Downtown Vitality Index: The cities are best-positioned for success in the hybrid era

While the hybrid world has dealt a harsh blow to many downtowns across the nation, the lingering impact has been far from uniform.

That’s according to the latest Downtown Vitality Index from The Business Journals, which analyzed a variety of metrics affecting downtown activity across more than 40 major metros to determine which central business districts are best positioned for success.

Miami topped this year’s Downtown Vitality Index, thanks to its strong momentum for office real estate, a thriving tourist economy and work-from-home rates that remain only slightly above the national average of 9%. Last year, another Florida city — Tampa — topped the list.

Wichita, Kansas; Nashville, Tennessee; Cincinnati and Orlando also finished near the top in the Downtown Vitality Index, which is based on a weighted formula that looked at these factors:

The formula is weighted, with office space trends, work-from-home percentage and downtown cellphone activity among the heaviest-weighted factors. With the exception of downtown cellphone activity, the category scores are compiled using percentiles that show how downtowns around the nation compare. A score of 0 is worst and a score of 100 is best.

Those obviously aren’t the only factors that contribute to downtown vitality, but this project aims to put downtown recoveries in context and spotlight standout performers in these metrics in conjunction with our recent Future of Cities event.

The recovery gap between cities at the top of the Downtown Vitality Index and coastal metros like New York and San Francisco is top of mind for business leaders everywhere.

Economist, historian and futurist Richard Florida foresees a reckoning in the post-pandemic world as empty office spaces continue to dot downtown skylines and a commercial real estate price reset looms.

“We still haven’t felt it because lease terms haven’t come up,” he said. But in the coming years, “we’re going to see prices adjust to the point where (buildings) will either be converted, reused or torn down.”

And yet, he’s optimistic, because Florida believes such a reset sets the table for a revolution that could reshape America’s cities.

While hard data shows distinct patterns of recovery, Florida understands the value of a case study and cites Nashville, Tennessee; and Orlando as urban areas getting it right.

“This entertainment factor, this buzz … has become so important,” he said. [Nashville is] still an affordable place to live. It’s a really nice place to work and is a fun place for people.”

As for Orlando, Florida attributes its success to, “conventions, tourism and Disney (as) part of the economic development making the downtown stronger and a better place to live and work.”

Here’s a breakdown of each metric in our Downtown Vitality Index, including the top performers in the category and key takeaways:

Downtown office commercial real estate

What we looked at: We analyzed central business district vacancy and absorption rates for office space from CoStar Group, Jones Lang LaSalle and Cushman and Wakefield.

The takeaway: Several tech-centric metros that have struggled to backfill vacant spaces posted low scores in this metric, as have some cities that saw tremendous new construction of office space in the years leading up to the pandemic. Several fast-growing Sun Belt markets were among the standouts in the category.

Urban hotel occupancy

What we looked at: Using data from CoStar or local tourism associations, we tracked occupancy rates for hotels in central business districts or urban areas, and how those rates have rebounded since the onset of the Covid-19 pandemic.

The takeaway: While recovery was very strong in centers of commerce and tourism such as New York, Boston and Washington, D.C. — which all showed rates of at least 89% — some smaller regions such as Birmingham, Alabama, bounced back even stronger at 100% or more of their pre-pandemic level.

Downtown activity

What we looked at: The latest data from the University of Toronto School of Cities and the Institute of Governmental Studies at UC Berkeley, which have been working jointly to track cellphone data of more than 18 million North American smartphones to show how activity in downtowns compares to pre-pandemic levels.

The takeaway: The latest data from the study, covering the spring of 2023, shows the average downtown is now at 74% of its pre-pandemic activity. Las Vegas, which is a unique case because of its focus on tourism, leads the nation at 103%. Among more traditional metro economies, top performers included San Jose, California; Miami; and Phoenix. At the other end of the spectrum, St. Louis, Minneapolis and Louisville, Kentucky, are all at 56% or less of their pre-pandemic activity level.

Remote work

What we looked at: The U.S. Census Bureau’s latest American Community Survey, which showed the percentage of workers in each metro who are working from home. For the purposes of the Downtown Vitality Index, a higher percentage of individuals working from home translates to a lower score in this metric, because high work-from-home percentages are a factor many communities say are limiting activity in their downtowns.

The takeaway: Many transit systems have struggled since the pandemic, with the average system still down 29.6% compared to 2019. Metros with average levels of remote work and strong hotel occupancy rebounds also generally fared well in our public transit metric, as well as systems that have recently upgraded their systems.

Population growth

What we looked at: We analyzed the latest population growth estimates from the U.S. Census Bureau, taking into account growth since the pandemic and one-year growth between 2022 and 2023. While these are metro-level numbers and not limited to downtowns, they show which regions have the strongest momentum for population growth, which is a factor that adds vibrancy to downtowns.

The takeaway: The Sun Belt remains the star, dominating population metrics once again this year. Texas cities Austin, Dallas, Houston and San Antonio all showed three-year growth rates of at least 4.76%, with Orlando and Jacksonville in Florida hovering near 5% and 6.5%, respectively. A closer look at county-level data also shows some Midwest regions picking up the pace.

Expensive coastal metros like Los Angeles, New York and San Francisco continued to lag for population growth.

Source: “Downtown Vitality Index: The cities are best-positioned for success in the hybrid era“