Today's Wall Street Journal has a great article "Downtown, Where the Price is Right." The article cites a new study comparing office rents in major U.S. cities compared to surrounding suburbs. The cities where downtown rents fetch the highest premium over their 'burbs:
1. Manhattan; 2. Boston; 3. Washington, D.C.; 4. Chicago; 5. Montreal; 6. San Francisco
And the cities where suburbs fetch the highest premium compared to downtown city rents:
1. St. Louis; 2. Oklahoma City; 3. Phoenix; 4. Kansas City, MO; 5. (tied) Detroit, Nashville, Philadelphia
One key difference between the top group and the bottom group is that NY, Boston, DC, Chicago and SF have the nation's highest rates of commuters who takes public transit to work and who walk to work.
In St. Louis, OK City, Phoenix, Kansas City and Nashville rates of public transit use are much lower--Nashville and Oklahoma City's public transit use rates are about 1%, and St. Louis' is the highest at about 10%. Compare to NY, DC, SF and Boston, which have commute-to-work on transit rates of 30-50%. Walk-to-work rates for these cities are about half or less of NY, DC, SF, etc. (The outlier is Philly with a high public transit use rate and walk to work rate, but with downtown renting for 6% less than suburban office space)
My point: cities need to have strong public transit and walkability to be desirable. Said the research director for the study, "These are all areas that evoke prestige and provide superior high-quality public transit, are generally considered safe and all seem to contain inviting, pedestrian-friendly public spaces."
What's especially fascinating is that vacancy rates aren't such a big factor. Chicago may have a 16% office space vacancy rate in its downtown, but it still can fetch 41% more in office space rent per square foot than can its suburbs.
Take note city planners and policymakers: public transit and walkability mean bigger bucks for business, tourism, and more money for tax rolls. We don't need to even get into the air pollution and global climate change caused by all that driving in the transit-poor cities, do we?