It might be easy to forget, after hearing Target Corp. say last week that it will empty a huge downtown office tower, that Minneapolis before the pandemic was the place to be.
Schafer: There's value in offices, even if Target says it's declining
March 13, 2021 at 2:00PM
More than 1 million square feet of office tenants moved into downtown Minneapolis over the previous six years, the real estate firm CBRE said in 2019. The North Loop gained another big slug of tenants, too.
Minneapolis co-working spaces were still opening in 2019, too, led by the aggressive expansion of an upstart from New York called WeWork. While cranking out marketing hype seemed to be its core business, WeWork's spaces in downtown Minneapolis and in the North Loop were the most fashionable places to work in town.
The momentum continued all the way through the end of 2019, when lease rates in downtown Minneapolis were inching up, leases were being signed and there were new office buildings under construction.
Accounts about employers moving into the city all seem to mention how they were attracted by transit connections and cool amenities for workers, both inside the buildings and on the surrounding blocks.
Last year, it all abruptly stopped. Yet Minneapolis didn't suddenly become the place to leave. What happened is that a pandemic changed office work.
Minneapolis-based Target, which employs about 8,500 people downtown, largely sent its office workers home a year ago. Now, it appears, a lot of them won't be coming back, at least not every day.
There currently aren't any Target employees working in the building it's going to abandon, 33 South Sixth Street, where the company leases 985,000 square feet.
This building is part of City Center and was known as the Multifoods Tower when it opened in the early 1980s. Target is by far the largest tenant. Yet with its announcement last week that it's a leaving, that doesn't mean it's moving its offices. There will not be a mass layoff, either.
Instead Target is adopting what it calls a "Flex for Your Day" approach. The company shared with the media a memo from the chief human resources officer, and it assured the nearly 3,500 people who worked in City Center that they are going to still have a "home base." It might be in another Target facility downtown or in Brooklyn Park, but they won't go daily if they don't want.
Target still has a lease obligation for nearly a million square feet of space through 2031. What seems most likely is that the biggest office sublet opportunity in the state's history just opened up.
Target has earned a reputation for being particularly disciplined about its financial decisions, although of course it doesn't always get the results its executives and planners expect.
Yet you have to assume they really did their homework on how to redo its office space.
It should save money on this move, but Target staff assured me last week that this had nothing to do with saving money. It simply won't need that much office space anymore.
That means Target managers have satisfied themselves that worker productivity has held up well during the pandemic when people worked from home, and there's no reason to expect it to slip if they continue to for part of the time.
Maybe none of this should be as surprising as it was, as there has been talk about work from anywhere for months, as soon as employers finally grasped that the COVID-19 pandemic was going to be a long grind and not a six-week crisis.
But yet it was still stunning news, if just for the scale of the decision. No pilot program dumps a million square feet of office space and takes away the permanent workplace for 3,500 people.
And there are things being given up here. That means risk.
The businesspeople who signed leases a few years ago to move into the city were not wrong about its appeal. Amenities do work to attract people, to a building and to an employer.
When 2nd Avenue in downtown Minneapolis was lined with food trucks and you still couldn't find anything you wanted for lunch, the problem was you.
Rooftop decks were becoming more popular, new furniture was appearing in office lobbies and so on. There was a lovely fireplace surrounded by seating on the ground floor of the building where the Star Tribune has its office. The idea behind all of it was to provide a place to be besides a desk where there was a chance to talk to other people.
It's the unplanned interaction between people that made the downtown business districts really valuable. That's a topic explored by economists and business-school professors when writing about things such as knowledge spillovers and the positive effects of similar businesses all setting up shop next to each other.
These are really simple and very powerful concepts once you think about them.
Value comes from what working people know, and fortunately for everyone else they just can't keep this know-how to themselves. That's why businesses more or less in the same industry seem to grow faster simply by locating next to each other, as information and ideas leaks between them.
Their staffers weren't e-mailing each other, commenting on each others' LinkedIn posts or opening up a multi-employer Slack channel. They were bumping into each other on the sidewalks and in coffee shops and restaurants or taking new jobs across the street at a competitor.
The people who run Target and other big companies have to be well aware of all this. And if they are going to make a hybrid model really work, with lots of people routinely working somewhere besides their office, they seem to have some work to do.
Last week a crabby old newspaper writer took to Twitter to reveal his skepticism about working from home, complaining about the loss of face-to-face work with friends and having missed all the unplanned chances to learn something new, which pop up every day in the office.
"I either get to be part of that," he wrote, "or I'm done."
Yeah, that was me.
