The short-term outlook of city officials and commercial real estate experts is improving as office workers gradually return to in-person work, and they share an optimism as downtowns reawaken from the COVID-19 pandemic.
Though statewide COVID-19 office restrictions were lifted last month, the number of employees working downtown in Grand Rapids and Kalamazoo has yet to reach pre-pandemic levels, officials there report.
Roughly 60 percent of downtown Grand Rapids businesses have returned to in-person office work, according to a recent Downtown Grand Rapids Inc. (DGRI) survey of about 120 downtown organizations that included both ground-floor offices and some building management entities. Still more entities are planning a return in the near future, according to the survey.
“We’re definitely seeing traffic pick up and more people around,” said DGRI President and CEO Tim Kelly. “Compared to last year, it’s a pretty massive increase.”
Similarly, the number of office workers in downtown Kalamazoo is gradually increasing but still below pre-pandemic levels, said Patti Owens, vice president and managing director of Catalyst Development Co. and board member of the city’s Downtown Development Authority.
Newly formed “parklets,” outdoor events and outdoor dining are helping to drive foot traffic back downtown, she added.
“We’re starting to see people coming back downtown and hungry to get back to a little normalcy,” Owens said. “Businesses have done such a good job adapting to the reality of COVID-19 and jumping on opportunities.”
Retail steady, long-term optimism
Both officials also report a net increase in the number of retail businesses since the start of the pandemic. Kalamazoo has had a net gain of about 10 new downtown retail businesses during the pandemic, Owens said.
Downtown Grand Rapids had 31 new businesses open since March 2020 after 26 closed, for a net gain of five businesses, Kelly reported.
“It’s very close to what we’d normally be seeing,” Kelly said. “We’re not past all this yet and there may be more closings coming, but in general this is pretty close to what we’d see in a normal year.”
Sam Cummings, managing partner at Grand Rapids-based CWD Real Estate Investment LLC, called the number of ground-floor retail tenants that have closed during the pandemic “not insignificant.”
However, Cummings remains optimistic about the long-term recovery of downtown Grand Rapids given West Michigan’s amenities as well as major companies like Acrisure LLC, Perrigo Co. plc and Spectrum Health establishing downtown headquarters.
“That, together with the river restoration and the activity of Grand Action 2.0, we’re going to be OK,” Cummings said, referring to a major plan to build an amphitheater and mixed-use development along the riverfront. “The important stuff is long term, and the anchor uses and reasons to be downtown are once again re-emerging.”
Flexibility is key
Meanwhile, successful employers will likely adopt a far more flexible work-lifestyle approach for their office employees, multiple West Michigan office furniture executives said at last month’s West Michigan CEO Summit.
Most employers have landed on a hybrid model, allowing employees to choose between in-person and remote working options, said Ryan Anderson, vice president of global research and insights at Herman Miller Inc.
“Empowering (employees) to have more choices isn’t just a great way to retain them, it’s a great way to make sure they are the most engaged they can be, and the most healthy and productive,” Anderson said.
Cummings said that flexibility extends to the office space itself.
“The good news is we’re able to accommodate and have a lot of ready-to-go office spaces that are really well fit-out that we can be really flexible with on terms,” Cummings said. “We have a lot of existing, cool spaces. We can see and are rounding the corner on the office issue, but we don’t know its radius yet.”
DGRI’s Kelly said it’s still too early to tell whether employers will downsize their office spaces long term because of the pandemic.
“Most businesses are probably evaluating their needs going forward, but at this point we’re not seeing any major conversations about downsizing,” he said. “What we’re hearing is that the office is still very important.”
Owens expects at least some downsizing to occur within downtown Kalamazoo office spaces. Additionally, the recent completion of the Warner Building downtown will cause five entities — Warner Norcross + Judd LLP, Southwest Michigan First, Stryker Johnston Foundation, Communities in Schools of Kalamazoo and The Kalamazoo Promise — to relocate their headquarters to the new building, leaving behind some empty office space.
“I do think you’re probably going to see (some downsizing) once companies get their plans in place on who gets to stay home,” Owens said.
However, Cummings cautioned against comparing office trends in Grand Rapids and other smaller West Michigan downtowns with larger markets like Chicago and New York City.
“One of the things our city enjoys is you can have a pretty good urban experience and in 10 or 15 minutes be on a mountain bike, and in 30 minutes be on a beach,” Cummings said. “From a lifestyle choice, it’s pretty compelling.”
Paul Nemschoff, vice president of global strategy and marketing at Haworth Inc., also noted during last month’s CEO Summit that West Michigan has continued to draw new residents during the pandemic.
“In the past, a recruiter would sell someone on a job and then on West Michigan,” he said. “In the midst of building a global e-commerce team and identifying that these roles can all be remote, it transitions people into the area in a more progressive way, and in the long run it allows us to be more accessible.”
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