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America’s Downtown Hotels Are Cheaper Right Now, but How Is the Neighborhood?

Across the United States, downtown business districts are hurting. Many former office workers continue to do a substantial share of their jobs from home, leaving entire blocks without functioning businesses. 

According to commercial real estate analytics firm CoStar, the U.S. is now saddled with an estimated 1 billion square feet of empty office space—a record high. The widespread vacancy is so enormous it now affects the neighborhoods you might choose when you travel.

There’s no shortage of online warriors who want to convince you that the vacancy problem is the fault of the red party or the blue party, but the real problem is about the green: There has been a shift in how Americans work. More people are working outside of dense population centers right now, and those employees have left empty space behind.

During the worst of Covid-19, many city-based businesses were forced to allow workers to go remote and work from home. Some companies closed shop entirely. City after city lost thousands of commuters who used to support businesses such as restaurants, stores, and grab-and-go cafés. 

When the customers went, the local businesses that served all those people failed next. In some places, petty street crime rushed in to fill the vacuum. 

Although increased office vacancy is afflicting areas across the United States, the problem seems to be the worst, or at least the most noticeable, in cities that once boomed with the foot traffic that tech companies brought.

The vacancy rate in San Francisco is now reported to be between 30% and 35%. Downtown Dallas is facing a similar vacancy rate of 31%. In Austin, Texas, roughly a quarter of office space reportedly sits empty. Even downtown San Jose, California, a cozy hub for elite tech workers and home to many important headquarters in the digital space, reports more than 6 dozen empty storefronts. 

All this is not to warn you against visiting these destinations. The reasons you’d want to explore each of those places as a tourist remain mostly intact. 

But the change should give you more to think about with regard to the location of your hotel. You can no longer assume that any downtown hotel will be surrounded by the amenities you need. If you book a hotel in a newly empty district, you might find yourself having to travel farther than you expected to eat or shop.

When you search for hotels in major cities right now, you’re bound to find plenty of good deals as the hospitality industry desperately tries to replace the trade it lost when meetings went digital and convention business evaporated.

In San Francisco before the pandemic hit, trade shows, high-roller meetings, and tourism kept Bay Area hotels jammed. Back then, there were weekends when you’d be lucky to find a decent place to stay under $350 per night, and when you walked out the front door of your hotel, it was a given that you could choose from dozens of good places to eat and shop.

Now, even the nicest hotels in San Francisco will give you a bed for well under $200, and they might sit amid blocks of empty storefronts, as captured by this sobering video shot in early August 2023.

Some cities, such as New York, have been able to dodge the decay somewhat because they benefit from a denser population and a healthier mix of permanent residents and businesses. In cities where, by and large, people live and work in the same place, any hotel you choose is bound to be in a busy area that will serve your needs.

But in San Francisco’s business district, in many urban blocks of Texas, and in other places built with car commutes in mind, districts with overly heavy commercial zoning have become the real estate equivalent of zombies.

So if you spot a great deal on a hotel in a city, there are new questions you must now ask about the residential-to-commercial density in the neighborhood. Will you find any restaurants nearby? Will any shops be open? Will you feel safe enough to walk through a neighborhood that lacks those things?

The U.S. has seen this kind of shift before. So many of the bygone aspects of urban life that Americans hold as folklore, from Automats to nonstop movie screenings to thriving streetcar networks, were only made economically possible because downtown areas were packed with people. When Americans shifted to the suburbs, cities lost a huge degree of natural dynamism. It’s not politics—it’s economics. When lifestyles change, places change. 

The road back will be long. Developers have not been especially inclined to replace offices with decent-quality apartments. It’s expensive to convert an empty office building into a workable residential building, costing as much as $500 per square foot, according to this deeply informative video on the topic from the Wall Street Journal.

California is trying to lower the expense with a new law giving special deals to developers who make the switch. Without such government incentives, the sticker shock of turning office space into homes usually outweighs the benefits, from a developer’s point of view.  

Yet without people, city neighborhoods cannot thrive, and if you stay overnight in one of them, you’ll need to plan (and budget) to travel to other neighborhoods for your food and entertainment.

Developers and businesses alike are trying to shore up their real estate investments by forcing employees to return to the office. But it’s likely that tactic can only go so far.

American cities underwent an exodus to the suburbs once before, in the 1940s and ’50s, and many urban centers eventually bounced back in a new form. Our generation’s recovery will take years of office rental growth, considerable focused investment, and inducements like California’s in order for newly desolate downtowns to repopulate with viable businesses.

In the meantime, vacationers must balance a new set of considerations when offered a deal on a downtown hotel. Maybe a low price is your only concern. If so, great—these neighborhoods could use your business.

But if you’re not willing to take a risk on a hotel situated in a newly depressed, amenity-starved district, then turn your eyes toward residential areas, which remain busy, or look to the tried-and-true “touristy” areas that are always bustling with visitors.