Congratulations on your annual fund raising efforts. I have known of this for many years and was always impressed with what you accomplish. I want to salute you for coming and especially salute those of you responsible for filling this room.
I was asked to come here to give a combination pep talk and words of encouragement regarding the state of and future of downtown development.
I should begin by saying I know the caliber of some of your past speakers, and I feel the need to temper your expectations.
These are certainly interesting times we find ourselves in. Interesting…a good word to perhaps mask our real feelings. I have heard that there is an old Chinese toast that they would offer to their enemies: May you live in interesting times. Think about that.
If we were not personally impacted or did not know of others who were, perhaps we could look at this objectively and find it all somehow instructive, and in that regard it would be interesting. With the wisdom of hindsight, I hope we can learn from these times and see that they do not repeat themselves. In the meantime though, I see them as interesting.
You have all probably heard that the Chinese have a character for crisis. Most suggest that the character is made up of two words – danger and opportunity, although there is some question as to its actual interpretation and whether opportunity is really the intended meaning. Regardless, it makes the point that the difference is in how one sees things – danger or opportunity. Make no mistake, these are troubling times and we all have every right to be concerned. But, there is also opportunity and as in all things, the key to dealing with interesting times is to not let the times control you, but focus on what you can control.
So, this is a good time to be talking about and planning for downtown development. As the economy improves, and we all know it’s when, not if, downtown will see the opportunity for significant investment IF it has been positioned for the new opportunities that are and will emerge.
In normal times we would simply look at what has been going on and is underway and draw some reasonable conclusions about what might happen, what trends might emerge. But virtually every development trend ran into a wall 6-12 months ago and may not be able to climb over or go around that wall for another 12-18 months. So is it reasonable to even look back and draw any conclusions from pre-recession trends or activities?
I think the answer is yes, to a point. I don’t believe that development will pick up exactly where it left off, at least not across the board. This is not a time out and once the game resumes, everything is back in play. As we reenter the development game, we are going to see some new players, or some previously minimal players getting more action, taking on more important roles, and one of those will be downtown.
You know about tipping points. Usually tipping points are the result of thousands of small actions that cumulatively over time tip us in a new direction. I believe that downtown development had already reached the tipping point in the mid-late 1990’s. But three things happened in the past year or so that have solidified downtown’s importance in the development market and bolstered its place in the economy’s recovery. One is the rise of gas prices to over $150.00 a barrel, or $4.00 a gallon. The second is the economic meltdown itself. And the third is the election of President Obama.
Regarding the price of oil, people who had only casually thought about how much they were spending on transportation were forced to come to grips with the fact that car dependence is expensive. While we don’t have much in the way of alternatives yet, people actually found ways to drive less, and they began to look for ways to make real changes in their car use. Among those was to look at where they live relative to jobs, services, schools, churches and the other regular aspects of their lives. People who once did not factor in the cost of commuting were suddenly focused on location. As the economy recovers, some of those people will look more openly at downtown and closer in opportunities as a way to lessen their car dependence. More on this later.
The second factor in the growing importance of downtown is the economic decline itself. It was so sudden and is so deep and wide, that people are having to seriously look at their lifestyle and their patterns of consumption, beyond transportation. Steve Mouzon is an architect and founder of The Original Green, a company focused on sustainable design. In his blog he wrote about the idea of planned obsolescence, and in particular planned obsolescence in architecture versus the value of things that endure.
“When people make lots of money, a perverse thing happens. You would think that with more money, people would demand better stuff. But when prosperity abounds, the necessity of thinking long-term decreases. When times are tough, however, the thought of replacing a tool, a piece of furniture, or whatever on a frequent basis is really frightening... we simply cannot afford to do that. So I believe that the Meltdown will begin to cause people to think long-term again, and to begin to value enduring things.”
What might that mean relative to downtown? How about our historic architecture, which was not built with planned obsolescence in mind…the homes and office buildings and commercial spaces in your downtown are not being replicated elsewhere to the standard they were built. We don’t build them like we used to. That they have endured, even through hard times and neglect and in some cases abandonment, is a testimony to the quality of their design, construction, materials and to their durability. More and more people are recognizing the value of things that last, and as we emerge from this economic mess, downtown and our central areas will be recognized as good long term investments because they were built to last. So this economy is again creating focus for many of us.
The third factor is the election of the new administration in Washington. America has not had an urban or city focused agenda in over 40 years. This administration has announced they will create “a White House Office of Urban Policy to develop a strategy for metropolitan America.” While the proof is in the end result this does mean that cities, and in particular city centers, are now on the radar for support and incentives to continue to spur redevelopment. When the game begins again, downtown will be a player.
Aside from these three recent events, there are factors that we can look back on pre-recession to draw some hope for post recession opportunity. In no particular order, they include:
1. Trend back to downtown living
2. Sprawl fatigue and a better understanding of density
3. Desire for transit or mobility options
4. Desire for walkability
5. The continuing demographic trends
6. Rise of the creative economy and creative workers
7. Growing desire for green and sustainable development
1) Trend back to downtown living
Brookings Institute did an analysis of downtown population, household, and income trends in 44 selected cities from 1970 to 2000 and finds that:
■ During the 1990s, downtown population grew by 10 percent, a marked resurgence following 20 years of overall decline.
■ From 1970 to 2000, the number of downtown households increased 8 percent— 13 percent in the 1990s alone—reflecting the proliferation of smaller households of singles, unrelated individuals living together, and childless married couples.
Why Downtown Housing is in Demand from Smart Growth Trends, by Edward T. McMahon (Planning Commissioners Journal #33, Winter 1999)
A 1998 survey conducted by the Brookings Institution and the Fannie Mae Foundation found that one of the fastest growing segments of the nation's housing market is downtown housing and it is occurring in large cities and smaller cities and towns as well. He attributes this growing demand for downtown housing to access, amenities and pedestrian friendly environments.
Access. Downtown's usually have the largest concentration of jobs in a metropolitan region, and downtown housing makes walking to work an attractive option. Even when downtown residents have to drive, reverse commuting is an attractive option.
Amenities. Virtually every downtown has amenities not typically found in suburban neighborhoods -- museums, waterfront parks, colleges, theatres, unique views, and interesting architecture.
Pedestrian Friendly Environment. Most downtowns are walkable. They evolved during a period when development was compact, high density, and pedestrian friendly. I will speak more to this point shortly.
This movement to live downtown again is economically critical. While each downtown employee spends between $2,500 and $3,500 downtown each year, each downtown resident spends anywhere between $7,500 and $14,000 annually in the downtown. We certainly want downtown workers but we clearly want downtown residents.
So there was a movement back to the city before the meltdown, and it should continue once the economy rebounds for the following reasons.
2) Sprawl fatigue and a better understanding of density
It is said that cities are an invention to maximize exchange (goods, culture, friendship, knowledge) and minimize travel. Over time, and in particular since the end of WWII, we have systematically worked to alter that. We have unwittingly worked to maximize travel in order to exchange goods.
Compared to 1969, Americans today drive:
• 88% farther to shop
• 137% farther for family/personal errands
• US Census Bureau, American Community Survey, nationally Americans spend more than 100 hours commuting to work each year. NC averages 23 minutes to work each day.
• The average American driver spends 443 hours per year, the equivalent of 55 eight-hour workdays, behind the wheel.
But that may be changing. Even before the recent high gas summer, studies showed that driving patterns had peaked. Driving, as measured by national VMT, began to plateau as far back as 2004 and dropped in 2007 for the first time since 1980. We may have reached the tipping point where people are saying, enough! Even as we enjoy our suburban lifestyle, we are beginning to question its sustainability and even its value.
The developer Vince Graham summed it up well: "If what you sell is privacy and exclusivity, then every new house is a degradation of the amenity. However, if what you sell is community, then every new house is an enhancement of the asset." Sprawl focuses on privacy and exclusivity but it is hard to achieve either; Smart Growth or downtown development focuses on community.
ULI Emerging Trends in Real Estate 2009 – Development strategies – “Reorient to Mixed Use and Infill. Energy prices and road congestion accelerate the move back into metropolitan-area interiors as more people crave greater convenience in their lives…not only because of mounting suburban congestion, but also because the cost equation is changing in favor of less car-dependent lifestyles…many empty nester baby boomers and their young adult progeny favor more urban lifestyles and move back in from the suburbs.”
And the economic argument for local government - “Local officials now realize that paying for basic infrastructure – roadways and schools, libraries, police, and sewer services – spread over large and sprawling distances is inefficient and expensive.” ULI, “High-Density Development: Myth and Fact” 2005
3) A growing desire for transit and mobility options
This is related to both the recognition of the cost of personal vehicles and the desire to have more choice in transportation. Not everyone knows that car ownership is about 17% of the Average Household Annual Expenditure or that that comes to about $7400 per year, per car. Even not knowing the numbers, people are recognizing that owning and operating cars is costly. So they are looking for options.
Public transportation in this country has been marginalized for years and it is only beginning to arise from its second-class status, but as more people experience that as an option, they are looking at their own central cities and wondering if perhaps more could be done to offer choices other than the personal car. Even when prices fell back under $2.00 a gallon, transit ridership, which had risen dramatically, stayed up. Many people learned that transit can work for them (at least where transit exists).
ULI Emerging Trends in Real Estate 2009 – Development strategies – Plan More Transit-Oriented Development – “Metropolitan areas nationwide realize they need to build or expand mass transportation systems in order to overcome road congestion, which strangles economic growth and increases carbon footprints.” A partner to this factor is the next one.
4) Desire for walkability
This is after all the original transportation mode and one that more people are rediscovering.
The National Association of Realtors and Smart Growth America released a nationwide poll in fall 2004 on the kinds of communities people want to live in. The survey found that most Americans (55%) seek smart growth communities that have shorter commute times, sidewalks and places to walk by. Among those likely to buy a home in the next three years, 61% say that they would choose to live in this kind of community.
Walking is one of the most popular pastimes, particularly where walking can be done safely and in an interesting setting. But this is more than casual walking I am talking about; it’s about the practical reality that we have unconsciously (or in many cases, consciously) created places that are not connected by pedestrian access. And people are seeing the folly of that poor design and seeking places that are connected. And are walkable.
Our best transportation and urban planners are now building walkability into their plans, and downtowns are inherently walkable. But we cannot assume that or take it for granted. Pedestrian environments to be
fully successful should accommodate different types of walking, including rambling, utilitarian walking, strolling or lingering, promenading, and special events walking. This is not just about having a sidewalk; it’s about understanding how to maximize people’s interest in walking and making it enjoyable.
So as we anticipate emerging from this economic time, one thing we should be doing now is a walkability assessment of our inner cities to see how we can capitalize on this growing interest.
5) The continuing demographic trends
Aging did not stop with the economic decline (although some of us seem to be aging faster) and the baby boom is still the biggest factor in demographic trend watching simply by virtue of our size in the market place. When we boomers decide on something, it happens in large numbers. Somewhere along the line more of us are asking, do I want to spend so much time on maintenance (lawn, home, car) or on other pursuits? And as a means to reduce their time on maintenance, people are shedding their homes for condos or apartments, and often they are looking for urban sites that meet their laundry list of needs.
Of course, there are actually two major groups who are looking at downtown living – empty nesters and young singles or couples. Both want the classical urban ingredients:
• Mercantile or retail
• Domicile or housing
• Theatrical or entertainment
Downtown offers all of this, if you have an organized development effort in place and are paying attention to these multiple needs.
There is another subset of people to consider as well, although not really a demographic sector.
6) The rise of the creative economy and creative workers
We all know about Richard Florida’s work on The Rise of the Creative Class. In this book he argues that the most successful cities in the coming decades will be those that attract the brightest and most creative people. These people – designers, software creators, artists, techies, and the like – want to live in places that are diverse, tolerant, open, alive, exciting, unique, and capitalize on their special qualities or sense of place. They are not following jobs; they are creating them and doing so in urban areas and downtowns.
In NC wages alone from creative enterprises (arts, entertainment and new media, advertising and design) infused more than $3.9 billion into our economy in 2006 employing nearly 159,000 people. And Wilmington has a pretty fair share of these people now.
Moving forward, the cities that understand creative industries and the creative class and maintain their unique setting will be able to attract this important economic driver. And as we emerge from this recession it will be led by entrepreneurs and other creative people who even now are looking at this time as an opportunity.
7) Growing desire for green and sustainable development
The ULI Emerging Trends in Real Estate 2009 says Best Bets in 2009 for Development are to “Retrench, Reorient to Mixed Use and Infill, Plan More Transit-Oriented Development, and Go Green.”
But can downtown be green and is it sustainable? In truth, 75% of all greenhouse gas emissions are generated in the world’s urban areas (buildings, cars, heating/cooling systems, etc.). And yet, on a per capita basis, urban areas produce the least greenhouse gases. And as we look for ways to make our buildings more energy efficient, add green roofs, provide alternative transportation, better manage Stormwater and better utilize existing buildings, cities will only get greener. And that is a good thing.
There is one more factor that needs to be mentioned as I close. None of this will matter unless we have people like you who are willing to continue to be the leaders of and for downtown Wilmington. For 24 years I worked with NC’s communities on downtown development and revitalization. In all that time, I came to understand one thing above all made the difference in a town’s success or pace of progress. No surprise, that was leadership.
The public and private and non-profit sectors must be working together with a common vision, and with committed leadership, forward-looking leadership. That, coupled with professional staff, will set you apart, put you in the game, and prepare you to succeed in the new economy. Whether these other factors evolve or new ones emerge, without leadership, it may not matter, because we will be leaving our future to chance. And none of us can really afford to do that.
These are interesting times. Make the most of them and be ready to go once the game resumes.