Uniquely Affected By The Pandemic, Downtown Economies Still The Biggest Job Centers In Most Regions

Monday, October 25th, 2021

The demise of dense downtown areas in the United States has been predicted throughout, and long before, the COVID-19 pandemic. But according to a new analysis released today by the UC Riverside School of Business Center for Economic Forecasting and Development, downtowns are far from dying and today continue to be the largest job centers in most regions across the nation.

While the report identifies unique challenges facing downtowns due to pandemic-driven shifts in behavior, these changes are not likely to outweigh the things that have traditionally drawn businesses and workers to centralized urban areas.

"A century ago Henry Ford predicted that cities were 'doomed' due to the mass production of cars, and those same predictions have come with every communication innovation since, from telephone to fax to email to Zoom," said Taner Osman, Research Manager at the Center for Forecasting and the report's author. "The prized benefits that central cities generally deliver – better access to workers, business services, infrastructure, and networking and innovation opportunities – have made downtowns much more resilient than people believed over the decades and firms still want a presence in these areas despite higher costs."    

The economies of downtowns, or 'central business districts' have been doubly affected by the pandemic as they are home to both a hefty share of jobs in industries that suffered large employment losses, such as Leisure and Hospitality, and also to industries where work-from-home trends are strongest.

The most significant effect will likely stem from work-from-home trends. Throughout the pandemic, office workers have been by far the most likely to work from home. At the same time, in the 100 largest regions in the nation, office jobs account for 40% of all positions in central business districts. As more office employees work from home, the pandemic has had the effect of lowering the daytime populations of downtowns, affecting multiple industries beyond the office.

The principal question is whether working from home will become a new normal. "The endurance of work-from-home trends will ultimately depend on worker productivity," said Osman. Academic research has come down on both sides of this question, with some studies revealing greater productivity at home contrasted against a large body of research that finds face-to-face contact is a key source of productivity.