Remember back before March of 2020? That’s when commercial real estate publications — including this one — wrote regular features on how hot urban downtowns had become. People were flocking to live in multifamily towers in the center of downtowns, while restaurants, bars and retailers operating in the hearts of cities across the Midwest were packing in the customers.
Today? That’s changed, thanks, of course, to the COVID-19 pandemic.
Walk through downtown Minneapolis, Chicago, Indianapolis or St. Louis today, and you’ll get a different feel. Many retailers are shut down. Hotels are nearly empty. And office buildings that were buzzing before March of last year are quiet as employees continue to work from home.
When will this change? When will downtowns regain the momentum they saw before the pandemic hit? During the last week, Midwest Real Estate News spoke to commercial real estate professionals working in downtown markets across the Midwest. They all agreed that downtowns look very different today. But they also agreed that this is far from permanent.
Downtowns, they say, will be back, and as long as vaccination efforts continue to gain steam, the shoppers, workers and tourists should start to return this year.
We’ll be running these interviews with brokers who specialize in the central business districts of Midwest cities during the next several days. We start with Adam Barrett, vice president with the Minneapolis-St. Paul office of Colliers, who spoke with us last week.
Barrett said that employees are slowly returning to the office in downtown Minneapolis. He pointed to figures released by the Minneapolis Downtown Council – Barrett is a member – showing that as of April 1, about 15 percent of employees were back in their offices in the city’s downtown.
Barrett himself has been working in the office for all but one week during the pandemic. His own eyes, he says, tells him that activity, both in the form of office workers and visitors, is slowly but steadily on the rise in downtown.
“Over the last two or three weeks, I am seeing more traffic downtown,” Barrett said.
Some of this traffic has returned not only because of the increase in vaccinations, but as a result of warmer weather. That’s a trend that repeats itself each year in downtown Minneapolis.
“Every year people migrate away from downtown when it gets cold,” Barrett said. “When it starts to warm up, you see more people walking along Nicollet. As the weather has broken over the last two weeks, more people have been out walking in downtown. That is natural. Every year is cyclical in downtown: People gravitate away and come back.”
At the same time, there has been a push among Minneapolis-St. Paul companies to bring their employees back to the office, with many employers targeting June for the start of these efforts. Other companies, the bigger ones, are looking at a fall return to the office. This includes companies such as Wells Fargo, Target and Thrivent.
Another factor that should boost activity in downtown? Children in kindergarten through the 12th grade are now allowed back in Minneapolis public schools. That could have a ripple effect on downtown activity, Barrett said.
“I think we’ll start to see more parents returning to the office as those kids return to school,” Barrett said. “I imagine many of those parents are now thinking about when they will return to the office.”
At the same time, the Minneapolis Downtown Council is launching efforts to activate the streetscape throughout the downtown area as a way to encourage more people to visit the heart of the city.
Minneapolis and St. Paul, of course, haven’t dealt with just the COVID-19 pandemic. Minneapolis has also been at the center of protests against police brutality and the fatal police shootings of African Americans. Protests hit downtown Minneapolis starting in May of 2020, after George Floyd was killed by police officer Derek Chauvin, who had knelt on Floyd’s neck until the man died. Chauvin’s trial was still going on as of press time.
Then this April, a white police officer shot and killed 20-year-old African American man Daunte Wright in the Minneapolis suburb of Brooklyn Center. This has resulted in another round of protests.
Protests against police shootings and efforts to defund the police have hit most of the United States this year and last. But in many ways, Minneapolis has been at the center of the Black Lives Matter movement. The city is also seeing a push to reform its police department.
Barrett said that the focus today in Minneapolis is rightfully on equity initiatives and the actions of the city’s police force. But public safety matters, too, he said. People will need to feel safe to return to downtown Minneapolis.
“I know that there are many companies across the country that have prioritized equity, inclusion and diversity efforts. That’s a positive,” Barrett said. “In Minneapolis, in my opinion, we have not had time to heal yet. Part of that healing process, as well as the progress associated with that healing, will have to take place with employees collaborating, getting together and coming up with ideas. I see many offices really pushing to get employees back in Minneapolis because they want to see that dialogue take place.”
The challenge is that people won’t see downtown Minneapolis as safe if there isn’t streetscape activation throughout the area and people moving through the urban center of the city. As Barrett says, it’s a bit of a “chicken-and-egg” dilemma. People won’t return to downtown until they feel safe. But they won’t feel safe until people are there.
Barrett says that it will have to be the companies and employers who will take the lead in bringing people back to downtown and reversing the perception that downtown Minneapolis is not safe.
“I am excited that there are businesses pushing to get people back to the office,” Barrett said. “One of my clients is saying that their workers must come back in June at least three days a week. They are saying that they want people back.”
This doesn’t mean that companies won’t reduce their downtown office space. Barrett says that he expects to see companies cut their office space in downtown Minneapolis-St. Paul by an average of 15 percent to 20 percent.
That’s because many employees will continue to work from home at least part of the time. But this reduction in office space doesn’t mean that downtown Minneapolis will crumble. Barrett, in fact, sees the opposite: He predicts that downtown Minneapolis-St. Paul will steadily bounce back throughout the second half of 2021.
“Downtown Minneapolis, like many downtowns, still offers things that the suburbs can’t when you are a company trying to attract and retain the best workers,” Barrett said. “You have building owners who have invested heavily in tenant amenities. You have all the retail outlets right there, all the restaurants. Downtown might be going through a rough time now, but that won’t last.”
Employers that are pushing for a return to the office say that they are noticing a drop in productivity as their workforce toils mostly from home. That collaboration between employees doesn’t happen over Zoom calls.
And while some companies might leave downtown Minneapolis, Barrett said, these moves will be for a host of reasons, not all of them related either to the COVID-19 pandemic or the social unrest.
The downtown office scene will change and evolve, too. Barrett said that he expects to see a growth in the number of spec office suites popping up throughout downtown. These suites might offer three- to five-year leases, a break from the typical lease terms of seven to 10 years in downtown Minneapolis.
But those big decisions will have to wait. Barrett said that most companies are putting their long-term plans on hold for now, and are concentrating instead on the immediate future of bringing workers back to the office.
“A lot is occurring downtown now that is good,” Barrett said. “We just need to get people back in the door. That will activate the streetscape and get us closer to a busier, more active downtown.”