Downtowns take a hit: the remote work trend impact

By Lisa Brody

Humans are social animals. We enjoy congregating for meals, social events, work and notably, to watch athletic contests. Yet, surprisingly, since March of 2020, when the COVID-19 pandemic hit the world with an unprecedented force, millions of workers around the world and the United States packed up their briefcases and work bags and headed home from work, initially thinking they'd work from home if they could for a couple of weeks. They set up laptops on dining room tables, took walks in their neighborhoods, figured out how to make lunches and had time for elaborate home-cooked dinners with bottles of wine, and began binging from streaming services. Lost in the shuttle home were local stores, restaurants, coffee shops and transit services. But in a world of temporary shutdowns, everyone was in the same boat.

Now, almost three years into the pandemic, many people are still set up in their work-from-home offices, working either completely remotely or in a combination of a couple days in their office and the rest from their abode. As Southeast Michigan Council of Governments (SEMCOG) noted in a demographic paper identifying and studying the shift of remote work before and after the pandemic, “by summer 2021, many people were vaccinated, states and municipalities lifted many pandemic-related restrictions, and businesses began resuming normal business hours. However...many employees continue to work from home at much higher rates than pre-pandemic levels.” Busses are less full, car ride services are used less, retailers are altering their hours and ramping up their websites and social media presence, and many restaurants are still closed for lunch.

According to the SEMCOG report, titled, “Remote Workers in Southeast Michigan: Demographic Trends Before and During the COVID-19 Pandemic,” only 4.5 percent of southeast Michigan workers worked from home in 2019, before the world shut down, although 31 percent of those who did were 60 or older, primarily in legal and administration support occupations and business and financial occupations, compared to 21 percent of those aged 25-59. They were also more likely to have at least a bachelor's degree than a lower level of education, and be White or Asian by race or ethnicity.

“Some jobs by their very nature are difficult or impossible to do from home, and workers in these jobs cannot do their jobs from anywhere but their worksite,” the report points out. “These include restaurant servers, hair stylists, production and maintenance workers, and construction workers...Telework is more common among 'knowledge workers,' those working in science and technology sectors and people who do most of their work on computers…These occupations are also the ones that have relatively higher salaries.”

In a quick blink of the eye, however, the region and the world was turned upside down with the emergence and rapid spread of the COVID-19 virus.

Telework, or remote work, suddenly became a necessity for those who could in March 2020, in order for businesses to continue operating. According to SEMCOG, in August 2020, 54 percent of workers in southeast Michigan were working from home – a twelve-fold increase in just one year. In July 2021, after many people had access to vaccines and many offices had reopened, 28 percent were still working fully remotely. Of that, more than half – 57 percent – had a bachelor's degree or higher, while only 11 percent of those with a high school degree or less had the option to work from home. The outlier is the medical profession, especially those who are hospital-based and must be in-person.

“For long-term trends for working from home, the data is still really noisy,” said Trevor Layton, communications manager for SEMCOG, meaning it's still in flux and being ascertained. “The question is still how many people will return to work, how many will remain remote, and how many will go hybrid long-term. Some people stayed remote longer than anyone expected or forecast. The number of white collar jobs stayed remote longer.”

Birmingham, downtown Detroit, other downtowns, and suburban office parks are all experiencing the residual effects of employees who make their coffee in their kitchen in the morning and head to a desk or table in another room rather than heading out on their commute. Some places have more vacant office space than previously, or commercial space is being reconfigured for different ways or working – or completely new uses. But there are also additional casualties as people stay home – streets are quieter, lunch business slacks off, retailers see less foot traffic. It's the inadvertent casualty to WFH (work from home), and it's full impact is still being determined.

Three years ago, baristas at the Starbucks at Maple and Old Woodward could predict just when they would be slammed – the waves from when office workers began arriving in the morning, their mid-morning and mid-afternoon breaks, and just after lunch. While it is still one of the busiest spots in downtown Birmingham, the rushes are a little less predictable, with many offices hosting hybrid employees, including the large advertising firm McCann.

“I think it's too soon to call it if offices are coming back. I don't think it's decided yet, and I think people are making policy decisions too soon,” said Birmingham City Manager Tom Markus. “The real takeaway for me is that COVID created what we see now, and we have to let it play out.”

He noted there is the possibility the in-office labor situation could get worse this winter if the new variant breaks through, and some commercial landlords could choose to convert some vacant office space to residential, “but it's all too premature.”

Christina Sheppard-Decius, who was appointed executive director of the Birmingham Shopping District in September but began her term at the end of 2022, was previously executive director of Downtown Development Authorities (DDAs) at downtown Dearborn and downtown Ferndale, noted that Birmingham “seems to be faring better than some other downtowns. What we're seeing is stores and restaurants are changing their hours and the days they're open, but that is consistent across the region, the state and the country,” due to the changing nature of employment.

“Retailers have to get their online businesses going. That's a very important factor,” Sheppard-Decius noted, as shoppers of all stripes have become more accustomed to shopping online.

However, as she is getting to know merchants in downtown Birmingham, she said she has met with so many retailers “who say their customers are so excited to come in now (that the pandemic is easing), to speak to them in person, and touch their items again. We just have to be flexible and open to new ideas. We have to change with the market, otherwise the market will leave us behind.”

“I believe a hybrid workforce is in our future where employees will work a mix of in-office and remote hours. I believe employers discovered that many of their employees could be just as effective working remotely, while employees got used to working at home and adjusted their lifestyles to accommodate remote work and enjoyed the savings that came along with it,” said Joe Bauman, president, Birmingham Bloomfield Chamber (BBCC). “There already have been a number of companies that have swapped office space for a variety of reasons and have downsized their physical footprint and that likely will continue to accelerate as more and more leases come due.

“Many retailers have reduced their store hours, and many restaurants that used to be open for breakfast and lunch now are dinner only. Well-managed, quality companies always survive a downturn, and I believe the same will happen in this new environment,” Bauman said.

Richard Astrein, co-owner of Astrein's Creative Jewelry on W. Maple Road for the last 50 years along with his brother Gary, said they have seen a significant difference in the walkability of the downtown since the onset of the pandemic. While their store continues to be busy, they are being visited primarily by people who are destination shopping.

“I used to sit in the window and see 20, 30 people walk by during a lunch hour. You don't see any of that anymore,” Astrein said. “The big one is McCann – they said they were bringing people back full time, but they're not. They're staying hybrid or virtual.”

He said that has had a huge impact on business.

“They'd walk by, and the kids would come in and buy engagement rings,” Astrein said. “It affects everything else in the city, from restaurants not opening up for lunch, the banks aren't as busy, the casual shops don't have office workers stopping in. They need to have people coming in for more than just destination shopping.

“There's a huge ripple effect. And talk about the vibrancy of the city – now it doesn't have the same vibe. On a nice day in the summer, people would be in the park, and now there aren't very many people in the park, even on a beautiful day,” he said.

Karen Daskas, co-owner of Tender with her sister Cheryl, agreed. “Town is flat,” she said. While her high-end women's fashion store may not be one many office workers stop in, as an active participant of the city, she noted, “There is a lack of foot traffic. The streets are quieter. You don't see individuals running out to get lunch.”

Lennon Caruso, who has been in town at Caruso Caruso on W. Maple since 2005, with his father, Frank, running the store for years before him, noted he has seen many changes over the years, but he has not seen an increase nor a decrease in sales relative to employees working from home.

“When Universal McCann moved in, there was this promise that 300 workers would need lunch and would flood the streets of Birmingham,” Lennon said. “But people are going to work and thinking about spending money on coffee and as little as possible on food. I think they're trying to max their time on work. There are those lawyers or ad execs, but they're not a critical mass. I open the doors of the shop, and some days there are not a lot of people, and some days there are.”

From his perspective, “Town is as good as I've ever seen it, but not because of Universal McCann, because that's empty. The positive flip is the Daxton Hotel has added people to the streets of Birmingham. The high end hotels have driven a lot of business. Between Christmas and New Year's, we saw so many people from all over.”

Another critical issue which Daskas pointed out is, “The parking structures are quieter. You see the available number of spots are much bigger.”

Daskas' perception is spot on, and city manager Tom Markus said, “That's the most object way you can tell. The parking count is down. Even the parking passes aren't being used. I don't think the on-street traffic is as reliable because we're weather-oriented, and mid-winter, we're always down.”

“There is no question fewer office workers has had a negative impact on retails and restaurants in many downtowns including Birmingham. Birmingham no longer has a 'parking problem,' and that is a huge problem in and of itself,” Bauman said.

While some may revel in the ability to find that parking spot right near their favorite store, it actually is hurting the city's coffers.

Besides available on-street parking, there are 3,579 parking spaces at the five city-owned municipal parking structures. For the past decade, during the work week, monthly parking permits issued by companies to office workers took up a majority – if not all – of the available spaces in the Pierce, Peabody, N. Old Woodward, Park and Chester structures. While many companies are still holding onto those coveted monthly parking passes, as of November 2022, 342 passes were available at the Chester structure and 152 passes were available at the N. Old Woodward structure, with 77 permits having been canceled in the month prior at Chester, 14 canceled at N. Old Woodward, and two at the Peabody structure, as employees continued to stay home. There are a total of 880 spots in the Chester structure; 745 in the N. Old Woodward structure; 437 in the Peabody garage; 811 in Park; and 706 in the Pierce Street structure.

The other use for the structures is by short-term parkers, or “transient” users, in the city's parlance, those who come for an hour, or two or three. As of October 2022, 74 percent of parking spaces were in use on a given day, compared to 68 percent in October 2021, providing $146,793 in revenue in October 2022 compared to $182,457 in October 2021. Peak time for transient parkers is 10 a.m. to 2 p.m., and a microcosm shows that on October 11, 2022, ending at 2 p.m., there were 224 hourly parkers at the Pierce structure; 141 at Park; 147 at Peabody; 67 at N. Old Woodward; and 82 at the Chester garage.

Sheppard-Decius said there can be hidden pluses as employees reshape work landscape. While downtown Birmingham maintained a retail occupancy of 96 percent, according to the BSD, as of November 2022, with 12 new retailers opening in 2022 and six more planned so far for the upcoming year, there can be opportunities for others as spaces become available, especially in second floor locations where offices were previously.

“Those office uses where there are vacancies, how do we work with them to fill them, or reuse or repurpose them? Some may consider residential, or service-oriented businesses that don't need to be on the first floor,” she said. “That opens up the possibility that they may be able to afford second floor rent when they couldn't afford a first floor rent. With challenges there are also opportunities.

“We just have to mine the field,” Sheppard-Decius pointed out, “to focus on the little changes to accommodate situations, to work with the economic factors of today.”

“It is difficult to re-imagine office space for other uses, but some property owners might not have a choice. Residential is one possibility but retrofitting the plumbing for individual units is very expensive. Retail is another alternative but mall-like space is struggling to remain relevant in today’s marketplace,” Bauman pointed out. “Companies always will be interested in top-quality, Class A office space to showcase their business, or want to locate in a downtown area that offers its workforce additional amenities. I feel downtown office space has a better chance of maintaining its tenants than some of the high-rise office buildings in neighboring communities.”

Ned Staebler, vice president for economic development at Wayne State University and president and CEO of Techtown, said research is still being done as to what the long-term versus short-term effect of working hybrid and virtually.

“Currently, there's an effect on Main Streets,” he said, pointing out that main street in Ann Arbor, which would rarely have more than one or two vacancies, “there are currently a dozen empty storefronts. That's unusual. In Birmingham, there are some. In Detroit, it's completely impacting the downtown.

“The office workers are the lifeblood for these businesses. How long does this work? Not forever. People are coming back to the businesses more and more,” Staebler said. The reason, he said, “most CEOs, presidents of companies, managers, are coming back to the office three, four, five days a week. What we'll see is people who want to be in those positions will follow suit. Either they want to be around people in those positions, and they'll follow suit. Or they'll realize Zoom meetings can't do everything. They're not good for creativity. Creativity, serendipity, teamwork, all happen in person.”

Those who return to the office may not find their work space will look the same, Staebler said, whether employees are working full time or hybrid. “In many offices, lots of spaces are changing from cubicles to open, more collaborative spaces for collaboration and team meeting.”

Kelli DeLarosa, co-founder of PARTNR HAUS on Cole Street in Birmingham, concurred. Her original business is a design business which renovates offices and designs and creates furnishings, with an offshoot a co-working space.

“We preach collaboration and open spaces. When we design corporate offices, we're now designing them like co-working spaces. People don't need space today for 500 individuals, but for 100 people to drop in, as well as added meeting spaces. That's what's really growing, because if you're going into the office, generally it's purposeful, it's for a reason. You're doing your work at home and your team work at the office,” she said.

DeLarosa said a delightful side note to the co-working space is that many people who use their open co-working space are now working together in business. “It's a great synergy.”

Staebler, who runs the co-working space Techtown on Burroughs in the New Center area of Detroit, said, “There is a demand for shared working spaces, for shared amenities, shared, communal work spaces, even if people are from different companies. It's cheaper for companies. It creates energy and synergy, which is why co-working took off in the first place.”

While he thinks in a post-COVID/flu/RSV-spike world, many people will want to get back to normal work habits, Staebler believes co-working spaces will last because, “It's a low premium way to get people back to working together.”

Brooke Wagner, co-working manager and events coordinator at Work Co. on N. Old Woodward in downtown Birmingham, said while she can't predict the future, “One thing COVID taught us is the way people work is changing, and employees want flexibility and want to choose how they work. And COVID showed they can be flexible, and the work will get done. The traditional Monday-Friday, 9-5, model is no longer needed.”

Wagner said studies show that employees now value flexibility in their work day as much as having a 401K, and it's one of the things they've seen in their spaces.

“We opened two years ago, as people were getting back out into the world and it worked to our benefit. People wanted to get out of their homes,” she said. “Some people wanted the flexibility of work from home, but also wanted the flexibility of coming into a space and that's what we are there for.”

Wagner said Work Co. offers four membership options, of which their private office membership is their most in-demand, with a wait list. DeLarosa said they have seen their membership pick up, also, with conference rooms and meeting spaces rentals increasing too.

“People are having meetings and events, and also renting spaces for interviews,” she said. “We make sure we have the right amenities, and can hook into TV and media. Just bring the people.”

DeLarosa is not sure if co-working spaces are here for the duration, but “as of right now I see it staying until employers mandate people to return to the office.”

On the other hand, “employers are spending a lot of money redoing their spaces and reducing their footprints. Their spaces need to be something the employees desire to come back to work for, rather than a simple cubicle.”

A significant segment of the marketplace that is still struggling to come back from the COVID-19 pandemic and the evolution of the workforce is the restaurant world. The pandemic itself was cataclysmic for the industry – the National Restaurant Association (NRA), the trade group that advocates for the industry, estimates that approximately there are about 90,000 closed diners, cafes, chain outlets, taverns, bars and neighborhood restaurants as a result. In just 2020, it is estimated that about 72,700 more restaurants and bars closed than normal, all due to the pandemic – a 95 percent increase over the average annual closure rate. The NRA believes more didn't close in 2021 because of federal funding from the Restaurant Revitalization Fund.

“The best way to look at it is to look at (the restaurant business) in 2019 and look at it today,” said Jeremy Sasson, founder/CEO, Heirloom Hospitality, which owns Townhouse Birmingham and Detroit, Prime + Proper, Cash Only Supper Club, and the upcoming Mad Nice in Detroit. “It's light years better than 2020, 2021 and most of 2022. Every week over the last three to six months, it's looking more like Detroit from before the pandemic than since the pandemic.”

A significant challenge for him – and all restaurateurs – who offer more than a “quick bite” for lunch is, “when workers are not required to be in the office on the same day, we have no idea how many we'll have day-to-day,” Sasson said, noting that pre-pandemic, Fridays were the strongest day for lunch business. Now, if hybrid workers have the option of which days to work in office or stay home, they'll work from home on a Friday. “We have no compass. Lunch diners typically don't make reservations.”

Pre-COVID, Townhouse Detroit was “a convenient, accessible dining venue in a crowded city center,” he said, acknowledging “in this business you're either hot or you're not.” While for a period of time he said it would have been “foolish to be open for lunch in Detroit,” the transformed Townhouse, which has elevated its décor and cuisine to be a destination dining experience, is once again open for lunch.

“It was the right move for us,” he said. “We're seeing growth every week.”

Samy Eid, owner of Phoenicia and Forest in Birmingham and Leila in Detroit, said that while “we built Leila to offer lunch service, the pandemic killed it. I don't see us opening for lunch at Leila ever. The cost of opening for lunch is significant. People don't drink at lunch, which is where we make a lot of our money, there's the cost of labor, and the cost of food and products. By not opening for lunch, the stress on the restaurant is less, the stress on the staff is less, the stress on the property is less.”

He said the workforce in Detroit is not ripe for the opening of a restaurant of Leila, or others of that caliber.

“In a city where Quicken Loans (now Rocket) has thousands of employees, it impacts everything and everyone,” he said. “The appetite for lunch is non-existent, and people don't have time for it either. Nice linen tablecloths restaurants cannot make it in Detroit. It's hard to justify opening. Food trucks, fast casual – they're the ones cleaning up.

“Maybe as things settle, some restaurateurs will attempt it again. But in the end, we're businessmen,” Eid emphasized. “People think we're in show biz – but we're in business, and we have to keep sharpening our pencils. It's hard to make money in the restaurant business, and this has made it harder.”

Forest has never been open for lunch, and he doesn't see a change in that strategy. At Phoenicia, however, which is undergoing an expansion and renovation with a planned reopening in the late spring, he expects to offer lunch.

“Phoenicia will always be open for lunch because it's part of our DNA, and it's not dependent on office workers. It has such a loyal, loving clientele that it's part of our existence,” Eid said.

Bill Roberts, owner of Bill's, Roadside R&G, and ML in Bloomfield Hills, and Streetside Seafood in Birmingham, closed all of his establishments for breakfast and lunch during the pandemic, although he said it is more because of staffing issues than office workers. He said Streetside Seafood reopened for lunch on Thursdays and Fridays during this past holiday season, “and we're going to give that a try, and Bill's is open on Thursdays and Fridays for lunch and Saturday brunch.”

But a big challenge is there are less people working, and therefor less people coming in for lunch.

“It makes for an easy long weekend if you're working from home and you head up north on a Friday,” Roberts said. “It's a different world out there. It's all affecting commerce. We used to be open for breakfast at Bill's everyday. I don't see that happening. I don't want people standing around.”

Ned Staebler of WSU said it's a little bit of a “chicken and egg question. If you go into the office and no one's there, do you go in again. Or if you go downtown and there's no restaurant open, you don't want to go. But, if more and more start going in, it will be more worth it for businesses. Slowly, that will adjust and it will be more rewarding to come in.”

A further question mark in this uncertain era in transit. While parking in Birmingham is more available, other aspects of transportation are also potentially in flux. In November, tri-county voters approved a transit millage, but it's implementation is yet to be determined. Brandon Adolph, acting AVP of Marketing and Communications at SMART, said, “The way the public moves about the region to work, school, shopping and other appointments has shifted. SMART is working to adapt to the changes and by doing so, we anticipate ridership will increase based on meeting the public’s need. Thus, transportation is important to the region and the future success in southeast Michigan by supporting economic development to get people to jobs.”

He acknowledged that with many working from home or hybrid, “the way people travel on a daily basis has changed. SMART is working to evaluate all of our services, with public input to create and expand mobility options for the region, working together with communities, residents, and businesses to develop a plan that is sustainable and accommodates the change in travel patterns.”

On a positive note, regardless of the style of work, ridership has increased over the last year, with

SMART experiencing great success with the introduction of its pilot Flex, microtransit service, in five zones throughout the region and offering new opportunities for transit.

Joe Bauman of the Birmingham Chamber sees only positives from the improvements and the transit millage.

“I feel the newly adopted county transit millage will benefit our communities in the short run by making reliable transportation available to a workforce that has been shut out of the job market due to a lack of reliable transportation. And eventually, the millage will bring mass transit to some communities in the county that for whatever reason had opted out of the current system. There certainly are a variety of factors that need to be worked out, but an improved public transit system should be a benefit to both the business community and our residents.”