New study shows downtown areas lagging behind pre-pandemic levels of activity

Recent findings from a study titled The Death of Downtown? Pandemic Recovery Trajectories across 62 North American Cities, conducted by a group of six researchers at the University of California’s Berkeley campus's Institute of Governmental Studies found that U.S. and Canadian downtowns are recovering from COVID-19 related setbacks at much slower rates than the “rest of the city,” and many downtown areas are still seeing less visits than pre-pandemic levels.

To determine the exact bounds of each cities’ downtown area, as well as the number of mobile phone devices (the measure of activity levels), the researchers used data from SafeGraph's Patterns dataset. This dataset includes aggregated and anonymized data of activity levels to points of interest (POIs), which was further broken down by the researchers into data for each of the studied downtown areas. Data was used to calculate a “Recovery Quotient” or RQ by dividing the most recent device count (March 2022 to May 2022) over the device count from pre-pandemic data (March 2019 to May 2019). An RQ of less than 100 means that there is less activity now than there was pre-pandemic, an RQ of 100 means the activity levels are comparable, and an RQ of over 100 means that there is more activity now than pre-pandemic. More info on the methodology can be found here.

The above was replicated for the 62 largest cities in the U.S. and Canada and found that San Francisco has been lagging the most with an RQ of just 32 percent, while Salt Lake City saw the greatest rebound over its pre-pandemic levels.

Only four of the 62 cities studied surpassed 100 percent RQ, with Salt Lake City at 155 percent of pre-pandemic levels, followed by Bakersfield (117 percent), Columbus, Ohio, (112 percent), and Fresno (108 percent).

On the other hand, 18 remain at under 50 percent. In addition to the slow recovery of San Francisco (31 percent), other cities that remain below 50 percent of their pre-pandemic activity include Cleveland (36 percent), Portland (41 percent), Detroit (42 percent), and Chicago (43 percent).

In terms of geographic regions: The highest RQ in the Midwest was in Columbus (112 percent) while the lowest was in Cleveland (36 percent); The Northeast’s highest was in Baltimore (91 percent) and lowest was in Philadelphia (51 percent); The Pacific’s highest was Bakersfield (117 percent) and lowest was in San Francisco (31 percent); The Southeast’s highest was Tampa (85 percent) and lowest was Raleigh (45 percent); and the Southwest’s highest was Salt Lake City (155 percent) and lowest was Denver (56 percent). A visual representation of these datapoints and others can be found at Downtown Recovery’s website here.

But why are these cities seeing such a range of activity levels? The study identifies several key factors that influence the recovery of activity to the downtowns: population density, business density, mode of transportation to work, and the presence of workplaces continuing to support remote work.

Downtown areas, defined as the area in a city with the greatest employment density, were found in this study to have an average of 71 percent of their total real estate dedicated as office spaces, combined with the uptick in remote work catalyzed by the pandemic that lessened the need for offices, there has been a decrease in the demand for downtown real estate. In fact, a recent study titled Work From Home and the Office Real Estate Apocalypse, conducted by researchers at NYU and Columbia Universities, found that if remote working patterns stay consistent with recent levels, office buildings could see a U.S. nationwide decrease of $500 billion in value over pre-pandemic levels, representing a 28 percent plumet. The study claims that if remote and hybrid work trends stay consistent for a full decade (until 2029), the decrease could be even larger at 38 percent.

With that being said, remote work can be seen as a threat to traditional downtown spaces, especially with regards to property values, with The Death of Downtown? study identifying the need for downtowns to “diversify their economic activity and land uses” in order to survive. Remote work was associated with a lesser need to travel downtown and thus a lower demand for downtown real estate, subsequently lowering the value of properties there. The authors recommend actions such as renovating select office buildings into residential, institutional, and recreational spaces to combat the trend.

It is important to note that the RQ for the entirety of the cities studied (including their downtown areas) is oftentimes higher than that of the downtown area alone, furthering the idea that remote work and overall shift to online spaces is disproportionately impacting downtown areas.