Is this the end of the central business district?

Although the world’s megacities are being tested by ever increasing populations and the current pandemic crisis, competition among them to attract talent, tourists, technology and capital is ever present. Maintaining attractiveness and cultivating the best possible environments are of paramount importance to foster their growth.

Central to this contest is the war for talent, where there is fierce competition to attract high-quality skills. This strategic factor takes precedence over all other considerations, including the proximity to clients and business opportunities, and the amenities that provide a “work, live and play” environment. The need for high-quality skills is much more than the requirement to secure bespoke and innovative offices.

Among experts interviewed by EY, 84% consider access to highly skilled professionals a fundamental factor of the attractiveness of GBDs, compared with 70% in 2017. According to the EY report, Building the Talent of the Future (pdf), more than a third of the key professional skills sought in 2020 were not considered essential three years before. These skills include customer experience, entrepreneurial skills, risk management and data analytics.

The ease of business interactions in the world’s largest business cities is a decisive factor for their attractiveness. Stakeholders in large business districts emphasize the growing importance of being closest to markets, customers and partners (57% in 2020, an increase of 11 points from 2017). In addition, 40% of respondents considered the urban environment and the overall influence of GBDs to attract talent and clients as very important.

Finally, real estate is considered very important by 14% of respondents which is consistent when compared with the results of the 2017 survey. Companies do not overlook the trends of the real estate market but do consider the built environment as a prerequisite. They examine the real estate market closely after having assessed the overall business climate, influence and urban environment of the business district.

Global awareness of environmental issues has grown drastically. According to ULI’s Emerging Trends in Real Estate®: Europe 2020 report, climate change is expected to have the biggest impact on real estate over the next 30 years. In addition, almost half of the survey respondents say climate change has become a greater risk within their portfolio over the past year and 73% expect it to become even greater over the next five years.

In GBDs, 86% of the EY-ULI survey respondents consider having a diversified and sustainable transport network as their top priority in terms of environmental performance. This preference is followed by efficient resource management (water, energy) at 66% and adding more vegetation to the district (46%).

The COVID-19 pandemic will bring more attention to companies’ societal roles and responsibilities. Moreover, companies’ increasing efforts to address environmental issues may make societies expect more of such measures in the coming days.

For the generation coming up behind Generation Z, the post-pandemic new normal will just be their “normal.” The impact of this generational shift will likely be quite profound. This generation represents the first digital natives and the first global cohort born into the climate emergency period, making them more focused on climate issues than prior generations.

For the time being, companies seem to absorb these higher rent costs, thanks to their parallel cost strategies to offset them. This means that by modifying their real estate use around collaborative, shared and open spaces, businesses have managed to reduce their total office space requirements.

GBD stakeholders, both private and public, will develop new resilience strategies in a collaborative way, and at a larger geographical and technological scale. In their view, it is a precondition for effectively responding to the many challenges of the coming decade, including political tensions, climatic risks or health crises, such as COVID-19.

The current situation highlights the urgent need to work together to protect public spaces and the economic livelihood of small businesses, such as restaurants and local shops. These risks call for looking beyond the business district and even the city’s borders for solutions. It is a question of thinking about the governance of metropolitan assets on a much larger scale.

As described by the survey, the nature of tomorrow’s risks is varied. It includes health, climatic, economic, technological and social risks. Many recent examples have shown that the entities in large business districts need to better anticipate them and work to ensure the resilience of the business districts. Along with governments, companies may find themselves operating in a world where the safety net expectations of workers and societies have permanently shifted, along with their role in helping provide the safety net.

The relationship between business and government to respond to the needs of citizens in other social areas is also changing. Promoting housing affordability, a report published by ULI in 2020, highlights the importance of the public sector’s leadership to set the vision and framework and the need for greater transparency from the private sector to build trust and enhance collaboration. This will go a long way in addressing societal needs more comprehensively.

The concerns of safety and economic resilience are immediate. And the underlying global megatrends will reshape the attractiveness of GBDs in the future.

According to the professionals interviewed, business districts are increasingly looking to enhance the “multi-use experience” of the areas, not only for employees, but also for inhabitants, tourists and consumers. This intention is obvious in the EY-ULI’s 2017 report and has considerably developed since then. According to the experts interviewed in the GBDs, the COVID-19 crisis will further accelerate this trend to enhance experience once the business districts are back in a “new normal” phase.

Mobility is seen as a key attractiveness factor for future GBDs: 64% of respondents call for more efficient transport networks, mixed-use spaces (40%), as well as services for workers (29%). Business districts are no longer judged solely on the basis of their economic offering, but more and more as major hubs of social life that focus on community building and placemaking. Health and well-being (28%), and the development of housing (27%) provide additional potential for mixed-use projects.