By forcing us to spend more time closer to home, could COVID-19 be the catalyst for reinvigorating some urban areas that need it most?
The challenges faced by many parts of our towns and cities were well documented before the onset of COVID-19. The shift to online shopping66 is leaving a legacy of vacant retail units and declining property values in many locations67. Office stock is concentrated in core locations, typically in downtown Central Business Districts (CBDs) or out of town business parks. Consolidation of healthcare and other services into hub networks has left many local areas with limited access to local facilities, as has been well-documented in the U.S. and U.K.68; ’food deserts’ now affect 1.2 million people across the U.K.69 and more than 5% of Americans70.
We need to take a holistic view of what makes places successful.
Governments and agencies increasingly recognise that inequality has far reaching consequences for the economy, society and the environment71, 72. The outward signs of deprivation become self-reinforcing, as business investment withdraws. This “hollowing out” impacts the health and wellbeing of local communities; once decline sets in, it becomes hard to reverse.
Many of these trends have been brought into focus by COVID- 19. As the Avison Young Cities Recovery Index illustrates73, people are moving around less, particularly within major cities74. E-commerce has accelerated sharply, including among groups that have previously been resistant to shopping online75. However, the pandemic has also changed behaviour in ways that could offer opportunities for some urban areas.
Vast numbers of people are currently working from home, by choice or otherwise. Avoiding crowds and public transport is encouraging people to shop and spend their leisure time nearby – to the benefit of the local economy. This may just be a temporary phenomenon, driven by short term COVID-19-related restrictions. However, there are reasons to think it might signal something more significant, at least in some places.
In the U.K., a surge in interest in “local” property markets has seen the greatest uptick in enquiries directed at regional towns and outer London neighborhoods76. In the U.S., city rents are falling, and suburban rents are climbing77. This is true across property sectors, with office, retail, and residential markets all reporting rising activity – in some cases exceeding pre-COVID-19 levels.
This shift in the property market chimes with the concept of the '15-minute city' being advocated by many academics and policy makers. The concept that local administrations should focus on delivering the core day-to-day amenities, services and spaces that residents need like schools, work, food, leisure and healthcare within 15 minutes78 of their home. To revitalise our urban areas, we need to take a holistic view of what makes places successful and invest across that spectrum of needs. This links closely to thinking around impact investing and the desire to generate local social, environmental and economic value, which is gaining traction in the public and private sectors.
The places we create matter now more than ever. Developers such as Argent Related79 and U + I in the U.K. are leaders in the concept of placemaking; the idea that successful buildings are only possible in places that address the wider needs of society. The World Green Building Council just launched its Health & Wellbeing Framework to educate the building and construction sector to drive healthier spaces to improve our physical and mental wellbeing. Urban-tech start-up Venn, now operating in Tel Aviv, Berlin and Brooklyn, focuses on driving neighbourhood-based growth by using a digital platform to link real estate owners, residents and local businesses. The vitality created reinvigorates the entire area, helping to build successful local communities.
The places we create matter now, more than ever.
Several drivers appear to be converging to create interesting opportunities for long term investors prepared to embrace this holistic approach to urban development:
- Employees are demanding greater flexibility, with the concept of ‘Work Near Home’ growing in popularity80.
- Investors and asset owners are increasingly looking at genuine multi-use buildings with the flexibility to respond to market changes.
- The hyper-localization of supply chains suggests that local stores have a bigger role to play in omnichannel retail than many think81.
- Popular concern over issues of social equality is driving political initiatives to support and invest in areas needing revitalization, just as ESG funds are attracting private sector capital and looking for investment opportunities. Environmental and welfare concerns coupled with wider societal awareness is influencing people to shop and travel more sustainably.
- Governments are investing heavily in ‘active travel’ funds and infrastructure to encourage walking and cycling – which has been shown to increase engagement with local shops and businesses82, 83.
- Smart city initiatives are helping connect urban areas in ways that allow efficient service delivery using a distributed rather than centralised model84.
City centres are not dead; quite the opposite.
City centres are not dead; quite the opposite – but local neighbourhoods also have a key role within our urban hierarchy. No policy initiatives are a panacea and there is no one-size-fits-all solution to delivering positive urban change. But the fact that people are spending more time and money in their local neighbourhood is a trend that many will watch with great interest.
66. https://www.theguardian.com/business/2019/sep/09/uk-retail-footfall-dips-further-as-shoppers-shun-high-street 67. https://www.flipsnack.com/LocalDataCompany/local-data-company-market-analysis-2019/ 68. https://www.rwjf.org/en/library/research/2013/06/overcoming-obstacles-to-health-in-2013-and-beyond.html 69. https://www.kelloggs.co.uk/content/dam/europe/kelloggs_gb/pdf/Kelloggs_Food_Desert_Brochure.pdf 70. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7299236/ 71. https://www.frbsf.org/economic-research/files/wp2017-23.pdf 72. https://www.imf.org/en/Publications/WP/Issues/2020/09/25/Should-Inequality-Factor-into-Central-Banks-Decisions-49756 73. https://www.avisonyoung.co.uk/en_US/ukcitiesrecoveryindex 74. https://www.google.com/covid19/mobility/ 75. https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi
76. https://secureforms.egi.co.uk/propertylink-localrevolution 77. https://www.bloomberg.com/news/articles/2020-10-30/where-rents-are-falling-and-where-they-are-rising 78. https://www.bisnow.com/manchester/news/construction-development/the-ten-minute-city-can-work-and-we-will-build-it-says-allied-londons-mike-ingall-106476 79. https://www.argentrelated.co.uk/developments/brent-cross 80. https://avison-young.foleon.com/2021-forecast/real-estate-trends/flex-office-portfolio/ 81. https://avison-young.foleon.com/2021-forecast/real-estate-trends/supply-chain-logistics/ 82. https://tfl.gov.uk/info-for/media/press-releases/2018/november/getting-more-people-walking-and-cycling-could-help-save-our-high-streets 83. https://www.livingstreets.org.uk/media/3890/pedestrian-pound-2018.pdf 84. https://smartcityhub.com/category/governance-economy/