Exploring the Economic Revitalization of Downtown Minneapolis: Part 3 of 4
Jun 26, 2024
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The Dynamic Business Landscape of Downtown Minneapolis (2020-2024)
Introduction:
Downtown Minneapolis has seen significant changes in its business environment from 2020 to 2024. The combination of pandemic-driven closures and a surge in new business openings has reshaped the landscape, with key industries driving growth and transformation.
Recent Business Closings:
The pandemic has led to numerous business closures in downtown Minneapolis, impacting the community and economy. Notable closures include several longstanding restaurants and retail establishments. This has led to increased vacancy rates and economic challenges for the area, highlighting the need for strategic recovery plans.
As Twin Summit Consulting analyzes the challenges and opportunities in revitalizing downtown Minneapolis, it is crucial to understand the dynamics behind the recent business exodus. The pandemic significantly impacted urban centers, with many workers transitioning to remote work and not returning, leading to a sharp decline in foot traffic and economic activity in downtown areas.
One of the major trends observed is the relocation of companies from downtown Minneapolis to suburban areas. For instance, Portico Benefit Services moved to Edina, citing the need for a more flexible, hybrid work environment, and AT&T relocated its office to Bloomington. These moves highlight a broader shift towards suburban locations that offer greater flexibility and lower costs compared to downtown spaces (Center of the American Experiment).
During 2023 Twin Cities Business reported: With over 21.2 million square feet of vacant office space in the Twin Cities metro, office vacancy rates in the area are up 12.2% year over year, according to a recent report by Toronto-based Colliers International. According to Center of the American Experiment this trend is particularly pronounced in the Minneapolis central business district, which saw a negative absorption of 300,000 square feet in the first quarter of the 2023 year alone.
Based on the “Four years after George Floyd , Minneapolis still scarred” (nypost.com) article, the riots following George Floyd's death in 2020 exacerbated these issues, causing further disruptions and leading many businesses to either close down or relocate permanently. This article also highlights that office vacancy rate in downtown Minneapolis stands at 27% and that measures only the office space on which no rent is being paid. The true vacancy rate may indeed double that number.
The types of businesses leaving downtown range from corporate offices to retail and service establishments. The common reasons include the shift to remote work, safety concerns, and the economic downturn resulting from both the pandemic and civil unrest. These factors have collectively diminished the attractiveness of downtown Minneapolis as a business hub.
The effects of this exodus are profound. The high vacancy rates are contributing to a decline in property values, which in turn impacts the tax base for the city. This reduction in revenue can affect public services and infrastructure investments, creating a vicious cycle that further deters businesses from returning. The University of Toronto has gauged the post-2020 recoveries of 66 North American downtowns by measuring cell phone traffic and comparing it with the same time period in pre-COVID 2019. As of October 2023, Minneapolis’s downtown had recovered only 56% of its 2019 traffic. (Center of the American Experiment).
Despite these challenges, there is hope for revitalization. Strategic initiatives focusing on enhancing safety, improving infrastructure, and incentivizing businesses to return could help reverse the negative trends.
The Push for Downtown Minneapolis Revitalization
Initial Impact and Early Efforts (November 2020)
In November 2020, downtown Minneapolis began feeling the profound effects of the COVID-19 pandemic. Steve Cramer, President and CEO of the Minneapolis Downtown Council, highlighted that the pre-pandemic number of 218,000 daytime workers would not return soon, given the rise of remote work. This shift significantly impacted local businesses, particularly restaurants.
(Source: https://tcbmag.com/downtown-minneapolis-will-come-back/)
In February 2022, approximately 44.6% of the workforce in downtown Minneapolis were working in downtown offices. Following the stabilization of COVID-19 cases after the Omicron wave, there was a significant ramp-up in the return to office in the spring of 2022. The "mpls downtown council" and partners began collecting return-to-office data in August 2020, at which point the share of employees working in-office in the core business district was estimated at 12.2%. This percentage remained around 15%-16% through the fall of 2020 and early 2021. In the spring of 2021, the share of in-office workers jumped significantly to 23.3%, marking the largest monthly increase since data collection began. This trend has continued to increase, except for a minor setback in January 2022. (Source: https://www.greatermsp.org/pages/return-to-office-trends/)
Figure 1. The chart showing the "Downtown Minneapolis Office Occupancy Rate" is sourced from Greater MSP
Revitalization Efforts (April 2023)
By April 2023, the push to revitalize downtown Minneapolis had gained momentum. A brainstorming event, "The Big Think: For the Love of Downtown," brought together business leaders and community stakeholders to reimagine the central business district. Key suggestions included enhancing the riverfront with new attractions, creating a skating rink, and establishing a vertically integrated urban food district. A standout idea was the weekly "Downtown Day," where businesses would commit to having their teams work downtown at least one day a week, supported by in-person meetings, catered lunches, and special offers from local establishments.
(Source: https://tcbmag.com/what-you-can-do-for-downtown-minneapolis/)
Current Challenges and Efforts (August 2023)
By August 2023, the flexible hybrid approach of downtown's largest employer, Target, continued to impact the local economy. Reporter Brianna Kelly's months of interviews with downtown businesses revealed a pressing need for Target's full return to the office. "Everyone wants Target to be back; we need Target to be back," Kelly reported. The absence of Target's employees had far-reaching effects on property values and the hospitality business. Restaurateur David Fhima expressed frustration, calling on Target to do its part in revitalizing downtown.
Many downtown leaders echoed the sentiment that Target's return would significantly boost the local economy, though some were hesitant to speak publicly. Target, maintaining its hybrid model, emphasized its commitment to Minneapolis and highlighted the strategic advantages of flexible working arrangements.
Recent Developments (March 2024)
By March 2024, downtown Minneapolis showed signs of a robust revival. The Big Ten Women's Tournament and a partial return of workers to downtown offices brought significant crowds, reminiscent of pre-pandemic days. Steve Barnier, owner of Dave's Downtown, a lunchtime staple in the skyway, reported a 40% increase in business compared to the previous week. The presence of large companies like Target and U.S. Bancorp encouraging a return to downtown work contributed to the surge.
Kathy McCarthy, Senior Director of Public Relations and Communications for Meet Minneapolis. also noted that the 13,000 attendees at the convention center for the American Physical Society convention contribute positively to this vibrant atmosphere.
The Role of Twin Summit Consulting in Downtown Revitalization
Twin Summit Consulting, is deeply committed to the revitalization of downtown Minneapolis. We are focused on understanding and addressing the post-pandemic challenges that have affected the urban landscape, particularly the significant decline in foot traffic and business activity.
Leveraging our expertise in marketing and business development, we aim to propose innovative solutions that will attract businesses back to the area, stimulate economic growth, and enhance the vibrancy of downtown Minneapolis. Through our dedication and proactive approach, Twin Summit Consulting aspires to play a pivotal role in the long-term revitalization and prosperity of the city’s central business district.
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