The Pandemic Has Made A Hot Mess Of Downtown D.C.'s Economy

Back in the Before Times, downtown Washington, D.C., was known for its busy restaurants, packed offices and marquee entertainment centers like Capital One Arena. It often felt like developers were hosting a ribbon-cutting for a new gleaming office building every other month.

Now, empty streets are the norm. The COVID-19 pandemic has transformed the District's once-thriving downtown area into a ghost town over the past nearly eight months. Crowds only seem to materialize when there's a protest, leading business owners to board up their windows and re-lock their doors.

A new economic report documents the recent toll the coronavirus pandemic has taken on the 138-square-block section of downtown D.C. It was produced by the Downtown D.C. Business Improvement District (BID), a nonprofit that promotes and supports business and property owners inside its boundaries.

The gist? Downtown D.C.s' economy has been crushed by the pandemic, though it has made a slight recovery since the BID issued its last report in July.

First, some slightly good news: Office workers slowly started to make their way back to work over the past three months. The percentage of office workers in their offices went from 5% in the summer to 10% in the fall.

However, businesses in downtown D.C. offered about 7,000 fewer jobs in September than they did at the end of last year. The BID attributes the decline to permanent closures and staff cuts made by suffering hotels, restaurants, stores, theaters and event venues. The catering and concessions company Aramark, for one, announced in late October that it was laying off 738 employees at Capital One Arena and 123 employees at the convention center until those facilities reopen.

Most of the people who work in the area's office buildings are still employed but working remotely. Businesses have added back about 1,900 jobs since June, bringing the total job count to 181,600.

Office vacancy rates hit record levels in downtown D.C. (15.2%) and the city as a whole (11.5%), continuing a three-year trend. There were no office sales in the entire city in the past three months of the year, a fact the report's authors call "highly unusual."

Anyone looking to rent a floor of offices right now is going to have a heyday. Landlords are offering record levels of rent concessions, including space improvements and months of free rent. The BID says landlords are beyond eager to attract new tenants, as many existing ones are waiting to make any long-term decisions about revising their work-from-home policies or renovating their existing office spaces.

As for retail, vacancy rates have also gotten worse over the past three months. The retail vacancy rate reached an all-time high of 18% in October, up from 12% at the end of 2019 and 17% in July.

And restaurants continue to take a beating. Though more restaurants are now offering indoor and outdoor dining than they were in the summer, restaurant sales are only reaching 30%-50% of 2019 levels. That does mark an increase from three months ago, when restaurants were only making 20%-40% of their 2019 sales. No new restaurants opened in the last three months, and one — Olivia on F and 9th Streets NW — closed.

More businesses and cultural institutions like the Smithsonian National Portrait Gallery unlocked their doors after the city moved into Phase Two of reopening at the end of June. Planet Word, the city's new museum of language, celebrated its grand opening in October.

However, many culture and entertainment spaces within the DowntownDC BID's boundaries remain closed, including Capital One Arena, the Walter E. Washington Convention Center, the Shakespeare Theatre and Madame Tussaud's Wax Museum (that perennial favorite of out-of-town tourists). Over 1,000 theater shows and other performances were cancelled between March and December 2020. The ensuing loss of patrons — around 400,000 of them, according to the report — hurts restaurants, bars, parking garages, Metro, ride sharing services and other businesses.

These numbers spell trouble not just for downtown workers, business owners and landlords, but for the city as a whole. Last year, downtown D.C. contributed nearly 16% of D.C.'s local gross tax revenue, according to the BID's State of Downtown 2019 report. Lost tax revenue could mean the D.C. Council and Mayor Muriel Bowser will cut spending even further, extending the pandemic's negative impact on residents far into the future.

When will the economy rebound to pre-pandemic levels?

Whenever the pandemic ends, the report's authors hedge. "What happens next is dependent upon the pace of decline in the spread of COVID-19," they write. The BID will work with its members and the D.C. government to prepare for officer workers, business travelers and tourists to return in higher numbers as soon as early 2021 — if the number of cases holds steady, that is.