• A shift to hybrid working, fluctuating visitor numbers, aging real estate and competition from emerging submarkets continue to weigh on the short-term outlook for many Central Business Districts (CBDs)
• Despite short-term challenges, CBDs are in a strong position to capitalize on their strengths moving away from overreliance on offices to become multi-purpose destinations attracting residents, visitors, businesses, and investment
• Partnerships between the public and the private sector will be critical to the success of CBD transformation, maximizing growth opportunities and creating dynamic city cores that work for all

New hybrid and remote work arrangements, aging real estate across multiple asset classes, competition with emerging and non-traditional submarkets, long commutes and a lack of consistent footfall due to limited residential populations continue to weigh on the short-term outlook for many CBDs.

In the new world of work where employees continue to reassess their work-life balance, priorities have shifted and quality of life is now the number one consideration. Office workers are looking to cut their commute times with long and expensive trips to Central Business Districts now much less appealing.

Although a return to pre-pandemic levels of transit usage and footfall will eventually take place over the longer term given population and employment growth, this will take significantly longer than in previous cycles.

New, vibrant mixed-use neighborhoods are emerging across the world’s largest cities attracting a growing share of businesses, residents and investment. These districts home to rapidly expanding creative, tech and R&D clusters are diverting investor focus from more established submarkets and spurring new development of office, multifamily, boutique hotel and retail properties.

Emerging districts such as Fulton Market in Chicago, Shoreditch and King’s Cross in London, MediaSpree in Berlin and Roppongi in Tokyo are putting pressure on traditional CBDs to reinvent themselves. Some Central Business Districts are already beginning to embrace change by emulating the more mixed-use, human-scale and amenity-rich environment found in these rapidly growing submarkets.

Office re-entry only represents part of the footfall equation for urban cores. After the office sector, hospitality and retail are the most exposed to changes in demand, with revenues in these sectors highly volatile and dependent on both routine and spontaneous trips. Even with pent-up travel demand being realized, the 2023 predictions for leisure travel are estimated to remain below pre-pandemic levels.