Hybrid Work Model Points to Uneven Recovery for Metro Downtowns 

In the darkest days of the pandemic, all of us shifted to sheltering in place, and especially to working from home, fleeing to the countryside if and when we could, the demise of the big city downtown seemed set in stone.

If you live anywhere near a metropolitan area, you know what we mean. From New York to Boston to San Francisco and any number of points between, subways and buses were empty. Skyscrapers no longer bustled with office workers — and by extension, the businesses and restaurants that were and are the staples of the local, citywide economy suffered or shuttered.

Now, as vaccines have been widely available across the United States for more than a year, infection rates are dropping, and hiring is up, various economies are reopening. Larger firms are demanding that workers return to their physical stations at least a few times a week. The implication here is that with an influx of workers, those local businesses will see some tailwind to their sales, which in turn means they can keep up staffing levels of their own.

But thus far, depending on where you look, the recovery has been uneven. As noted Friday (March 4) by Bloomberg, San Francisco is suffering from a downturn in business tax revenue, and has shown an office vacancy rate north of 20%, while the average similar vacancy rate across the U.S. stands at nearly 17%. It’s worth noting, however, that San Francisco, per data from CBRE, among the top markets for tech talent. Much of that tech talent can work from home, presumably, and thus the negative ripple effect for downtown businesses would be significant and long-lived — evident by a drag on the recovery of hospitality and leisure related jobs.

Headwinds Might Abate — Depending on Where You Look

And yet: There are signs that the headwinds to recovery, particularly in San Fran, might not linger as much as had been feared. Anecdotal evidence has been coming in recent weeks that some major employers are mandating that workers return to the office (though not in full force). Google, for example, has said that beginning next month, workers in the Bay area will have to start returning three days a week.

The recent data employment data show that employers, in February, added 678,000 jobs, according to the U.S. Labor Department. We’re still not where we once were — there are still 2 million jobs in the economy, overall, than there were before the pandemic. The data show that employment in leisure and hospitality continued to increase, with a gain of 179,000 in February.

Drilling down into the numbers a bit, growth occurred within food services and drinking establishments (up 124,000 positions) and accommodations (up 28,000) though the overall leisure and hospitality sector still has 9% lower employment than had been seen just before the pandemic. Professional services, overall, added 95,000 jobs in February — and is 954,000 positions higher than before the pandemic. We might assume that the hybrid work models that are taking shape would be part of those recoveries, and would by extension positively impact some of those metro centers. Sweetgreen, in another bit of anecdotal evidence, said during commentary on its earnings call that the return of workers to office settings is helping boost sales, particularly in urban locations.

PYMNTS’ data underscores the new normal, which may indicate the “local economy” headwinds within metro areas may abate, though unevenly.  Last month’s ConnectedEconomy™ Monthly Report: Working In The “Whenever, Wherever” Office found that 45% percent more consumers — or 70 million more people — now work in a so-called “hybrid” environment, rather than in a traditional office space.

Read also: Remote is How Two-Thirds of US Professionals Now Work