St. Paul Downtown Alliance prepares for office workers return post-COVID

St. Paul's downtown businesses are preparing for life after COVID with a mix of outdoor cleaning, safety patrols and events designed to welcome office workers back into the city after a year in which most employees were sent home to work remotely because of the global pandemic.

The St. Paul Downtown Alliance hopes to smoothly transition 55,000 office workers back into the urban core after months of being sequestered at home due to COVID-19.

For a year, only about 10% of downtown employees have ventured back to the office, according to the Greater St. Paul Building Owners and Managers Association (BOMA). As vaccinations spread, it's believed more will return. Alliance President Joe Spencer expects the first wave of employees to return after July 4.

The planning comes as companies reconsider how work will get done post-pandemic. Target Corp. last week said it will cut its downtown Minneapolis office space by a third as it switches to a hybrid office- and remote-work model for its employees post-COVID.

City officials, building owners and property managers are pondering the fate of the market and exactly what will change long term.

In St. Paul, the focus is getting employees comfortable with the prospect of coming back to the city. The "topic has been a hot one lately, filled with lots of speculation … as people are [preparing to] come back for the first time in a year and a half," Spencer told city and business leaders during a videoconference presentation earlier this month. For now, the plan is to spruce up St. Paul, add a yet-to-be disclosed "extra presence' of safety personnel and host outdoor events.

"This is critically important to the future of downtown," Spencer said.

Major downtown stakeholders such as Travelers, Ecolab, Wells Fargo Place, Securian Financial and Bremer Bank plan to help the Alliance advertise events and safety initiatives so the public knows St. Paul is ready for thousands to re-enter downtown.

Jim Scannell, a Travelers senior vice president who is playing a major role in Alliance's effort, said it's important for downtown companies to trade information about how they will operate once vaccination levels are high enough that workers start returning to work.

It's important "everyone is cognizant of when other people will be coming downtown, so if there are problems that pop up, we can quickly get them addressed," he said.

Pat Skinner, the general manager of the Wells Fargo Place tower that houses 25 tenants with 1,500 workers said his building will do heavy "top to bottom" office cleaning and pipe flushings in each tenant space right before its workers return.

"Once life returns, we are going to do a big tenant party," said Skinner. Wells Fargo Place's owner, Unilev Capital Corp., has been preparing for life after COVID for months. It added a high-tech air-filtration system and postponed rent for three restaurants and a store to help ensure they survive to serve his 1,500 tenants long after COVID-19 is gone. "Amenities are so important," Skinner said recently while visiting his building's Subway sandwich shop, which stayed open thanks to the rent help.

During the recent videoconference, officials from real estate services firm Cushman & Wakefield and economic research firm Places Platform told Alliance, city and state officials that office buildings should help retain their struggling retail and food tenants. Finding replacements could be tough until the COVID economy recovers, they said.

COVID-19 will have a lasting effect on the commercial real estate industry but "not be detrimental," said David C. Smith, Cushman & Wakefield's global head of Occupier Research.

Some 81% of surveyed corporations in 35 markets expect to have a hybrid work model in which employees continue to work remotely a few days each week following the pandemic, he said. Most employees will probably work in the office three days a week and at home two days, which could impact the vitality of downtowns.

Large patches of office space will be greatly underutilized some days, which could change office space needs and leases going forward. "The expectation here in the U.S.," Smith said, "is there will be a continued drag of about 15% to 18% of absorption [rates for office square footage] as we look forward … because of the growth in work from home. It is an impact, but not totally devastating to the market."

St. Paul employers are expected to hire more workers over time, which should mitigate any COVID-related office downsizing, Smith said.

Increased hiring statewide could generate another 80 million to 100 million square feet of new office space. To compare, the swell in hybrid remote work is expected to cut employers' office square-footage needs by 12 million to 15 million square feet, he said. Figuring out when and how to address the demand swings is critical.

The Twin Cities metro boasts about 82 million square feet of office space, including nearly 7 million in the core downtown of St. Paul.

With COVID, office tenants have struggled and vacancy rates have shot up, reaching 23% in downtown St. Paul and 21.9% in downtown Minneapolis, according to Cushman & Wakefield fourth-quarter reports.

"What came from this [research] is we now know we need to manage office space usage much better," Christopher Leinberger, founder and managing director at Place Platform, told Alliance and St. Paul officials on the call this month.

Without the right planning, St. Paul's post-COVID offices could resemble a restaurant where guests can't just show up but instead have to make a reservation and arrive 10 minutes early, "otherwise your table gets given to somebody else," Leinberger said. "We are going to have to manage our offices as we increase the hybrid nature of work."

Dee DePass • 612-673-7725