People Are Worrying About the Wrong Downtowns
“Urban doom loop.” “Office real estate apocalypse.” Today, anyone who reads business news has seen dire predictions for America’s downtown commercial towers, which emptied out when the coronavirus arrived and remain under-occupied three and a half years later. Most coverage centers on the most expensive big cities, such as New York.
But the focus on glittering superstar cities is misguided, because many more fragile downtowns—the likes of Dayton, Ohio; Birmingham, Alabama; and St. Louis—entered the pandemic with little margin for failure. Even Minneapolis, with a strong overall labor market, faced a high office-vacancy rate in 2019. Still more commercial space emptied out during the pandemic, and foot traffic downtown has waned. “It’s spooky,” one retail clerk told The Wall Street Journal.
To be sure, Manhattan office investors and their lenders certainly have plenty to lose, because participating in that market was so expensive to begin with. According to the from the commercial-real-estate company Colliers. Current rents for comparable space in San Francisco ($79) and Boston ($72) also dwarf the rents typical in boomtowns such as Atlanta ($38), Denver ($39), and Dallas ($31). The rents in some of the priciest markets have started to come down—notably in San Francisco, where Class A rents, according to Colliers, hit $105 in 2019—but are still nowhere close to Sun Belt levels.
