Business districts face uncertain future during COVID surge

After more than a year of working remotely, companies are continuing to re-evaluate their office properties.

State Street, the international wealth manager, is one of the youngest to announce the closure of its New York City offices. And with the rising Delta variant, other companies are pushing the start dates further into the fall, including BlackRock, Wells Fargo and others.

So what is going on in these business districts and what will the impact be outside of those tall office towers?

The ripple effect has three stages: the first, of course, is the pebble thrown into the water. So many people will work physically.

The average office occupancy in the United States is currently around 30%, according to JLL, a commercial real estate company. That number is unlikely to jump too high anytime soon, said Ben Breslau, JLL’s chief research officer.

“We have seen some companies postpone these dates to either October or some to January,” he said.

January that brings us to the first wave of the pebble: all of the restaurants and retail stores that rely on personal clerks.

“If the return to office is postponed, the recovery will take a little longer,” said Wroclaw. He estimates that the hospitality and retail sectors will recover sometime through 2022, and this makes a lot of people wonder if business districts, which identify so strongly as business districts, will still work.

“Well, the pandemic really revealed the inner city ecosystem,” said Michael Edwards, president of the Chicago Loop Alliance. “So everything is connected, right? There are no workers so the restaurants go away and when there are no restaurants people say, ‘Why should I come back downtown to work?’ “

But when companies move out, other companies and people can move in to live, study or play. That would be a win for the last wave in the pond: the cities themselves. Edwards said that Chicago’s Loop business district accounts for almost a third of the city’s tax revenue when you add sales tax, property taxes, and parking tickets.

“In most cities, they are the economic engine of the urban budget. And that’s why they have to be protected if the city is to survive, ”said Edwards.

Chicago has made some progress; Around twice as many people live in the loop today as there were ten years ago. But the city needs to diversify more to cope with the shift in office work, Edwards said.