Examining the long-term impact of the pandemic on downtown buildings

Only a fraction of Minneapolis workers have returned to their offices, leading to questions about the future of downtown buildings.

Office building occupancy in downtown Minneapolis is at 13.5% for October, according to recent ‘reanimation’ metrics, analyzing data from a sample of downtown’s largest office buildings. The regularly updated metrics are the product of a partnership between Minneapolis Downtown Council, BOMA Greater Minneapolis, Meet Minneapolis and Minneapolis Federal Reserve.

It’s now been nearly seven months since Minnesota’s ‘Stay at Home’ order went into effect. While many businesses have since reopened, the current ‘Stay Safe’ plan requires companies to telework if possible.

"Occupancy has dropped considerably," said commercial real estate expert Jason Butterfield, a senior director at Frauenshuh Commercial.

Butterfield said, with a vast majority of large corporations still working remotely due to the COVID-19 pandemic, smaller businesses also suffer, including nearby shops and restaurants.

"It’s ultimately the perfect storm," Butterfield said. "There’s just not a lot of people working downtown at this point. And those small restaurants, like on the skyway, there is a ripple effect. They’re the ones that are going to be feeling this pain significantly."

5 EYEWITNESS NEWS checked in with some of Minneapolis’ largest employers to see how long they anticipate work-from-home models to continue.

Wells Fargo said it will continue with its current operating model through at least Dec. 1, affecting about 200,000 employees in the region. Vice President of Corporate Communications Steve Carlson said the company doesn’t know when it will return to a more traditional operating model but is "creating a thoughtful, phased plan for returning to the workplace."

U.S. Bank said about 75% of its total employee base is working from home and officials don’t expect a large-scale return to the office before January 2021. Essential employees will continue working onsite, as the vast majority of branches have remained open for banking services.

Thrivent Financial said 90% of the company’s 1,200 employees in downtown Minneapolis are still working remotely. It has extended its remote work until at least January 2021.

Xcel Energy normally has about 2,000 employees at its headquarters in downtown Minneapolis. Company leaders said 90% are still working remotely and that will continue through at least February 2021. A spokesperson said, "As a company headquartered in Minneapolis, we’re proud to call the city home. We’re investing in our communities and region to ensure that, as our economy recovers from the COVID-19 pandemic, we also help downtown Minneapolis, and the city as a whole, remain as vibrant as ever."

Minneapolis-based Target announced the vast majority of team members will be working remotely through June 2021. Executive Vice President and Chief Human Resources Officer Melissa Kremer said, "As we look to the future, our headquarters environment will include a hybrid model of remote and on-site work."

Despite long-term work-from-home models, Butterfield said corporations do not appear to be selling their office spaces or looking to pull out of downtown.

"In the Great Recession of 2008, 2009, we saw many companies give back millions of square feet of office space. In this cycle, this isn’t quite the same," Butterfield said. “I do feel landlords believe this is all temporary.”

He said he is also surprised companies are not downsizing their offices and that some are actually expanding.

"We’re seeing office users actually demand more office space. You’d think they’d be shrinking in size, but they’re actually taking more space to give themselves a little more room," Butterfield said. "The office size pre-COVID, pre-pandemic was actually shrinking. The per square foot per employee was dropping. Now we’re seeing an increase in that."

Butterfield is hopeful downtown areas will see a resurgence when workers start heading back to the office.

He said, in the meantime, some landlords are reducing the rent for retailers so they can make it through these slow months.

"The vibrancy will come back to downtown Minneapolis, downtown St. Paul and you’ll see this within the next two years. It just will take time to flush out," Butterfield said.