Detroit Regional Chamber > Chamber > In Downtown Detroit, Is It Time for a Post-COVID Pivot?

In Downtown Detroit, Is It Time for a Post-COVID Pivot?

September 13, 2022

On Oct. 25, the Chamber will be exploring the “Future of Our Downtown” during the 2022 Detroit Policy Conference.

The revitalization of downtown Detroit is one of the nation’s greatest success stories of the past decade. As the city enters a post-pandemic environment, new efforts are underway to build a more equitable and prosperous future. The 2022 Detroit Policy Conference will examine the next phase of downtown’s resurgence and the actions needed to continue its momentum. The article below from Crain’s Detroit Business captures this important theme well.

Crain’s Detroit Business
Kirk Pinho

Sept. 12, 2022

Tuesday marks two and a half years since the first COVID-19 cases were confirmed in Michigan.

In some ways, downtown Detroit has rebounded since the bleak early days of the pandemic, when downtown became a ghost town. This summer saw a surge in visitors, and more will be on the way this month with the return of events including the auto show and Detroit Homecoming.

But in other ways, especially the return of daily office workers, downtown’s traffic rebound has a long way to go.

Now, armed with nearly $14 million in federal COVID-19 relief dollars funneled through the Michigan Economic Development Corp., downtown’s key advocacy group is envisioning ways to help it pivot to a future less reliant on office workers.

July saw the highest daily downtown visitor traffic since the pandemic began — an average of 95,010 per day, not including workers or residents — and the first time during the global health crisis that a month surpassed its pre-pandemic level.

According to Placer.ai data compiled by the Downtown Detroit Partnership, there was an average of 94,522 visitors downtown in July 2019.

And Claude Molinari, president and chief executive officer of Visit Detroit, said downtown hotels have increased occupancy from the mid 20s in January to 57% as of last month. In 2018, there were eight major citywide conventions and this year, there are 12; next year, seven are already on the books, he said.

“We’re excited about where things are going,” Molinari said.

But the office-dominated central business district faces challenges not revealed in those visitor-driven numbers. Although there may be more feet on the street from downtown visitors, there remain far fewer butts in seats in the central business district’s 17.9 million square feet of space.

Chicago-based brokerage house JLL, which has a Royal Oak office, says office vacancy downtown is 11.7% — among the lowest rates in Southeast Michigan. However, the DDP says that daily office population is still just perhaps 45% of pre-pandemic levels.

Many major corporate players and large employers remain in hybrid or work-from-home mode, said Eric Larson, chief executive officer of the DDP.

“It’s a very significant impact,” Larson said of the office population drop.

General Motors Co. is famously hands-off — it’s policy is called “Work Appropriately” — leaving the decision of whether to come into the office to its workers, leaving much of the Renaissance Center empty.

Rocket Companies Inc., with its offices in a constellation of downtown buildings, staggers its workforce, alternating days in and days at home. Blue Cross Blue Shield of Michigan? Mostly hybrid, but some come in Monday through Friday. DTE Energy Co.? Hybrid.

So although landlords’ buildings are well-occupied on paper, in reality it’s a different story at the ground level, having ripple effects on restaurants and other businesses that rely on the 9-5 crowd for revenue.

Companies may yet order workers back five days a week but some level of hybrid work appears here to stay. What happens with all that office space once leases begin to roll over and, as expected, companies officially shed space, is in the back of observers and landlords’ minds.

Pivot for downtown?

That’s part of the reason why some are envisioning a pivot, adding more residential and public space to balance out the sea of offices that comprise downtown.

Last week, the Michigan Strategic Fund doled out $13.74 million in Revitalization and Placemaking Program money — which comes from the federal American Rescue Plan Act — to the DDP for eight projects, including a pair of residential real estate developments by Gilbert’s Detroit-based Bedrock LLC and Lansing-based Karp and Associates.

Those projects are:

  • Placemaking enhancements to Cadillac Square next to Campus Martius Park.
  • A pair of placemaking investments in the Paradise Valley Cultural and Entertainment District improving the central park and enhancing the entryway into the district.
  • Grand Circus Park placemaking enhancements.
  • Randolph Plaza improvements at the entryway into the Greektown neighborhood with permanent outdoor gathering space.
  • Social district infrastructure in Capitol Park.
  • Bedrock’s redevelopment of the Harvard Square Center building on Broadway Street.
  • Karp and Associates’ redevelopment of the 1133 Griswold St. building.

It’s public space and residential projects like these, Larson said, that will help drive more residents and visitors downtown when the daytime office population continues to lag — and will for the foreseeable future.

Larson pointed to improvements at Grand Circus Park helping drive a broad strategy for the area.

“That community, especially as Related and Ilitch come together, is really starting to infill,” Larson said. “It’ll take some years, obviously, and it’s not going to be overnight, but the transformation of that park is going to take some time, too. Having a strategy about how the overall master planning of that park evolves with the surrounding neighborhood as it grows up is really critical.”

How landlords grapple with reduced office consumption remains up in the air, although some ways to help repurpose that space have been tossed around.

“I think we’ll see building owners start to get obviously more creative in terms of how they can utilize those spaces,” Larson said.

Federal legislation introduced last summer that would offer developers a sweetener to turn old office buildings into residential, institutional, hotel, or mixed-use space has floundered in Congress, sitting in the U.S. Senate Finance Committee.

If it becomes law, that could help drive additional residential inventory in a central business district that tends to lag behind the downtowns of other large metros.

For example, there are about 4,500 units in the downtown core, according to the DDP.

Yet four hours away in Cincinnati, a city with less than half of Detroit’s population, there are close to 18,000 residential units downtown, according to CoStar Group Inc., a Washington, D.C.-based real estate information service.

Detroit’s population is three-quarters of Columbus, Ohio’s but Columbus’ downtown has nearly 11,000 units. Cleveland has 300,000 fewer residents than Detroit within its limits but about 12,400 units in its downtown — nearly three times as many as Detroit, with another 1,000 or so in the hopper. Baltimore has 100,000 fewer residents but more than 15,000 units in its central business district.

So whether it’s finding new life for struggling office buildings, bringing more residents into the CBD and injecting new life and adding to public space and amenities, all will be crucial to a downtown still trying to find its footing in the pandemic.

“This 24/7 environment with residential and mixed-use is going to be really critical,” Larson said.

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