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Weekend Interview: Tracy Hadden Loh On The Crisis Of Cities And How CRE Can Regain Its Dynamism

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

A longtime researcher and academic focused on urbanism and real estate, Tracy Hadden Loh has been at the forefront of rethinking and reimagining how cities work during and after the pandemic era. A fellow at The Brookings Institution, Loh has authored a series of papers — on topics like breaking the urban doom looppushing past misperceptions of crime and the myths of office-to-residential conversions — that speak to the urban uncertainty of the moment, as well as the desire and possibility this period of unease and even fear may hold for American downtowns. 

Downtowns may have given visitors “​​​the creepy feeling that you had missed the Rapture and been left behind,” as Loh wrote for the Atlantic, but the only way to change that for good is to push cities and downtowns to evolve into something different. 

Born and raised in Washington, D.C., Loh has pursued a career in research about cities and urbanism all her adult life, along with stints as a city council member and a member of the Washington Metropolitan Area Transit Authority Board of Directors. But it was during collaborations with urbanist Chris Leinberger, a celebrated academic and partner at Arcadia Land Co., when she sharpened her focus and realized that “commercial real estate was the intersection where everything that I was interested in came together.”

In this interview, Loh speaks about the security and safety issues plaguing cities, how the pandemic underscored just how badly commercial real estate has lost its mojo, and the oversized role commercial real estate can play in finding solutions to these vexing issues. 

This interview has been lightly edited for length and clarity.

Brookings Institution fellow Tracey Hadden Loh has been enmeshed in research about the state of our downtowns.

Bisnow: You recently quoted someone on Twitter who said everything downtown is back in terms of visitation and activity, except for offices and public transit. And I found that to be a stark summation of where we are. What lessons should we take from that, and how should commercial real estate react to that fact? 

Loh: Big picture, change is the only constant. One of the things, aside from the massive loss of life, that was horrible about the Covid period and the Covid disruption was the pace of the change. Covid washed over the globe overnight. And even in the ensuing three years since, as some of the more temporary disruptions have resolved, there are all of these trends that Covid accelerated. 

Everyone has had to adjust to a new normal that includes a new pace of change. Some sectors, some institutions, some people have done a better job of adjusting than others. It's really exposed the fragility of commercial real estate and transit as sectors. Or the rigidity. For whatever reason, it’s hard to adjust. In the case of transit, you can’t pick up rail tracks. In the case of commercial real estate, as I have argued, there’s a really big-picture need to change the way the sector does business. There were a lot of warning signs before the pandemic. There are a lot of structures in place, barriers to allowing people to adapt and do business differently, barriers to innovation. There’s been this lack of dynamism in commercial real estate as a sector we’ve seen during the Covid time period that I think people did not see coming.

Bisnow: Right, and part of that is that downtowns are in crisis. That’s the big headline. But downtown has been in crisis before: public safety in New York in the ‘70s and ‘80s, a post-war flight to the suburbs.

Loh: There’s even more crazy examples of that. Downtown Chicago burned down in a fire. The entire thing. San Francisco was destroyed by an earthquake. That actually happened.

Bisnow: OK, so was it as simple as the sector was more dynamic in the past?

Loh: I straight up think the sector was more dynamic. I think this calcification has set in over time. Both a symptom and a cause of it is the amount of consolidation that's happened in the sector, the institutionalization and the financialization of commercial real estate. Another word for lack of dynamism would be "stability." It’s not a bad word, but it’s not a helpful word at a time when the characteristics that are needed are flexibility and adaptation.

Bisnow: So there’s a lot of talk right now about office-to-residential conversions. And you argue that we really should just be building stuff, period. Is our imagination constrained? Is it that we have so much trouble and so many problems building, we can only think about changing what we already have? 

Loh: Yeah, it is. It is a real limitation of imagination. My advice, not just for the real estate sector but to our society more broadly, is before converting offices into housing, have you tried just building housing? Right? Crawl, walk, then run. 

Bisnow: I think if you talk to some people in the commercial real estate industry, they would say, "Well, there's been so much more regulation."

Loh: OK, so I'm defining the industry maybe more broadly than an industry insider. I'm saying a lot of the lack of dynamism that the sector suffers from comes from regulation from the public sector or comes from limitations imposed by lenders that come from the need to access capital. So I would define the commercial real estate industry as inclusive of financiers and regulators and absolutely point the finger at them for a lot of the limitations that limit innovation and dynamism. 

Real estate tends to attract personalities, like people who want to solve problems and do deals. Within the heart of the commercial real estate sector, like amongst practitioners, there can be a transactional mindset that can limit possibilities, but that’s a lesser issue than regulations or the constraints of financing. 

Bisnow: We've had a couple of rounds of downtown revitalization proposals — New York City, D.C., Chicago — incentives to spur on building or conversions. And you've spoken a lot about the risk of subsidizing the wrong behavior. So what are the kinds of changes in incentives and maybe regulatory shifts that need to be introduced that could break up this sort of sclerotic industry and make it more dynamic?

Loh: A lot of the issues with regulation are the costs and uncertainties that some kinds of regulation introduce into the development process. And there's two things you can do about high costs and high uncertainty in the development process: You, and I'm talking to you, I mean the public sector, could provide extraordinary subsidies to address these high costs, or they could reduce costs and uncertainty by streamlining regulations and increasing predictability.


Bisnow: Are there good examples you've seen of suggestions, policy changes, proposals to help revitalize downtown?

Loh: All these ideas existed before the pandemic, right? I don't think that the pandemic has produced a period of tremendous innovation around downtown revitalization. I would actually like that to happen. What I would like to see happen, what I think the innovation that, like everything that this society went through in 2020, calls for is to not just repeat the playbooks of stuff that we know that works from the downtown revitalization that have happened before. What I would like to see instead is to remember that the other disruption that happened in 2020, besides Covid, was how extremely difficult it is to watch the video of George Floyd being murdered. 

There's a need for us to address the scale and the scope of inequality in our society and make downtowns into places that more people are invested in, feel connected to and can find opportunity in. I think the innovation that's needed is another generation of downtown policies that will launch shared prosperity in cities. 

I'm starting to see the early signs of that. My favorite things that I've seen happening in cities are congestion pricing in New York, the INVEST South/West Initiative in Chicago and the Equitable Development Initiative in Seattle. What all those have in common is they make more explicit the connection between the fruits of prosperity and growth downtown and investment in neighborhoods. That connection needs to become more explicit. Because the kind of trickle-down-economics promises that downtown's going to generate all this tax revenue that we're going to spend on services, even if that's true, there's a perception that it's not true. 

One thing that has become clear to me and the research that I'm doing is that leaders have to address both perceptions and reality. They don't have to treat perceptions as reality, right? They need to treat reality as reality and get after that. But arguing or downplaying perceptions does not work. Those must also be addressed in efficient and effective ways.

Bisnow: That seems like a big directional arrow toward your research on crime and misperceptions, which I think is really vital here. There's this perception that crime in the neighborhoods is flooding the downtown, which you’ve found to be a big overstatement. And that has distorted our views on safety. How do your leaders, politicians, business improvement districts and CRE-associated groups help with this perception of public safety?

Loh:  Business improvement districts, which are based on a commercial real estate tax base, have been real innovators of pragmatic solutions. Basically, you address the perceptions, get after the things that help people feel safe by making sure that when people need help, there’s someone who's there to help them, like downtown ambassadors. Making sure that when someone's in crisis that there's a crisis response that's appropriate. Not just dumping everything on the police. Picking up the trash, just doing the basics. Making sure that spaces like parking lots and other vacant lots have really good lighting. All of these things provide reassurance. And some of these things, there's also research evidence that shows that they actually do reduce crime.

Doing these kinds of tactical things that work, in order to provide reassurance and reduce crime, that can free up resources to invest in other targeted, place-based solutions that get at this intersection of economic insecurity and gun violence and crime and target that to the geographies where it’s concentrated.

Bisnow: Do big investors have a duty to stick with the cities they're invested in and support their neighborhoods? Like Ken Griffin, a big Chicago investor, left the city talking about how it's crime-ridden and not safe. Was he talking about reality? Was he talking about perception? Is there a responsibility for people in commercial real estate to sit by their downtowns, to be more reluctant to close retail stores, to invest more and be more public about the things they're doing to help BIDS and other groups?

Loh: There are a lot of voices out there that have argued there’s this kind of civic responsibility that exists. But personally, I think that people doing business have a fiduciary duty to have a business case for what they do. And I would say there's a strong business case for shared prosperity. 

Let’s think about some of the other stuff that's going on right now. There's a huge labor shortage. And a lot of the things that I'm talking about are ways to expand the workforce. If we can get more people engaged in work, that addresses the labor shortage and reduces crime. That's a win-win. I'm not talking about guilting anyone into doing anything. I'm talking about trying to help people be pragmatic about what works.

Bisnow: In Los Angeles, voters just passed a law that would raise money for homelessness services by taxing large real estate transactions, which include some commercial transactions. Should CRE be willing to foot more of the burden?  

Loh: I think this is a really fair question to ask. When you look at a problem like homelessness, the causes of homelessness are regional in nature because it's driven in large part by the cost of housing. But the pain is experienced primarily by the individuals experiencing homelessness, and then the hyperlocal places where they congregate to get their needs met. There’s a disconnect there. If homelessness is caused by a regional problem, then there should be regional solutions.

To tie this back to this earlier conversation, in this context, before you try ending homelessness, have you tried preventing homelessness? I would say two things to the business community about this: One, be advocates for regional solutions, because the reason you're in a particular area is to access a regional talent pool, a regional labor market, and not just the immediate local amenities around your office. So I think the business community can play a really, really unique and impactful role in being the voice for regional solutions. They're the ones who are thinking at the market level. Be an advocate. 

But then two, I think it's completely reasonable when being asked to contribute revenue to ask in exchange for really effective solutions. Not just throwing money at the problem of homelessness but also addressing the root cause. So to say, "Hey, city of Los Angeles, you want all your additional revenue to address homelessness? Are you also making it easier to build housing? Yeah, make it easier for me to help solve the problem, to help prevent the problem." Nothing happens without the other. Basic accountability.

Bisnow: Part of your prognosis and idea for solutions is, again, a much more varied downtown. One that draws people, where the focus is on equity. How do you create the sort of varied public spaces that support this? What do these spaces look like? 

Loh: I'm still working on that piece, but I can tell you the idea that we're exploring. The first is, you have to have the spaces, right? We need to reconnect to our waterfront. We just need to make sure that we have public spaces. We need to create the kind of governance frameworks that can both create and maintain those spaces. I think we lie to ourselves about what the cost of maintaining the commons is a lot of the time. And then, once the infrastructure exists, once the governance framework is in place, be inclusive about how that framework is activated.

Bisnow: Can you give us a bold prediction for the rest of the year?

Loh: There's going to be more return to the office. I know everyone thinks the office is over and that everyone's going to telework forever, but I think that office utilization has not yet plateaued. And I think that in a lot of the stickiest markets, we will see more movement on those numbers.

Bisnow: What’s your weekend routine, your favorite weekend activity? 

Loh: Doing nothing. 

Bisnow: That would be my answer to that.

Loh: I would say an activity that I've reconnected with in these most recent months is that my church, the church that I grew up in, reopened and started having services in person again. And so the highlight of our weekend has become going to church and hearing familiar prayers. My child was born in 2019, so this is her first year going to church in her first cycle of Sunday school.

Oh, and if I can add one more fun weekend thing, drag brunch. That has become my other big joy.