Vanishing downtown office towers
Just a quick pass-along tonight from Otis White's Urban Notebook (still without permalinks). I think this is a trend that will probably hit Houston soon: conversions of downtown office buildings to condos. There has been a rise of residential housing in downtown Houston, but as far as I know, we haven't yet converted a major office tower. But the vacancy rate is stubbornly high downtown - over 20% - and the real office-space action is much farther west in the Energy Corridor and Westchase. I think it's just a matter of time until we see a few conversions of the older, less desirable office towers - which could actually end up a healthy thing for downtown. I don't think we have to worry about ending up with an anemic downtown like Philly or St. Louis. It will have a healthy number of jobs for quite some time, more than any other employment center in Houston, at least according to HGAC projections.
Vanishing Office Towers
Are Downtowns Becoming Irrelevant?
One of the keenest observers of urban development around is Philadelphia Inquirer economics columnist Andrew Cassel. He asked a simple question recently about his city’s downtown: As center-city Philadelphia develops as a residential area, what’s happening to it as a business district? His answer: It’s fading fast. This isn’t just a Philadelphia story, though. It’s what’s happening with downtowns everywhere.
It’s ironic, Cassel writes, because in the 1970s and 1980s, we worried about downtowns becoming 9-to-5 places that bustled in the daytime but emptied out at night. After all, who’d want to live downtown? “Talk about having it exactly backward,” he says. “It turns out there are loads of people who want to live in or near center city — all kinds, from students and twentysomethings to empty nesters and retirees.” But, he continues, “even as the city grows more attractive as a place to live, it continues its long decline as a place to work.”
Look at the numbers. There’s about as much occupied office space in downtown Philadelphia today as in 1990, he writes, but suburban office development has mushroomed. Result: Downtown’s share of the region’s office market has shrunk from 41 percent to 27 percent. (It’s not just office space. Philadelphia has lost 9,300 professional and office jobs since 2000, even as the suburbs gained nearly 18,000.)
Downtown Philly has seen a fair amount of office construction since 1990, so how can it have no more office space than it did 16 years ago? Answer: A lot of office buildings have been converted to housing. He gives an example: the 57-story Two Liberty Place tower, half of which is being converted to condos. “Imagine: A 1989 postmodern glass-and-steel tower, a symbol of the city’s economic renaissance when it was built — and until recently among the classiest of Class A office addresses — is now obsolete and must be recycled,” he writes.
Cassel blames Philadelphia’s crushing employment taxes for the city’s decline as a business location, and he’s no doubt right that they’ve hastened the exodus. But the same trend can be found in other places. Across America, downtowns are becoming more appealing places to live and less appealing ones to work.
Take St. Louis, where office vacancies have dropped significantly in recent years. Booming economy? Hardly. It’s all those conversions of downtown office towers into condos, the St. Louis Post-Dispatch reported recently. Real estate researchers think about 1.3 million square feet of office space has been taken off the market in recent years as condo conversions or teardowns. “It’s simply supply and demand at work here,” said one developer, whose company is converting a 1920s downtown tower to condos. “There’s more demand for housing than there is for office, but there’s less supply of housing.”So should we be concerned about the decline of downtowns as business districts? Yes. The influx of residents is a positive thing for downtowns, but we need real work to go on there. Otherwise, downtowns could become little versions of Venice: inspiring to look at, delightful to explore but otherwise irrelevant to the world of commerce.