How one downtown rebounded from the pandemic, even as others struggle

By ASH-HAR QURAISHI, AMY CORRAL, RYAN BEARD

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    SAN DIEGO (KPIX) — At the onset of the pandemic in the spring of 2020, downtowns across the country emptied out. Soft lockdowns, office closures and a massive shift to remote work meant businesses in the urban core that were traditionally dependent on the daily foot traffic of commuters were at risk of financial ruin.

In San Diego, a downtown economy dependent on tourism and convention-goers, restaurant owners were bracing for the worst.

“People were hunkering down, but at least they were doing takeout and delivery and maybe going to the occasional restaurant that wasn’t supposed to be open,” said Michael Georgopoulos, a restaurant developer and partner at RMD Group. “But Gaslamp in downtown was quiet. I mean, it was scary.”

The historic Gaslamp Quarter — home to the city’s vibrant nightlife, art scene and eateries — was all but shut down. What made that even scarier for Georgopoulos was that he was wrapping construction on a new restaurant there that was scheduled to open in March of 2020.

“It was tumbleweeds down the middle of the street. And that does not happen in the Gaslamp on Fifth Avenue,” he said.

He was able to open months later with some limited outdoor space and emphasis on takeout orders, a strategy that helped keep him and his employees afloat.

“I assumed things were not going to come back to the levels they were for years, especially in such a market that relies on convention travel,” said Georgopoulos.

Yet three years after those uncertain times, his restaurant, The Huntress — and metro San Diego — are open and doing big business.

Return of tourism Todd Gloria, San Diego’s mayor, says part of the key to that recovery was revitalizing the tourist economy.

“Reopening our convention center was really important. We were able to do that in 2021, start having things like Comic-Con, the auto show, the major medical associations all coming back to San Diego,” said Gloria.

Today, downtown businesses in the Gaslamp and Little Italy areas are teeming with visitors — both workers and travelers.

At the start of the pandemic, in 2020, the number of passengers traveling into San Diego fell by 63% compared to 2019 levels. 2021 saw improvement, with the number of air travelers down by 38% compared to 2019. In 2022, the numbers showed a more dramatic improvement, with the number of air travelers down by just 13% of pre-pandemic levels.

“What we find now is many of those businesses are hitting their pre-pandemic levels. Increasingly. I’m getting updates to say that they’re now exceeding their pre-pandemic levels,” said Gloria.

Revenue numbers back him up. According to figures from the city, in 2019, San Diego took in $314 million in sales tax — a number that jumped in 2022 more than 19% to $375 million.

The city’s downtown rebound is something of an anomaly. Many cities are struggling to entice remote workers and residents back to the urban core.

New data from researchers at the University of California, Berkeley and the University of Toronto indicates that most American downtowns are still struggling.

“We started the study early in the pandemic, as we noticed folks departing actually in New York City,” said Karen Chapple, professor emerita of city and regional planning at UC Berkeley and the study’s lead author. “That was our first case that we looked at was the New York City, the metropolitan area, realizing that folks were leaving for the exurbs, for rural small towns all over the region.”

Chapple and her team analyzed those patterns using cell phone data in 62 downtowns. They studied how much activity there was before, during and after the pandemic.

“It’s a very significant number of pings all over North America that we were able to collect, about 18 million pings,” she said. “We record all kinds of activity, and that’s what makes it better than, say, those office footfall indicators or office vacancy rates, which are only looking at office workers. We’re looking at everybody who comes downtown.”

San Diego, it turns out was near the top of the list by the end of 2022 — recovering 99% of its pre-pandemic activity.

“What San Diego did right is it made a 24/7 city,” said Chapple.

That resiliency was due in part to economic plans that started long before COVID.

“There’s decades of planning and a lot of thought that’s gone into it. And that has made San Diego one of the most resilient cities in North America,” said Chapple.

“It’s the economy, stupid”  One strategy that seems to have paid off was having a diverse job sector that continued to bring employees into their downtown workplaces. San Diego’s downtown industries included food services, accommodations, education, and health care.

“Like they said about Bill Clinton, ‘It’s the economy, stupid,’ because if you have the right mix of sectors, you’re doing pretty well right now. But if you were too specialized, you might be suffering,” said Chapple.

San Diego didn’t over-specialize, whereas tech heavy cities ended up flatlining since many “techies” now work remotely.

“San Francisco might have been able to come back,” she said. “It had a compromised hybrid work situation with its tech sector. But now it’s going through the layoffs, and that’s what’s happening in in Los Angeles and Seattle and Portland and a few other tech places too.”

Also hurting most downtowns: too much office space and not enough housing, especially for families. Chapple says on average, 71% of downtown real estate nationwide is still made up of offices. Workers with the choice avoid long commutes in and out of downtowns.

Living where you work San Diego prioritized living in the downtown rather than just commuting in.

The city added at least 260 affordable housing units in fiscal year 2021-2022, with proposed construction on another 1,120.

The city has made it a priority to invest in more downtown housing options. Construction cranes dot the skyline.

“We’re more balanced. You know, we have over 30,000 residents in downtown and our city plans envision having more than 90,000 residents downtown,” said Gloria.

That balance includes housing in the heart of the city for larger work-from-home families, not just studio apartments.

“If you have built and provided for larger households, more Zooms, you’re doing better in the residential downtown market,” said Chapple.

The city also made hard decisions during the pandemic like sacrificing parking for outdoor dining — a controversial move that’s now permanent.

“When we couldn’t go indoors, and these are restaurants that employ hundreds or thousands of people,” said Gloria. “The public good in this case was making sure these small businesses could survive. And I will tell you, we have not lost a single business here on India Street.”

According to the Downtown San Diego Partnership, a nonprofit advocacy group, in fiscal year 2021-2022, 297 new businesses opened downtown — an increase of 11% from the previous year.

Mayor Gloria says the strategy has been to create a downtown that is a draw for both living and working. According to a 2022 survey from the Downtown San Diego Partnership, 86% of the city’s working residents said they’d prefer to work downtown.

“What we’ve built here is a downtown that has a healthy amount of office, a lot of tourism, a good amount of retail, a lot of residential, and then reasons for folks to come, said Gloria.

One shiny new reason people have come is a 10,000-seat outdoor concert venue opened during the pandemic. It was an investment of $85 million that many cities might have rethought.

“To have constructed this during the pandemic and to really say that while we’ve been apart, we’re just going to create an opportunity for people to come back together again,” said Gloria. “It was kind of almost like a welcome back gift to San Diego.”

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