Tony Hsieh, the 38-year old founder of online shoe retailer Zappos, is spending $350 million to redevelop downtown Las Vegas. His vision for an urban neighbourhood, in the centre of a city whose growth has been almost entirely suburban for the past half century, has the potential to change the way we think about downtown revitalization. And yet he is doing so in one of the most hostile real estate investment markets in the country. Although to Hsieh, this might be precisely the point, and its success may spell the beginning of a new kind of urban investment that has the potential to transform cities into the vibrant, walkable places they are striving to become.
While the success of the Vegas strip is stoked by the impassioned wallets of gamblers, further north in the historic downtown there is little to show for a city whose population has exploded from 127,000 in 1960 to just less than 2 million in 2010. Empty lots, parking garages, shuttered windows, and motels catering to thrifty tourist characterize what has been for the most part a forgotten ancestor to the extravagance of the strip. And apart from the strip, Vegas is a vast valley filled with mostly suburban detached housing tracts. Consequently, Las Vegas was one of the hardest hit urban areas during the height of the 2008 mortgage crisis. In 2006, the average house was priced at $357,497. By the end of 2011, the average had dropped to $121,181.
The mortgage crisis highlighted problems with the suburban development and financing program across North America, but it also alluded to a changing demographic preference that is now including smaller homes, less driving and an urban lifestyle in walkable, attractive places.
So when Zappos required a new corporate headquarters, Hsieh decided to locate in renovated office space in the City’s former City Hall building. This move bucks the trend of other tech companies and embraces an emerging change in city dweller’s lifestyle choices that Hsieh further seeks to foster.
Hsieh saw that there are essentially two ways in which a major organization can interact with the built environment. They can take the approach that many other tech companies have and build a new, self-sufficient campus filled with all the amenities it’s employees could possibly desire in a lush, isolated setting. Or, they could choose to locate in a more built up area and become part of the community around it, encouraging its employees to interact with others around them and function not only as a workplace but also as a node of knowledge and ideas within the neighbourhood.
The later was the obvious choice for Hsieh, as he sees that what’s around a company can be just as important of what’s inside. By integrating Zappos into its surroundings, it will maximize what he calls “serendipitous interactions”; the idea that unplanned encounters on the street, interactions with people and businesses, and the strengthening of ties between people and place can lead to increased learning, productivity, and innovation. He wants to get his employees out of the office and into the lively downtown streets around their new building, where he sees serendipity occurring through high residential densities, street level activities, and a culture of openness, collaboration, creativity, and optimism.
Yet therein laid the challenge: downtown Las Vegas’ streets are a far cry from the thriving walkable places found in Seattle and San Francisco; the West’s other tech hotspots. And so what began as a simple head office relocation transformed into a fully fledged downtown revitalization project. Hsieh and his partners are planning to invest $100 million into the purchase of land, a further $100 million on new high density buildings, and another $150 million on small business funding, tech strips, and the development of arts and culture programs. The goal is to catalyze downtown development, sparked by Zappos headquarters and the multitude of other businesses and residents fostered though Hsieh’s ‘seed funding’. Once those anchors are in place, Hsieh sees it as a self reinforcing system that will continue to draw new people and proprietors to the downtown’s reinvigorated urban environment, which will now be full of those all-important serendipitous opportunities.
There are no comprehensive plans for how all this will physically be implement, yet, but this is less important than the means by which it is being achieved. A private investment spread across multiple city blocks in an existing downtown, lacking a comprehensive project-based marketing strategy, and founded on a new urban philanthropy, is unprecedented. Certainly Hsieh stands to reap a healthy return should everything go according to plan, but his reward pales in comparison to the long term impacts this success would have on Las Vegas, and all metropolitan areas suffering from a loss of interest in their downtowns.
Hsieh is putting forward one solution to help solve a problem that has challenged North American cities for decades: how do we reverse an entrenched sprawl-based development program for one that is more supportive of existing urban areas? The traditional approach has been government land use policy, zoning controls, development restrictions to try to limit the amount of new suburban housing each year, targeted tax breaks for building downtown, and other top-down mechanisms for trying to shape the city region. Although success varies by place, there has been limited success and many downtowns have continued to languish even while their populations continue to balloon. Hsieh is offering what promises to be a bottom-up solution, recognizing that cities, corporations and citizens all want healthy, thriving downtowns. The missing component was the developers to get the ball rolling.
Should Las Vegas’s new downtown work, Hsieh will have a message for those developers. If you can plant enough seeds to create a critical mass, you can help transform existing underutilized urban areas into the kinds of places that will not only sell, but will kickstart the positive development of that neighbourhood into a well loved place. And it also becomes a message for companies; that their presence in a downtown environment can help lead the charge, as well as enrich the lives of employees who now have all the benefits of the streets around them including serendipity. Like a successful tech start-up, this model for development is helped along through the interactions of people across disciplines that mutually reinforce one another’s potential. By simply being in an urban environment, people and businesses find themselves learning from one another and increasing their creativity, productivity and innovation. Government of course still needs to play a role, by providing guiding principles to ensure these places represent the needs and wishes of the city as a whole. And they can provide services like parks, libraries, schools, and transit to add the elements of successful urbanism that developers can’t provide on their own. Working together, cities and this new breed of developers focused on the downtown could spur effective and long lasting impacts.
Zappos’ move will take place sometime in 2013. Already, plans are in the works for a co-working space and bringing 1,000 members of Teach for America into the downtown to live and work. Condominiums, offices, retail stores and a host of other services and cultural facilities are expected to follow within the next five years through Hsieh’s funding and the subsequent spinoff effects.
Certainly there is real potential for something great not only here in dusty downtown Las Vegas, but for all cities. The keys to reinvigorating downtowns, helped along by changes in lifestyles and continued support from governments, may have been presented through Hsieh’s grand scheme. And yet not many would have predicted that the future of urban development might be so successfully altered by a young online shoe salesman from Las Vegas.