Local alliances drive recovery in some cities – Finance & Commerce
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As vaccination rates rise and businesses begin to reopen, cities across the country are moving forward cautiously with economic recovery plans to get workers back into offices and revive real estate markets hit by the pandemic.
Some mid-sized cities – like Austin, Texas; Boise, Idaho; and Portland, Oregon – might be on the verge of a bounce back faster than others because they’ve developed strong relationships with their local economic development groups. These partnerships have established return plans that incorporate a number of common goals, such as access to affordable loans, relief for small businesses, and a focus on city centers.
Partnerships also encourage investments in infrastructure to attract new business activities. Last week, President Joe Biden announced a $ 2 trillion infrastructure plan to modernize the country’s bridges, roads, transit, railways, ports and airports.
“The stimulus packages create an agenda for the reconstruction of the metropolitan area,” said Richard Florida, a professor at the University of Toronto, who helped prepare a plan for northwest Arkansas.
In Tucson, Arizona, the revitalization plan, which goes into effect this month, calls for assessing the effect of the pandemic on important industries, including biotechnology and logistics. Other provisions recommend recruiting talented workers and preparing so-called ready-to-use sites of 50 acres or more.
Demand is high for industrial sites in Tucson. More than 80% of inquiries for real estate in the city are directed to industrial facilities, according to Sun Corridor, the regional economic development agency that sponsored the stimulus plan. And 65% of requests relate to space for new factories.
City leaders are building on a five-year, $ 23 billion growth plan in industrial and logistics development in the Tucson area, which resulted in the creation of 16,000 new jobs before the pandemic, according to Sun Corridor. Caterpillar and Amazon have established themselves in the region, while Raytheon, Bombardier and GEICO were among the many leading companies that have expanded their operations there.
“In hockey terms, we don’t play where the puck is; we try to skate where we expect it to happen, ”said Joe Snell, President and CEO of Sun Corridor. “We make sure we have the inventory of the sites so that when they come knocking on the door, we can fill the order.”
Other cities are struggling to recover after pandemic restrictions emptied their central business districts. The question is to what extent these city centers will bounce back when the pandemic ends.
“The pandemic has caused great changes in the way we work and in the geography of where we work,” Florida said. “The office as we know it, a workspace, is dead.”
Experts disagree on what will follow. Several economic trends, like the growth in hiring and acceptance of remote work, are colliding, said Richard Barkham, chief global economist at CBRE, the commercial real estate company.
After a 3.5% drop in economic activity in 2020, the U.S. economy is expected to grow 6.5% in 2021, he said, which bodes well for construction. But CBRE also predicts that office workers will spend 36% of their time working remotely, up from 16% before the pandemic.
“We are seeing a temporary slowdown in demand for new office space,” Barkham said. “We’re also seeing that it’s been reduced in two, three, or four years until the centers come back.”
The travel and entertainment industries were shut down during the pandemic, but companies that engaged in innovation, technology and information have exploded, said Tracy Hadden Loh, a member of the Brookings Institution. Growth in office development for tech jobs has been particularly strong in Austin; Charlotte, North Carolina; Phoenix; and San Francisco, she said, adding that building of offices for the knowledge economy would resume after the pandemic.
But she tempered her prediction because of another trend.
The number of square feet per worker has decreased significantly since 1990, ”she said.
Add to that the recent announcements from companies like Google, Microsoft, Target and Twitter regarding remote working, and some cities might see less office building activity.
These challenges are not limited to mid-sized cities. Large metropolitan areas like Los Angeles and New York are certainly in distress, but they have shown the ability in the past to bounce back from calamity. In San Francisco, city officials said there was no way to predict postpandemic construction activity, but expectations were high.
“This is not the first recession here,” said Ted Egan, chief economist for San Francisco. “We expect people to come back to the office.”
But cities that have a strong alliance with business development agencies should recover faster.
For example, the Downtown Austin Alliance, a business development group, holds focus groups and workshops, and conducts interviews and surveys to spark new interest in its downtown office market. Before the pandemic, 11 buildings covering about 3.5 million square feet were under construction, nearly half of all downtown offices.
Tucson also intends to resume construction. In addition to identifying industrial development sites, the Sun Corridor recovery plan calls for the revival of the city’s downtown area.
The pandemic closed 85 downtown restaurants, cut 10,000 travel and tourism jobs, and cut industry revenues by $ 1 billion. The antidote is to persuade city and county leaders to provide loans and grants to small businesses related to the tourism industry at the center of commercial space in downtown Tucson.
Mayor Regina Romero said the city is investing $ 5 million – $ 2 million more than last year – in the city’s tourism marketing group. Tucson also distributed $ 9 million of federal relief legislation passed in March 2020 in grants ranging from $ 10,000 to $ 20,000 to small businesses, many in tourism.
“We work together as a region,” Romero said. “This is one of the most important steps we can take for the recovery.”