In the wake of the COVID-19 pandemic, it is clear some things will never be the same — from the ways we socialize with one another to the way we shop to how and even where we work. The traditional workplace was already evolving before the pandemic, cities were changing, and technological advancements had enabled the widespread use of videoconferencing and streamlined collaboration.
But the sudden and forced social distancing of COVID-19 quickly pushed workers out of city center offices and into their homes in adjacent neighborhoods and suburbs. While this is an exciting time for many, downtowns and small businesses are at significant risk of shuttering — ultimately crippling the economic engines of our cities unless we make strategic decisions now to invest in those communities.
Until recently, workplace productivity was typically focused in urban centers. Large office spaces that fit entire corporations were a necessity for most businesses. These offices, historically based in “downtown” areas of cities, became centers for commerce of all kinds. Transportation, dining, retail and entertainment alike all flocked to these concentrated areas of business professionals and the opportunities that come along with them.
But when offices move, shutter or simply cut their daily occupancy in half, not only does real estate take a hit — so do the small businesses that depend on the 9-to-5 crowd in and around business districts and ultimately the city itself in reduced taxes. The deli next to the office, the dry cleaner near the metro stop and the bar down the block all lose customers, and many may have no choice but to close up shop.
If cities do not adapt to the evolving shift in working behavior, then the infrastructure that once thrived will surely crumble, leaving myriad businesses in shambles, communities broken, higher crime rates and once-prime real estate vacant. Action must be taken now to avoid the urban decay the U.S. experienced throughout the 1960s and ’70s, which can still be seen in many cities across the country. Single-use business-driven city centers need to be converted into complete communities, where future generations can live, work and play within a walkable and transit-rich downtown neighborhood.
Fortunately, there is a commonsense legislative solution to help cities adapt to the evolving business and real estate landscape. Sens. Debbie Stabenow, D-Mich., and Gary Peters, D-Mich., along with Reps. Jimmy Gomez, D-Calif., Dan Kildee, D-Mich., and John Larson, D-Conn., recently introduced the Revitalizing Downtowns Act, which would create a new federal tax credit to convert obsolete and excess office spaces into residential, institutional or mixed-use properties. Since many office spaces are no longer needed by the companies who once occupied them, converting such spaces into homes and businesses could present new opportunities and bring new life to our downtowns when they need it most.
But such conversions won’t happen on their own: They can be expensive and challenging, and there are no financial guarantees. Reworking office structures generally requires gutting the interior, subdividing large floor plates, and significant investment. Offices typically deliver a greater return than residential buildings, and obsolete buildings are oftentimes abandoned rather than repurposed.
That is why supportive tax policy can offer incentives and play a key role in rebuilding our cities. The Revitalizing Downtowns Act, modeled after the Historic Tax Credit program, would provide a credit equal to 20 percent of the qualified expenses to convert obsolete office buildings into residential, institutional, hotel or mixed-use properties. A project could even qualify for an enhanced credit of 25 percent if it incorporates affordable housing.
From affordable apartments and condos to cutting-edge retail and entertainment spaces, repurposing empty or underoccupied commercial space could stand to reshape the way we conceptualize “going downtown” in American cities. These properties pose a ripe opportunity to provide innovative and affordable housing in urban areas, support the small businesses that once relied on office workers and create new streams of tax revenue for our cities.
With a renewed national focus on infrastructure, it is important we consider all facets of our infrastructure network and investments to promote a more prosperous and resilient future. Now is the time to act because failure could lead to severe economic consequences for decades to come.
David Downey is the president and CEO of the International Downtown Association, an organization focused on empowering place management leaders with knowledge, research and public policies for creating prosperous city centers, commercial neighborhoods and livable urban places for all.