Public officials across the country are getting more creative in their strategies to rejuvenate their downtowns five years after the pandemic decimated foot traffic.
In San Francisco, leaders and landlords are offering small businesses free rent on retail space. Stakeholders in Birmingham, Alabama, are repositioning vacant offices into new storefronts and restaurants. In Denver, bodegas and banks are replacing offices downtown as city stakeholders hope to transition the retail base from focusing on workers to catering to residents.
City and economic development officials around the United States are looking to their ground floors as a way to fill gaps left behind by the absence of commuting workers.
"It's about adapting to a new normal and thinking about what the function of our downtown is now," Sarah Wiebenson, the senior manager of economic development at the Downtown Denver Partnership, told CoStar News.
Local legislators are among the 25,000 people who have descended upon Las Vegas to attend the annual International Council of Shopping Centers conference in an attempt to boost their retail ecosystems and rebuild the foot traffic and tax revenue largely lost as a result of the depressed office market.
"We've been working with the city and county of Denver on a transition from a central business district largely reliant on office foot traffic and workers to a central neighborhood," Wiebenson said. "We have to rethink what our retail is providing as our downtown population shifts."
'Big-picture shifts'
As the national office vacancy rate remains stuck at a historic high of about 14%, largely vacant properties and diminished employee attendance rates have drained cities of their bustling sidewalks, rush-hour traffic routes and tax revenue coffers.
In greater Washington, D.C., for example, whipsawing directives throughout the federal workforce and a slow return-to-office transition have further complicated the region's already fragile post-pandemic recovery. For Anthony Jeffrey, the business development manager for Prince George's County, Maryland — home to one of the highest populations of federal workers in the country, and many federal agencies — that has all increased the importance the area puts on its stores and restaurants.
"The office component to any environment is really important, but one of the things I've been talking about is how to build back that density," Jeffrey told CoStar News on the ICSC floor. "Density is going to be the key in attracting the businesses we're looking for, and this isn't just about general density, but also density that office markets used to provide. Having that daytime activity really supports the argument when you want to attract new and refreshed retailers."
Local officials are fine-tuning their relationship with tenants to help fortify retail ecosystems, from providing incentive packages or tax breaks to streamlining permit processes.
While the pandemic resulted in a slew of casualties among businesses and restaurants, it also reinforced the importance of the retail market's role in a local economy, especially as activity on the office front remains largely muted.
"Retail can fill the gap with regard to foot traffic and tax revenue, and at the end of the day, all things are dependent on one another," said Ali McEvoy, a partner at San Francisco-based retail brokerage Maven Commercial. "We need to make some big-picture shifts to completely fill the gap office has left behind, and cities are taking an active hand in incubating small businesses that give people the amenities as they come back to work in offices. It's all an environment that grows together."
San Francisco's Vacant to Vibrant program, a public-private partnership between San Francisco's Office of Economic and Workforce Development and the nonprofit SF New Deal, has filled 21 storefronts since it launched in 2023, with 26 more expected over the next year. McEvoy has been one of the brokers active in representing those tenants and said the program has been critical in activating space that otherwise would have struggled against the tidal wave of office vacancies and tenant move-outs.
Mayor Daniel Lurie’s office has said that JPMorgan Chase, the nation’s largest bank, has committed $500,000 to the program. Vacant to Vibrant has received millions of dollars from San Francisco-based companies such as Wells Fargo, the Gap and Visa.
"It's all helping the city create a more vibrant tapestry that is now creating more interest in nearby offices," she said. "We're seeing a resurgence of activity in general, and it starts with that activation on the ground floor."
Ground floor to upper levels
Beyond large metropolitan areas such as D.C. or San Francisco, some second- or third-tier cities see a thriving retail ecosystem as an entry point to building a stronger office market.
In Birmingham, city officials have doubled down on efforts to revitalize the downtown area to reposition buildings that no longer make sense as office properties and refill vacancies with amenities that cater to a growing residential population.
"In the post-pandemic economy, cities have had to become more aggressive in their response as, particularly in the central business district, there has been an outmigration of people that didn't return to work and has created a lot of office vacancies," Cornell Wesley, director of the city's Department of Innovation and Economic Opportunity, told CoStar News. "Birmingham has taken a proactive approach to reimagining those spaces and, if that workforce population hasn't returned, has tried to figure out how to prevent blight by bringing in amenities like retail and restaurants that complement the new population we have now."
Some office buildings that used to house employees now house multifamily tenants, and the city has been proactive in both attracting more residential-focused services — think dry cleaners, grocers or home goods outlets — and providing services that help support existing retailers.
And that's exactly why Wesley and other economic development officials have landed at this year's ICSC conference: to advocate for their cities and the potential they have to help build their office markets.
"That's why we're here," Wesley said. "We need to be visible in the spaces where we should be, since retail isn't going to come overnight. You have to be in these spaces and be proactive to fill the vacancies that we need filled."