A recent New York Times piece on commercial real estate focused on the fate of suburban office parks—those post-war complexes often referred to as cubicle farms. This line stood out:
“From the outside, it’s hard to know that the 20th floor of a skyscraper has gone vacant. In a suburban office park, the signs aren’t so inscrutable.”
Although it might be invisible to passersby, that empty 20th floor, and thousands like it throughout American cities—has been severely disrupted, and threatened the survival of, urban communities.
The story of the invisible empty floor is a simple one: mostly white-collar businesses shuttered during the pandemic, sending everyone home to work remotely. But, slowly, that story led to very visible outcomes—without office workers to support them, about a third of all small businesses in cities like Chicago and New York closed. In San Francisco, that number was closer to 50 percent. The most common closures included restaurants, coffee shops, groceries, and retail stores—in other words, the connective tissue that holds communities together.
There’s no sign that workers will be back at pre-pandemic levels anytime soon. A combination of permanent remote or hybrid work, in many industries, and new Covid variants that have stymied back-to-the-office mandates, is stalling their return. That’s the takeaway from Bloomberg’s “Pret Index” which analyzes transactions at café chain Pret A Manger. Sales in New York’s downtown and midtown stores are stuck at half of their pre-pandemic numbers (in contrast, London and Paris’ numbers have almost returned to 2019 levels).
But for cities stuck with empty storefronts, there’s a dire need to speed up their return. Mayors get headlines by offline large companies in, and for good reason. While they’re often given large tax breaks, they provide well-paying jobs and bring in thousands of people during the week who frequent the kinds of businesses that crumbled during their absence. Commuters spend money during lunch hours at take-out outlets, coffee shops, and retail stores, and hang out after work at bars and restaurants. They ride mass transit and use parking garages, further supporting the local economy.
Small Businesses Make Big Cities
Helping small businesses recover (and encouraging new entrepreneurs) isn’t just about making sure office workers get their coffees and happy hours. A pre-pandemic report by JP Morgan noted that small business growth in inner cities is critical to addressing unemployment. “The Big Impact of Small Businesses on Urban Job Creation: Evidence from Five Cities” found that in four of the five cities studied (Chicago, Dallas, Detroit, Los Angeles, and Washington, DC), small businesses created the most jobs.
The US Small Business Administration echoed the findings, reporting that small firms “accounted for 9.3 million net new private sector jobs from 2005 to 2019, or 64 percent of the total. While job creation tends to fluctuate from one quarter to the next, small firms created more jobs than large firms in 8 of the last 12 quarters of available data.”
These numbers represent millions of workers who are employed close to home. That means they can walk or use mass transit to commute, run orders, and shop and dine, which reduces car usage. That, in turn, improves air quality and cuts back on traffic, which enhances the livability and safety of urban communities. Those local worker/local shopper habits also keep money in the neighborhood. About $68. out of every $100. spent at local businesses stays in the community, as opposed to $43. for non-local businesses. That’s on top of small businesses paying local taxes, requiring less maintenance, and relying on existing infrastructure.
Small businesses, which typically offer more local diverse goods and services, also add to the identity and character of cities, which makes them appealing to both commuters and tourists (who spend about 1.5 trillion in the US annually). While all of America’s largest cities have national chain restaurants and retailers, it’s the unique local businesses that create an experience that can’t be replicated at home.
The Recovery Solution: Not About Big Business Alone
The benefits of large companies are real, but even in good times they were never shared widely (One out of three Fortune 500 companies are headquartered in just six cities: San Francisco, Minneapolis-St. Paul, Houston, Dallas, Chicago, and New York)—and even where they were strongest, they have yet to return to pre-pandemic levels. New York, Houston, and Chicago rank in the top dozen cities with the highest unemployment rates.
When New York Major Eric Adams, earlier this year, announced his economic plan for the city’s recovery, big companies, including JPMorgan Chase and Morgan Stanley, weren’t the focus. Instead, the “Rebuild, Renew, Reinvent” blueprint outlined specific efforts to help small businesses. After all, even if JP Morgan Chase’s 37,000 employees returned to their New York office next week, they would find many of their old favorite local shops and restaurants closed. Adam’s administration, as with Lori Lightfoot’s Chi Biz Strong Grant Program in Chicago and London Breed’s Proposition H and the Small Business Recovery Act in San Francisco, has the right idea: recovery isn’t a choice between supporting corporations or small businesses. It takes both.
Adams’ plan also confronts another reality of the pandemic: black-owned small businesses closed at twice the rate of other businesses, and the closure of many Asian-owned businesses, which at 20 percent of the city’s total were a significant economic driver before 2020 , led to an over 4000% rise in unemployment claims by Asian Americans from May 2019 to May 2020 (almost three times the overall state increase). For the good of their communities and city recovery, small business solutions must also address these inequities.
Bringing small businesses back to American cities, and in turn, revitalizing urban communities, must be a priority. Those businesses are vital to economic recovery and to supporting city residents, who include so many of the “essential workers” we relied on during the height of the pandemic. How can it be done? There is no one perfect solution, but a combination of the following four ideas would be a strong start:
1. Encourage large companies to bring workers back to the office. That could include building upgrades to make workplaces safer (more elevators, better air filtration); “hoteling,” or allowing smaller numbers of workers into the office at any one time who can then more easily share space with colleagues; aligning incentives and benefits with returning to the office (reward it). As that NYT article noted, suburban office parks need new identities, but urban office buildings, with their prime locations, just need a facelift and upgraded systems to deal with the possibility of another pandemic.
2. Create more affordable housing. The city-wide benefits of workers living close to their place of employment are only possible if the rent is reasonable compared with the salaries of those workers.
3. Improve mass transit. Make it easier for hospital and hospitality workers, teachers, entrepreneurs, cashiers, and salespeople to live and work in their cities.
4. Become more nimble. Deloitte’s report “Future-proofing cities in a post-pandemic world” cites this as a key to cities’ comeback. “Nimbleness refers to longer-term flexibility and intentional change-making within a city….One of the biggest challenges cities often face in being nimbler is their internal policies and procedures. Nearly 52% of surveyed cities cited complex policies, regulations, and procurement procedures as their biggest challenge in achieving their social, environmental, and economic goals.” Mayors Adams and Breed’s economic plans directly address the red tape small businesses fell victims to during the pandemic and how bureaucratic run-around prevented entrepreneurs from accessing the support they needed to stay afloat.