Reimagining Cities-Disrupting the Urban Doom Loop

Over-representation of Downtown office remains of particular interest, but we do not confine our framework to any subtype. Our first iteration explores each diversity quartile—with the first quartile being the WalkUPs with the lowest diversity and the fourth quartile having the highest diversity— against its exposure to Work. That is, within each quartile, we find the median Work share and then divide that quartile into two buckets—WalkUPs above that median exposure and WalkUPs below it. (We define the median of each independent quartile for this comparison.) Here, we see that valuation PPSF growth was consistently more negative in above-median Work share WalkUPs. In other words, within any quartile of the PP/CW Product Diversity Index, WalkUPs with more Work exposure significantly underperformed as compared to WalKUPs with less. While every quartile saw decreases in overall PPSF valuation, those with above-median office exposure greatly underperformed. This suggests that even controlling for PP/ CW Product Diversity Index, Work exposure mattered. The bottom line here is that no matter how diverse a WalkUP is, if it has an over-exposure to Work, it fares worse. In our second iteration, we considered whether the converse finding is true for Live and found that, for the most part, it is. Our prior findings around Work exposure does not suggest that residential product shares should be pushed to their extremes. When we look at multifamily specific PPSF, we found that WalkUPs with higher Live exposure—no matter how diverse—fared worse than WalkUPs with lower Live exposure. This is consistent with the concept of market saturation and diminishing marginal returns. This reveals to us a possibility that there can be too much of a good thing, and an ideal portfolio mix—a goldilocks scenario—cannot be overly residential either. One example is that, in the least diverse WalkUPs (first quartile), below median Work exposure was associated with worse outcomes for multifamily PPSF growth while above median exposure to Live led to worse outcomes as well. In these WalkUPs,

OFFICE EXPOSURE MATTERS NO MATTER HOW DIVERSE % Change total real estate PPSF (2019-2023) by PP/CW Product Diversity Index Quartile

Least diverse 25% of WalkUPs

Most diverse 25% of WalkUPs

First Second Third Fourth Total

0%

-5%

-10%

-15%

-20%

-25%

-30%

-35%

Above Median Work Exposure

Below Median

Source: Places Platform, LLC; Cushman & Wakefield Research Note: The C&W/PP Diversity index was used to determine the ‘Diversity Quartile’. Then within each quartile, a median was calculated for that quartile only and each WalkUP was designated as above or below the exposure to WORK commercial real estate.

Work was only 13% of the stock, signaling that there may be penalties for too little office. Yes, you can have too little office. For WalkUPs in the bottom three quartiles of the PP/CW Product Diversity Index, below median exposure to Live correlated with better total PPSF outcomes. A plausible explanation includes a saturation effect where, in less diverse areas, a market may already be saturated with various product types, including residential. Thus, adding more residential units does not yield the same positive impact on PPSF. A reason for this hypothesis is that in the less diverse quartiles, we observed much greater concentration of Live—averaging 70% in the least diverse WalkUPs with above median exposure. In the most diverse quartile of

48 Cushman & Wakefield