Downtowns are the original live/work neighborhood. Traditionally, small business owners lived above their shop, which was a convenient and cost-effective way to sustain a household. Especially profitable business owners might live elsewhere, instead allowing employees to live above the business, which was both a good business practice (increasing employee availability) and an employee perk. Over time, social norms, development patterns and zoning standards in all but the largest cities made it less common for families to live in downtowns, more difficult for business owners to use living space as an employee perk and costlier for landlords to upgrade upper-floor spaces while still meeting residential building codes. This resulted in many upper floors being relegated to storage uses, and existing residential units were largely retained as low-cost apartment units with limited capital investment.
However, there signs indicate that this trend is starting to reverse itself. The combination of shifting demographics, increasing demand for low-maintenance residential options within walking distance of amenities, and preference for unique architecture and authentic experiences has led to a resurgence in demand for downtown living space. This demand comes not only from young professionals, but also from baby boomers and single individuals (especially women), all of whom represent a growing share of U.S. households. Meeting this demand is simplest in downtown areas, where multi-story buildings and density are natural and desirable, rather than a concern—and where, in many cases, underutilized space already exists that can be renovated into unique units with built-in first-floor amenities.
This new demand can be met through a variety of means, including renovation of existing units, new infill development, or a combination of the two. The images to the right show an infill apartment building in Darlington, renovated upper floor units in Ripon (where rents nearly doubled post-renovation), and the Harbour Lights condominium rehabilitation/infill project in Port Washington.
In some cases, landlords are even selecting first-floor tenants based on their desirability to upper-floor tenants – fitness studios, co-working facilities, coffee shops and wine bars can be appealing as first floor amenities, if proper noise-dampening and venting mechanisms are in place. This is further reflected in the findings of a 2014 study, which indicated that an improved commercial façade increased interest in, and rents for, upper-floor residential units by as much as 30 percent.