The pandemic is the unwanted gift that keeps on giving.
I have a reader who might be considered a gadfly, but he’s an evangelist claiming that we’ve seen a sea change thanks to COVID-19 and remote work has made offices obsolete. Maybe he’s right. I say it’s too early to tell.
According to the federal Bureau of Labor Statistics, nearly 73% of businesses reported that their workers rarely or never engaged in remote work in 2022 — closing in on pre-pandemic levels.
But this minority of the civilian workforce working remotely casts a large shadow over our economy, especially central business districts.
Kastle Systems, which tracks back-to-the-office moves, estimated 49.8% occupancy as of late June. Kastle uses a 10-city average ranging from New York to Los Angeles but doesn’t include Seattle. In the latest report, Houston led at nearly 61% occupancy. San Jose, Calif., in the heart of Silicon Valley, where remote work flourishes, was the lowest at 38%.
As of May, 48% of workers in Seattle’s central core have returned to the office compared with 2019, according to the Downtown Seattle Association. The most significant boost has come from Amazon, which mandated employees must work in the office at least three days a week.
So, you can be an offices-half-full or an offices-half-empty kind of person.
Still, Capital Economics, an independent research firm, estimated this past month that remote work will shave 35% from the value of the U.S. office sector. In addition, it predicted many office buildings won’t return to their previous peak values until 2040 or later.
As loans come due for commercial real estate properties, many cities face a reckoning. Refinancing is difficult with high interest rates. In some cases, buildings are worth less than the land they occupy. Foreclosures and defaults are rising.
This is already spilling over to hurt sectors that are dependent on offices, such as architects, cleaning services, construction and others. The Wall Street Journal estimates this accounts for a “multibillion-dollar ecosystem.”
As a result, many American cities are struggling to convert office buildings unlikely to see workers again into other uses, especially apartments. Rigid zoning and building codes, the footprint of the structures, and resistance from nearby homeowners to increased density all make this difficult.
Seattle is facing some of the same challenges. Mayor Bruce Harrell announced a “call for ideas” to alter some of the city’s office space to residential or other uses.
The top contenders from architectural firms include the Mutual Life Building, the Polson and Western buildings, and the iconic Smith Tower, all in Pioneer Square.
“This design competition sought bold ideas from partners that are best positioned to help us design and build a downtown where we can all live, work, learn, shop, play, and so much more,” Harrell said in a statement. “We will use these ideas to explore and inform next steps to increase housing in our city core and activate our streets with new and diverse businesses and services at the ground level.”
But bringing these contenders to fruition will take time and money, as well as the consent of landlords. And newer skyscrapers lack floor plans that could easily be turned into residential uses.
The mayor gets it. He understands the direct relationship between the health of downtown and that of the rest of the city. His plan has the potential to enhance the vibrancy of both.
Several trend lines are moving in the right direction — return of workers, number of residents, visitors and hotel occupancy are all going up, and crime is going down, with violent crime and property crime down the first five months of the year compared with 2022. Downtown has seen a 13.8% decrease in violent crime and a 35.1% drop in property crime over the same period.
Harrell also proposes creative uses of retail space, helping small businesses locate downtown, upzoning parts of Third Avenue and waiving and speeding building permits.
Seattle must address the fentanyl crisis that is debilitating people on our streets daily. Establishing drug use legislation in the Seattle Municipal Code is a necessary step that will save lives and increase the city’s ability to see these Downtown Activation Plan components succeed.
Downtown must first be clean, safe and welcoming. Additional investment in the Metropolitan Improvement District, reviving Third Avenue, more coordinated graffiti cleaning and continued police support will all help get this foundational step on firmer footing.
But Seattle’s central core retains advantages that many other cities lack. For example, it is home to around 100,000 people. It’s near the natural deep water port that’s part of the Northwest Seaport Alliance with Tacoma, supporting many well-paying jobs that can’t be done from home.
The cruise industry is back from the pandemic, with 1.4 million people expected to sail from Seattle, up 12% from this past year and even beyond 2019 levels.
Most passengers take days between arriving here and boarding their ships to visit Pike Place Market, the Space Needle, Seattle Center, Amazon’s Spheres and myriad other attractions. They provide a boost once offered by full offices.
To be sure, we’re in undiscovered territory. But giving up on downtown Seattle is not an option. It accounts for the majority of the city’s business taxes and majority of its workers. Regular readers know my contention that any successful metropolitan area must have a thriving downtown.
Whether remote or hybrid work remains for much of the local workforce or a gradual return to the office continues, the heart of the city must be healthy.
