Central Business District

The central business district (CBD), a term coined by the Chicago School of urbanists during the 1920s, refers to the downtown of urban areas. Because of its maximum proximity to all parts of the metropolis, this location is geographically advantaged, allowing firms located there the greatest access to urban labor supplies, one another, clients and customers, the infrastructure, and specialized pools of information. Thus, the CBD offers a comparative advantage in vertically disintegrated types of production where firms have many linkages to one another, and locating there allows those firms with high transportation costs (i.e., multiple inputs and outputs) to minimize costs by taking advantages of the agglomeration economies readily available there. Because accessibility is the major determinant of land values and land use, locations in the CBD typically command very high rents (including the peak value intersection) and are marked by high degrees of vertical real estate development.

The form and function of the CBD have changed significantly over time, reflecting broad structural changes in the local, regional, national, and global economies. During the 19th century, when city sizes in the United States were relatively small, CBDs were comparatively less well developed. In larger metropolitan regions, they often were characterized by webs of small manufacturing firms and smokestacks. Well into the 1920s, when Ernest Burgess and others first theorized about the CBD, the location was surrounded by blue-collar, working-class neighborhoods (the “zone of workingmen's homes” in classical social ecology). Many CBDs also contained important retail functions.

However, during the 1880s and 1890s, a period marked by the emergence of producer services and the transition from local to national economies, CBDs became larger and more complex. As multiestablishment corporations began to dominate national economies, CBDs became the command-and-control centers of cities, including the headquarters of many firms. Thus, their landscapes were increasingly given over to skyscrapers, an innovation made possible by technological developments such as structural steel, the elevator, the telephone, and mass transit. By the 1960s, this process was more or less complete in the United States, and CBDs were marked by dense complexes of steel and glass towers occupied by workers in producer services such as finance, law, accounting, and insurance.

However, suburbanization, “white flight,” and industrial decentralization took their toll. In many American cities plagued by deindustrialization and capital disinvestment, neighborhoods near CBDs during the 1970s and 1980s experienced sharp economic declines, including rising levels of poverty, unemployment, and homelessness. Many downtowns, particularly in the Northeast and the Midwest, exhibited closed factories and warehouses. The suburbanization of retailing and the evacuation of middle-class purchasing power led many downtown stores to close.

By the 1990s, as globalization and the explosion of producer services ushered in a new round of growth and investments, many CBDs were reclaimed by corporations, a process accompanied by widespread[Page 33] gentrification and the associated influx of professional workers. Today, CBDs are typically the primary points of entry for the forces of globalization in the American city; large parts of the downtowns of many U.S. cities are owned by foreign firms, including large real estate interests. Despite the telecommunications revolution, CBDs continue to facilitate face-to-face interactions, another indication of their long-standing importance to the creation of urban agglomeration effects.

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