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Some cities have a chance to "hit the reset button" and compete for new residents

A picture of an empty storefront window and an add that says "office space for lease".
Tyler Scott
/

Some small and medium-size cities like Lansing have been trying for years to reimagine how their downtown areas should look if they want to attract new residents. The pandemic has disrupted the status quo, posing new challenges and, in the eyes of some urban planners, a new starting point.

“It gave us a chance to hit the reset button,” said Cathleen Edgerly, Executive Director at Downtown Lansing Inc., “to finally put action behind things that so many of us who have called Lansing home for decades have been talking about.”

Bringing more people into downtown Lansing has been a goal of city officials and business leaders for years. The return to work, post-emergency phase of the pandemic is forcing those same leaders to consider how the downtown area has long relied on a certain kind of demographic – state employees who, largely, commute into the city to work, and spend, and then drive home in the evenings.

Each state department is responsible for crafting its own return to work plans. Economic Developer Bob Trezise, President and CEO at the Lansing Economic Area Partnership, is worried far fewer state employees will be required to report to the office in person like they were pre-pandemic.

“So many businesses – particularly food industries, restaurants – really rely on that 8-5 population being captured and down here in the downtown area,” Trezise said.

According to the Department of Technology, Management and Budget, the state of Michigan has cancelled eight office space leases in Lansing since the beginning of the pandemic. (A DTMB spokesperson says some of these cancellations were planned before the pandemic, and increased remote work, were things to consider).

Lansing Mayor Andy Schor wants the state to help the city through this strange transitional period by putting up funding to subsidize redevelopment of some empty office spaces or historic buildings into new residential units. Adding plumbing, and all the necessary infrastructure to create livable spaces in a building which previously housed primarily offices, can be an intensive, expensive project. But he’s pushing for it.

“With all the dollars coming in from the federal government it would be great to see that go toward economic development and housing,” Schor said. “We have been very aggressively discussing with the governor’s office and with the federal government options for conversions from office space in buildings to housing.”

Schor says in recent years the city has added “several hundred” units of new housing – including a Meijer grocery store downtown called Capital City Market with a connected apartment complex developed by the Gillespie Group called BLOCK600 Lofts. He hopes investment from the state can help the city grow more coming out of the pandemic.  

Pat Gillespie, President of Gillespie Group, says the downtown Lansing residential market is booming. He says “every single apartment” the group manages is currently occupied. That’s not the case for office space in the group’s downtown property portfolio. But Gillespie is more bullish on attracting new businesses looking for large spaces to downtown, rather than converting office space to residential units.

“We don’t see it [happening] on a widespread basis,” Gillespie said. “A couple of buildings may lend themselves to that. But most of them, it’s going to take a little bit for the market to pivot and for start-ups and other companies to say, ‘I want to be downtown and now I can do it’.”

Christian Beaudion, Director of Research at the real estate brokerage firm JLL estimates the average office space vacancy rate is nearly 20%  – though that’s not evenly distributed across cities. Every local economy is different. But JLL expects most people will be back to working in-person at least a few days a week by this fall, and expects the office space market to remain healthy over the long term.

“The net demand for office space may have a slight decline, but it’s not as dramatic as many people have been thinking based on our modeling,” Beaudion said.

Other city leaders are less sure. Nan Whaley, the Mayor of Dayton Ohio and the head of the U.S. Conference of Mayors, says municipal officials across the country are carefully watching the commercial real estate sector to gauge their local economies.

“I think companies are kind of shaking out what jobs are going to end up being remote, which will be hybrid, and which will be in person,” Whaley said. “I don’t think we’ll have the full answer for that until the next two to five years, frankly.”

Whaley says some cities will have to dedicate the majority of their federal COVID relief funding to COVID-related expenses. Mayor Schor says Lansing will have to spend millions to make up for lost revenue from sources like income tax and parking.

“But then there’s also this huge opportunity to really… work to create some [economic] opportunity in places that haven’t been able to make it work because of a lack of investment,” Whaley said.

No one can say for sure what the future of work (i.e., how many people can work remotely) or how companies use office space will look like. But there’s research that more people are moving to cities with affordable housing (relative to major metro areas) and University of Toronto Professor and urbanist Richard Florida says, more people are moving to places with attractive natural amenities and things to do.

That trend predates the pandemic.

“I could see that happening a half dozen years ago and the pandemic just kind of shifted the tables a little bit or accelerated the transition in their favor,” Florida said.

Florida says on a recent trip to Traverse City and Northport, he met several people who used to live in downtown Detroit, and several people who used to live in New York.

“I think particularly among the smaller cities that have unique amenities, a lakefront, a waterfront, and have been able to build up a kind of food culture, … some kind of amenity mix, they have competed really well,” Florida said.

But for many cities trying to become more attractive to potential new residents and businesses, the immediate future is murky. Dan Gilmartin is the CEO of the Michigan Municipal League. He says business groups and state and local governments have an opportunity to work together to incentivize development of neighborhoods that attract more people.

“It’s certainly a challenge, but it’s an opportunity to do some really cool things too," Gilmartin said. “Especially in a place like Lansing that was really struggling to find its legs in terms of; what can we do to improve our downtown?”

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