Reimagining Cities-Disrupting the Urban Doom Loop

City tier analysis also reveals a slightly higher dependence of Downtown WalkUPs on owner-occupied office within secondary cities—13% for the moderate secondary cities, 9.2% for the large secondary cities and only 4.6% for gateway cities. Of course, Washington, DC stands out with its exposure to GSA, at 9.4% of citywide inventory and 23.2% of Downtown inventory. The next highest citywide concentration of GSA product was in Boston at just 1.3% of stock. Among Downtown WalkUPs, however, Miami ranked second most exposed to GSA at 5.4% of stock. While Downtown WalkUPs have been the largest type of WalkUP in our cities for over a century, the boom in the other three WalkUP types (Downtown Adjacent, Urban Commercial and Urban University) in the early 21st century is the new model for real estate portfolios. Often viewed as the younger siblings compared to Downtown WalkUps, these other WalkUP types have lessons to teach their older brothers and sisters. For example, they have exhibited a lower portfolio share devoted to office and higher shares in multifamily rental and for sale housing.

Finally, we note that among all of our WalkUPs combined—from 2019 to 2023— the share of office product has decreased from 40.9% to 40.8%, only 10 basis points (bps) over this period. This has been driven by other product types growing faster than office, not by a reduction in overall office stock. For example, Cushman & Wakefield data reveal that for CBDs in our 15 cities, 52.1 msf of new construction deliveries were recorded since 2020. Moving forward, a combination of decreased future office construction, office demolitions, deliveries of other product types and even office to-residential conversions is going to put downward pressure on Work’s share in these WalkUPs. Cities are implicitly diversifying, and the question will be how quickly they can accomplish something that will be more optimal. Obviously, the shift from office to other uses, especially residential, is too slow thus far but there is little doubt that the market, as shown in this research, is demanding a balanced product portfolio. This can be seen in the charts on the next page, which highlight both the inventory and valuation rebalancing that is underway. These data points reveal that Live is gaining value while Work is losing

INVENTORY COMPOSITION BY WALKUP AND CITY TYPE

GATEWAY MARKETS

ALL SECONDARIES

100%

100%

75%

75%

50%

50%

64.6%

25%

25%

44.5% 34.2%

36.3% 34.3%

19.7% 16.4% 7.4% 12.1%

11.3% 6.7% 17.8%

0%

0%

Commercial Urban

Commercial Urban

Urban

Total City

Urban

Downtown Adjacent

University

Total City

Downtown Adjacent

University

Downtown

Rest of City

Downtown

Rest of City

Office

Retail

Multifamily

Industrial

Hotel

GSA

Sports & Entertainment

Education

Owner Occupied

For-Sale

Source: Places Platform, LLC and Cushman & Wakefield Research estimates based on data from CoStar, CoreLogic, Cushman & Wakefield, U.S. General Services Administration, U.S. Department of Education IPEDS, U.S. Census Bureau, Property Shark

Reimagining Cities: Disrupting the Urban Doom Loop 35