Cities must act now or risk further challenges
On the backdrop of a softening economy and the heightened interest rate environment, real estate investors today are seeking ways to strategically deploy capital. For qualifying properties, conversions of older offices to new property uses can represent a compelling investment opportunity. But absent financial incentives and broader cooperation with public jurisdictions, developers will be less inclined to take a risk.
Cities hold the future of their economic resiliency in their hands, and the time to act is now. Private investors want to play a role in the recovery of downtown CBDs, but cities must pave the way for them to meaningfully participate. By offering incentives, fast-track programs and greater flexibility in zoning changes, cities can create a win-win scenario for the public and private sectors by (1) inducing demand for the redevelopment necessary for restoring the vitality lost in the wake of the pandemic and (2) offering the right level of incentives and programs that advance the city’s social and economic agenda. Policymakers have an opportunity to build on the lessons learned from prior economic downcycles, such as in New York City, where the expiration of the city’s 421-g incentive has slowed the pace of conversion.
The stakes are too great for cities not to act today. Failure to act will prolong local economic recovery, weaken competitive advantage and potentially contribute to the further loss of population and tax revenue as employers look elsewhere to build their businesses and house their employee base.
Even as the role of the office changes, physical offices, and the talent employers attract to them, will continue to play a significant role in shaping the economic vitality of a city. It is imperative that the public and private sectors work together to keep America’s downtown centers vibrant – the economic success of both parties depends on it.