Empty Downtowns: A Look at Dallas and Houston, Texas

Three years after the start of the coronavirus pandemic, the situation of North American downtowns remains fundamentally changed. While the lives of most people have returned to normal, the legacies of the lockdown era continue to affect formerly bustling city centers to a point that could cause a downwards spiral. Data collected by the University of Toronto School of Cities shows that as of the fall of 2022, the downtowns of many major population centers in the U.S. and Canada were recording much less activity than before the pandemic.

Dallas and Houston, two major cities in Texas, have been affected by the lull in downtown activity. The decreased number of workers in downtown offices has caused vacant office blocks, decreasing ridership on public transport, and less money spent on lunchtime or after-work activities. All these changes have the power to majorly decrease a city’s tax income, according to Arpit Gupta of the NYU Stern School of Business. This in turn can make downtowns appear even more unattractive as city services might have to be cut, empty transit could be seen as more dangerous, and ultimately, the number of downtown amenities like shops and restaurants could decrease, prompting even more workers to wave goodbye to a certain city.

However, there are opportunities for real estate investors in multifamily properties in downtown areas. Hybrid work models have the power to keep workers tied to downtowns, but companies are increasingly looking for spaces with high-quality amenities and recent upgrades. This creates an increasing number of commercial buildings that cannot compete. Real estate investors can take advantage of this situation by purchasing and upgrading older properties to meet the demands of modern businesses.

Another way to draw people into downtowns is to focus on livability factors and creating experiences that people crave. This approach has worked in European cities and can be replicated in Texas cities like Austin and Dallas. By investing in livable spaces and experiences, real estate investors can attract tenants and visitors to downtown areas, increasing their value and vibrancy.

Despite the challenges faced by many major North American cities, some have surpassed their pre-pandemic activity levels. In Texas, El Paso is one of four downtowns that have surpassed their 2019 activity levels, offering opportunities for real estate investors to capitalize on their growing value.