Urban retail corridors are on the rebound nationally after the pandemic drove away office workers, tourists and tenants in 2020 and 2021.
The number of U.S. workers returning to the office is not back to pre-pandemic levels, but it is slowly getting there, according to the report. Of the 10 major markets tracked by research firm Kastle Systems, average occupancy had climbed to 43.4% the week of April 27 from only 27.9% the week of Jan. 12.
New York City’s office rebound is still lagging the 10-city average but has seen the biggest increase from the start of the year. In January, office occupancy was at 18.1% but has increased to almost 40% by April 27 and is expected to keep climbing. In response, leasing activity is picking up with new signed retail leases in Midtown where many office towers are concentrated, according to JLL.
And while office occupancy levels may never return to pre-pandemic levels, they will get close. “In the next 18-20 months office levels will plateau at 70-80%,” Naveen Jaggi, president of retail advisory services at JLL, said at ICSC Las Vegas 2022. “It will vary by the market.”
More Consumers Head Downtown to Dine
As more people get comfortable with dining out, they’re heading to the urban corridors where many of the most popular sit-down restaurants are located, according to JLL.
About 82% of Americans were comfortable dining out as of the end of May, a 22-point increase from the start of the year. And the average number of seated diners at U.S. restaurants in April 2022 was only down by 1.4% compared to 2019, according to JLL and reservations service Open Table.
In Los Angeles, in the second quarter of 2021, the number of people going out to eat was 50.8% below 2019 levels. This year the number of people dining out is almost back to pre-pandemic levels, the biggest jump of any market tracked by JLL.
New restaurants and retailers are opening in urban areas to accommodate rising traffic, and more will follow, according to Jaggi. “Luxury and fast-fashion will lead the charge.”
More Tourists Means More Urban Shopping
Meanwhile, people are traveling again, and with international restrictions ending and warm summer holiday months approaching, JLL expects popular urban destinations to see an influx of tourists.
“Watch tourism in New York,” Jaggi said. “When you see 30-40 million people visiting annually, we will have reached full recovery.”
Times Square in New York City and Union Square in San Francisco are corridors that have been especially hurt by the pandemic. But both markets are on the mend, according to JLL analysis of Placer.ai data. Foot traffic from domestic tourists is up 14% in New York City from 2019, and while San Francisco is still below 2019 levels, domestic tourist foot traffic to Union Square doubled in the past year.
The trend is national, too. On Michigan Avenue in Chicago, domestic tourist foot traffic climbed 54.9% between January and April of 2022, compared to the same period in 2021. And on Los Angeles’ Third Street Promenade, domestic tourist foot traffic increased by 53.8% during the same period.