By Henry Srebrnik, [Charlottetown, PEI] Guardian
Post-pandemic American downtowns have yet to recover from the three-year COVID pandemic. In fact they find themselves in a continuing downward spiral.
During the first three months of 2023, U.S. office vacancy rates topped 20 per cent for the first time in decades. In San Francisco, Dallas, and Houston, vacancy rates are as high as 25 per cent. These figures understate the severity of the crisis because they only cover spaces that are no longer leased.
Actual office use points to a further decrease in demand. Attendance in the 10 largest business districts is still below 50 per cent of its pre-COVID level, as white-collar employees spend an estimated 28 per cent of their workdays at home.
Budget shortfalls
This has had reverberating effects. Property taxes underpin city budgets. In New York City, such taxes generate approximately 40 per cent of revenue. Commercial property contributes about 40 per cent of these taxes, or 16 percent of the city’s total tax revenue.
Empty offices in Manhattan also contribute to lower retail sales and public-transport usage. Weekday subway trips are 65 per cent of their 2019 level and public-transport revenue has declined by $2.4 billion. More than 40,000 retail-sector jobs lost since 2019 have yet to return.
This makes it even harder for low- and middle-wage workers who enable restaurants and small businesses to operate, causing major budget shortfalls from declining tax revenue that imperil numerous city services, trigger layoffs of city workers, all of which causes more people to leave.
Cities like New York must then make choices between cutting services and raising taxes, either of which will further drive out the remaining wealthy and productive residents and businesses. The cycle can be deadly. As in the 1970s, municipalities will start declaring bankruptcy and that will add a drain on federal resources, which will have to be used to bail them out.
The news is filled with reports of big retailers like Target, Whole Foods, and national drugstore chains closing stores that have become unprofitable in the increasingly chaotic neighborhoods of cities like Chicago, Philadelphia, Portland, and Seattle.
Retail deserts
In New York, the rising social disorder and crime of the 1970s and 1980s drove out not only hundreds of thousands of residents from the city, but also many businesses. Within a few years, entire communities lacked basic amenities like supermarkets and drugstores; empty storefronts littered shopping districts.
Policymakers began describing communities that lack essential retailers, especially supermarkets, as “deserts.” Local government tried a host of policies to lure stores, from incentives to public browbeating; what ultimately worked was neighborhood revivals spurred by declining crime. But many cities seem on the verge of a new era of retail deserts.
New York is now again plagued by retail theft, and businesses are fleeing. The city has lost approximately 675 outlets operated by national chains since the pandemic began, according to a retail census.
New York has seen the decline of drug stores. Duane Reade and Rite Aid have collectively closed more than 100 city stores since 2019. Already beset by everything from online competition to supply-chain woes, stores now face the task of coping with out-of-control theft.
New York is now again plagued by retail theft, and businesses are fleeing. The city has lost approximately 675 outlets operated by national chains since the pandemic began, according to a retail census.
Dollar Tree, a chain of low-cost general-merchandise stores that saw its recent financial performance eroded by rising thievery, has shuttered 12 New York City stores.
San Francisco’s problems are far worse. Office and retail space appears to be in an even worse state than in New York: The city has a record-high 31 per cent office vacancy rate.
Breaking leases
The consequences of the fentanyl epidemic, homeless encampments, housing that is unaffordable for most, and deteriorating school systems and high tax rates are also evident: Working class people endure lengthy commutes and two-income couples cannot afford to start families.
San Francisco has also been struggling with rising crime and public-defecation crises. Earlier this year, the San Francisco Chronicle questioned whether a series of interconnected forces — empty office spaces, shuttered businesses, and sharply reduced mass transit — has trapped the city in a downward spiral.
The owners of San Francisco commercial businesses, like hotels and malls, are simply walking away from their obligations, handing the keys to the banks. Major retailers are declining to renew leases, unable to break even in an atmosphere where retail theft is tolerated.
Last June, the owners of two of San Francisco’s largest downtown hotels, the Hilton San Francisco Union Square and Parc 55, announced they were going into foreclosure on their properties, stating that the city faces “major challenges.”
They noted record-high downtown office vacancy, “concerns over street conditions,” and reduced convention business. The city recently enlisted a public relations firm to try to convince the world that it isn’t doomed.
Declining foot traffic
In the Los Angeles area, a summer wave of flash mob attacks swept across various retailers. Philadelphia on Sept. 26 witnessed a night of mayhem in which groups of thieves smashed their way into dozens of stores.
Even smaller cities like Portland, Oregon are struggling. Many major retailers have closed some of their stores or have left entirely, including Apple, Nike and Walmart. Daily downtown foot traffic is down 60 per cent.
Two million people fled America’s largest cities from 2020 to 2022, signalling that a retreat from urban centres during the pandemic has hardened into an enduring and worrisome trend.
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