The rehabilitation and revitalization of blighted urban areas is a topic of utmost importance to city planners, residents, developers, activists, and business owners. It's rare that any of the stakeholder parties agree on a particular action, but through compromise and demand, financial incentives, and outright need, change is a constant in urban core neighborhoods.
One of the stranger effects of COVID-19 is how completely it disrupted the typical former push-and-pull of urban redevelopment. The great ongoing pain points in redeveloped areas used to be gentrification, congestion/lack of parking, noise disturbance issues, and increasing real estate prices that drove out those of lesser means.
However, the pandemic changed everything -- not just trends in the commercial real estate market, but the essential workings of it. And in order to recover, we may need to redefine what urban revitalization looks like. Here are six factors to consider.
Vertical construction is no longer the luxury multifamily ideal
Shared garages, elevators, common spaces (and the possibility of sharing contaminated air through ducts, even when "safe at home") -- now, all human contact drives constant paranoia when we know a disease is airborne, yet suspect it spreads through surfaces as well.
People used to cram into elevators or chat with each other in the mailroom without a care. Now, many won't share an elevator or a stairway and will rush past neighbors in the hallway, glaring if one isn't wearing a mask.
Granted, the norms are slightly different in different cities, but overall, high-rise buildings are no longer seen as safe fortresses -- more like confined spaces with countless opportunities for exposure.
Considering luxury multifamily high-rises used to be developers' cash cows in cities like Chicago and San Francisco, it's hard to picture urban redevelopment without that element. But considering many of the projects were highly controversial to begin with, perhaps this is a blessing in disguise.
Co-living isn't going to catch on
As a subset of high-rise condo dwelling, small-footprint units where people commingled in glossy common spaces -- oversized living rooms, pool areas, and even shared kitchens -- were touted as the "next big thing" by developers who knew that young, urban workers couldn't afford a normal-sized condo in hot housing markets.
Co-living made sense in the context of a thriving, tech-driven economy, where young professionals often moved for career reasons and needed a built-in community. But with careers on the back burner and fear of catching a deadly disease in the forefront, the appeal of sharing kitchen space with strangers nosedived. And during extended stay-at-home orders, the walls close in even quicker when your entire "home" is the size of one room. No wonder co-living leader Quarters went out of business in the U.S. We expect many others also have, or will shortly.
A huge drop in demand for office space
This is a one-two punch to high-rise developers in commercial urban centers. In Hollywood in 2019, when the city's transit-oriented communities projects pipeline was stuffed to bursting, the vast majority of proposed projects were either new luxury offices or new luxury condos (perhaps with 10% of the space allocated for low-income housing).
Fast-forward to now, and remote work has become the norm that company owners and employees alike can agree has long-term benefits. While there will be a return to the office at some point, it may not be on a large scale -- certainly not enough to fill up all those proposed multimillion-dollar towers.
Existing tenants can't pay rent -- and don't have to, for now
One of the most painful impacts for landlords is that tenants, both on the residential and commercial sides, have been protected from eviction for nonpayment of rent under the CARES Act. Each time the deadline comes near, landlords roll up their sleeves and prepare to remove tenants that may have gone six months without paying -- and every time, the deadline gets extended.
Currently, the national eviction moratorium lasts until March 31. Whenever it finally ends, and the nation gets on to the next phase of whatever recovery looks like, landlords will be juggling two problems. First, they'll need to collect rent from people who may have no money. And second, they need to find viable tenants when people are understandably hesitant to open new restaurants or retail businesses in the post-pandemic environment.
There are countless communities where retailers, bars, and restaurants haven't been legally allowed to open their businesses. Not only does this make the businesses financially insolvent, it creates instant neighborhood blight. Formerly thriving local retail businesses are closed and vacated. Even when many come back, the aftereffects will be prominently visible -- and the owners of these empty spaces may be hard-pressed to find new tenants whostill believe in brick-and-mortar retail.
People fear mass transit
This is one of the long-tail negative repercussions of the pandemic that isn't being discussed yet in terms of its effect on urban redevelopment -- but the ripple effect will be massive.
In an effort to combat congestion, pollution, and wasted space, many cities have created some sort of transit-oriented development strategy that encouraged pedestrians, eliminated parking spaces, and purposefully built vibrant mixed-use communities within footsteps of mass transit. Developers were incentivized to plan new developments -- or adaptive reuse developments -- that included fewer parking spaces and promoted a car-free lifestyle. These walkable communities promoted lifestyle changes even among people who didn't live in them, because they could use mass transit to commute to work instead of driving.
But now, people are fearful of mass transit, and there's no telling when they'll get over it. An enforced shift to social distancing has hammered into public consciousness how unhealthy it is to be in enclosed spaces, packed together with hundreds of strangers, for extended periods of time. How (and when) will we overcome that?
So what's left?
The question is probably more accurately, what's next? The answer: A whole lot of innovation, community involvement, reinvention, and lifestyle changes that have never been seriously considered before.
Healthcare workers taking over as tenants of hotels was an early example. But why shouldn't they move into mostly empty condo towers, not as luxury tenants, but quasi-corporate ones? Perhaps restaurants, instead of being fleeced by DoorDash (NYSE: DASH) services, could turn former servers into white-glove delivery people who bring orders to people's homes by wrapped vans or food trucks. Perhaps parks and parking lots will accommodate socially distanced outdoor dining.
And most importantly, maybe fast-tracking mixed-income housing in wealthy cities will finally become a priority among developers -- because even when the market for luxury condos and designer restaurants collapses, people of average income will still need decent housing within realistic means.