Neil Fraser
February 3, 2004
SO here we are getting well into the New Year and I trust it is going to be a great year for you and for the city! Lots of news and some really exciting developments on the radar screen. The Provincial Government Precinct; more upper income residential; Chancellor House; planning for a new inner city transportation system; JHBARTCITY 2004 as part of the Decade of Democracy celebrations; the Main Street Mall development; the completion of the Constitutional Court and much, much more will provide a great deal of material for future Citichats. Never had so much to write about and it's only the end of January! But this week, a look at trends in US cities.
I've just spent the last week in Washington DC. Apart from its other meaning, DC actually means Damn Cold - it was really freezing! The occasion was the 2004 Leadership Forum of the International Downtown Association whose headquarters are in that great city. The Forum is held every second year and brings city private sector leadership around the table to debate a variety of issues as well as to do some crystal ball gazing into future prospects for cities. Over the years, what I have found fascinating about these sessions is that, whilst they concentrate on US trends, many of these ultimately relate to ourselves after a time lag of a year or two, sometimes less. The following came out of the first session of the Forum - 'Critical Issues Shaping the Future of Downtown'.
Rich Bradley, well known to many of us here in Johannesburg and Executive Director of the Downtown DC Business Improvement District, had set the scene for this first session in an article entitled 'Downtown Identity: Change and Competition'. In the article he pointed out that many of the trends experienced in US cities over the past few years have proved to be positive - again it is fascinating to note how many of them apply to us.
The return of residential to downtowns; the growth and reinvestment in arts and culture; the diversification of local economies; the impacts of improvement districts and their evolving roles and the renewed interest of major retailers in centre city areas. These, he suggested, have "become new anchors against the winds of change."
These winds of change, however, are also bringing destabilising forces that challenge recent accomplishments. Two adverse trends that he noted were a perpetual lacklustre commercial office market and the burgeoning growth of 'town centre' shopping centres. The latter certainly doesn't yet appear to be an issue in our lives but the former is worth unpacking.
Henry Chamberlain who directs Boma International (to which Sapoa is affiliated) provided some stats that bore out the issue of the lacklustre US commercial office market. There is a current office vacancy in US cities of one billion square feet and a further 1.7 billion sq ft in suburban locations. This represents a 14.5% vacancy in cities, 16.5% in metropolitan areas and 18% in suburban locations! The cities that are doing best are genuine 24/7 cities which is what we are aiming for but which is still some way off. 'Mould' in older buildings is proving to be a problem whilst new security provisions occasioned by the need to be vigilant against terrorist attacks has added 50 cents per square foot to operating costs.
Commercial space conversions in the US currently are predominantly into medical (here, Kine Centre is being planned as an inner city clinic) residential (here, Corner House, National Bank House, 1 Rissik Street, the more recently announced conversion of the previous Ernst and Young building on Diagonal Street into the upmarket 'The Franklin' penthouses and others); office 'hoteling' facilities - this latter involves turning conventional office space into short term inclusive renting space - you hire an office or suite of offices for a day, a week a month together with reception, secretarial and meeting room facilities and services. We have seen a limited amount of this
But the overriding concern is that any economic recovery in the States is not going to be accompanied by a growth in jobs. The talk is of a 'jobless recovery'. Chamberlain attributed this to a number of causes - corporations are 'wiring up' for more people to work from home; less space per worker is being provided and retirement at 65 is being shifted out to 70/72 (ouch, looks as though I may be about a bit still!). But the really big issue is that many US companies are getting support services overseas rather than create local jobs.
The Urban Land Institute notes that more than two million US 'blue collar' manufacturing jobs were eliminated or moved overseas in the past two years alone and goes on to say "the trend is moving up the worker food chain, as knowledge based tasks are transferred to lower cost overseas sites as well. Analysts, research, accounting and other white collar office jobs are ticketed to countries like India and China which features highly educated and motivated workforces needing a fraction of comparable US wages and benefits.
Satellites, fibre optics, web based systems and computing enhancements combine to make a seamless operating system possible and highly desirable for company bottom lines." By some estimates companies will send upwards of 3 million service jobs overseas by 2010. At 200 sq ft per employee this amounts to 600 million sq ft of office space that will no longer be needed in the US economy! An opportunity for us?
Technology development is having a negative impact on some sectors, two examples given were that radio frequency identification devices make accurate determination of inventories possible resulting in a decline of 10% in warehousing needs over the past year alone whilst direct internet bookings of all forms of travel is resulting in the downsizing of travel agents. There is great concern regarding the time taken to get developments off the ground due to red-tape - the average development period, from idea to breaking ground, is 3 years far too long in a rapid change investment environment.
Don Borut, the Executive Director of the National League of Cities, highlighted some of the critical issues that city officials are now having to focus on - the disparity between rich and poor (the fastest growing communities are concentrations of the urban poor and gated communities!); the relationship between center cities and their inner and outer ring suburbs; education, particularly early childhood development. And racism is now an issue that is appearing more and more on the urban agenda!
Cities are also beginning to review traditional sources of revenue - is property the most effective taxing system? - this against a background of the Federal government trying to reserve many of the revenue growth opportunities for themselves in order to grow their tax base eg. taxing the internet. The big public sector concern is how cities will generate sufficient revenues to provide the services that their citizens expect.
Ann Lang, Executive Director of CEO's for Cities "a national non-partisan alliance of mayors, executives of corporations and business leadership groups, university and foundation presidents and national non-profits" the mission of which is "to equip urban leaders across sectors to strengthen urban economies through an exchange and application of best practice ideas and advocacy" provided some fascinating recent urban research findings:
- Voters believe strong cities are important to the future of the country as well as to the country's economy
- Voters are nearly unanimous in their support for city concerns
- Voters sense that the economies of cities and suburbs are interconnected
- Voters have become more certain in their opinion that cities are centres of progress rather than centres of crime and poverty
- Voters are now more likely to prefer living in a city and less likely to prefer rural areas compared to 1997
- Voters believe that businesses are the most effective at helping improve cities while they see universities and colleges as the most committed - Government is less effective and less committed
And, relevant to ourselves:
- Cities do not need to grow big to grow wealthy and growing big won't necessarily lead to wealth
- There are many paths to success but more important is to get it right
- College education is the biggest driver of economic growth and high school is barely significant anymore
We need to note the trends and inherent threats but, all in all, much of what was said also acts as a confirmation of the objectives of Joburg 2030 and particularly those related to the issues of education and a skilled work force.
Next week it's back to what's happening on the ground in Joburg and what to expect in 2004.
