took a greater interest in managing their vegetation, reports The Denver Post, employing weed-chomping goats to better tame the landscape. Using goats for wildfire mitigation isn’t new—California cities started using them in the late aughts and the practice is centuries old in Europe—but it has grown in popularity in the past decade in the U.S. and really picked up in Colorado after the Marshall fire. An important part of fire mitigation is clearing away low-growing vegetation like grasses, low-lying tree branches and shrubs to prevent flames from climbing to taller vegetation like trees. Goats are unique in addressing this issue because they can stand on their hind legs to eat low-hanging branches.

What They’re Saying

"I think it is a gimmick […] cooked up by contractors."

—Houston Mayor John Whitmire on plans to scrap ShotSpotter, a technology that uses “acoustic” sensors to detect and locate sounds that may represent gunfire, which are then reported to local law enforcement. His decision to scrap the city's $3.5 million ShotSpotter program, positions Houston as the latest city to abandon the controversial gunshot detection tool after a brief experiment. “I’ll continue to call it a gimmick," Whitmire said Tuesday. "I think it was one of those programs that was implemented to make people think we’re really fighting crime, but it doesn’t affect the crime rate."