Aerial shots show COVID-19 and Detroit’s new normal
Scenes of Detroit as residents learn to live and adapt to the COVID-19 pandemic and find their new normal.
Kelly Jordan and Mandi Wright, Detroit Free Press
The arrival of COVID-19 in mid-March 2020 brought Michigan an unprecedented economic shock.
In Detroit, the virus caused a sudden reversal in the recent downtown resurgence, as tens of thousands of office workers stopped arriving in the city every day and instead worked from home.
A year later, the state‘s economy is rebounding, including in the Detroit subway, but is still far from pre-pandemic levels, particularly in the hospitality and hospitality sectors. commercial real estate.
And in Detroit, many buildings are still largely vacant during the day, and landlords have maintained their rents until with future permission from Gov. Gretchen Whitmer’s administration, the newly vaccinated workers can begin to return en masse to the city. downtown by the second half. of the year – although some continue to work from home a few days a week.
Economists predict a continued recovery for Michigan through 2021, as the number of COVID-19 cases and hospitalizations continue to decline and no vaccine-resistant variants of the virus emerge and spread.
Extended aid measures and $ 1,400 checks in the new $ 1.9 trillion COVID-19 relief bill are expected to boost Michiganders’ personal income levels over the next few months, averaging a 1.2% annual increase by year-end, even though the total Payroll remains lower than it was before the pandemic, according to the University of Michigan’s Quantitative Economics Research Seminar .
“We suspect that many people will be surprised by the strength of the economic recovery after the end of the COVID-19 pandemic”, researchers at UM said in their latest forecast for Michigan.
In addition to how quickly vaccines can be administered, the speed of the state’s economic recovery could depend on when the Whitmer administration eases remaining restrictions on businesses, such as current capacity limits for restaurants. and public places, restrictions on in-person work and early curfews in bars and nightclubs.
Business groups recently urged Whitmer not to seek a six-month extension of an emergency order due to expire April 15 that requires many employers to ban in-person work that could “possibly be performed at distance”. The governor has not announced whether she supports extending office restrictions.
Yet recent economic indicators for Michigan have been encouraging.
Statewide unemployment rate fell from 3.7% on the eve of the pandemic to 23.6% last April, at the height of business closures, but fell to 8.2 % in December, according to the most recent data available from the US Bureau of Labor Statistics.
Since the start of this year, the employment situation has likely improved further as the Whitmer administration began allowing restaurants and bars to reopen for indoor service in early February, although at reduced capacity.
Employment in the leisure and hospitality industry has been the sector of the economy most devastated by the pandemic, seeing its total employment figures collapse by nearly half.
Nationally, total gross domestic product fell 3.5% in 2020. Michigan’s GDP alone would have fallen 5.2% last year, according to an economic forecast from Comerica Bank, which attributed Michigan’s more pronounced drop in the temporary shutdown of auto industry production last April and dragging second-quarter GDP numbers down.
Sandy Baruah, president of the Detroit Regional Chamber, said during the recent “State of the Region ” that the pandemic-induced recession was very different from the Great Recession in that its initial shock occurred faster and was deeper, although its recovery also occurred much faster.
âHalf a million Michigan workers lost their jobs at the start of this crisis was certainly unprecedented,â Baruah said. “We’ve never seen anything like it, and we certainly hope to never see it again. But unlike the Great Recession, the job recovery has been surprisingly strong.”
He added: “The data indicates that this economic challenge has turned out to be very different from what we witnessed during the Great Recession, when it took us a decade to get back to where we were.”
Many companies began implementing work-from-home protocols in mid-March 2020 during the initial outbreak of the pandemic and have not stopped.
According to data compiled by Newmark, the office vacancy rate in the Detroit subway reached a level in 2020 unprecedented in a decade, reaching 16.2% in the fourth quarter.
Yet office owners seem to be holding rents relatively firm.
The average asking rent for suburban office space fell only 3% year-over-year in the fourth quarter, and for offices in Detroit, asking rents actually rose about 9% to $ 23 per square foot, according to data from Newmark.
John Degroot, director of research for Newmark in Detroit, said asking rents had increased for the city because some new buildings had entered the market during the pandemic, adding to the supply. Recently, however, Detroit landlords have started cutting rents to become more competitive, he said.
There are about 76,000 total jobs in downtown Detroit, of which about two-thirds are office jobs, according to the Downtown Detroit Partnership.
Andy Gutman, chairman of Southfield-based real estate firm Farbman Group, said he expects to see many office tenants recall their employees to work by the second half of the year, as long as the vaccine rollout continues. proceeds well and no surprise virus variants appear. .
Gutman said he believes some tenants might reduce their office footprint a bit in the near term, although he doesn’t expect a large-scale reduction in space requirements or a drop in rents. due to the pandemic and organizations that have become accustomed to telecommuting.
âI think you’ll see landlords adjusting the size of their tenants in terms of space, but not necessarily lowering rates,â Gutman said. “We haven’t seen any downward pressure yet, and it remains to be seen if we will.”
He predicts that after COVID-19, more companies will offer flexible working arrangements so that not all employees need to show up in person to work in the office every day.
Another big difference between the Great Recession and the COVID-19 recession was the effects on Michigan’s housing market.
House prices collapsed during the 2007-2009 recession. In contrast, prices have jumped in the wake of COVID-19 and potential buyers hoping for big recession discounts have been disappointed.
The median selling price of a house or condo in the Detroit subway increased nearly 17% in January from the previous year to $ 210,000, and the number of sales increased by 4 %, according to the latest data from the Realcomp multiple ad service.
Car sales hold up but chip shortage continues
After suffering a brutal spring, automakers in the Detroit Three saw their financial outlook improve later in 2020, with General Motors reaching a profit of $ 6.4 billion for the year, with the former Fiat Chrysler making a profit of $ 29 million and Ford reporting a loss of $ 1.3 billion, which was less than some feared during the initial wave of COVID-19.
But automakers have recently suffered from pandemic-related shortages of semiconductor chips used in new vehicle parts. The shortage has resulted in production disruptions and is expected to cost the entire auto industry more than $ 14 billion this quarter in lost revenue and more than $ 60 billion for the year.
Downtown hotels devastated
For many hotels, the effect of COVID-19 on business and leisure travel has been devastating, especially for those in downtown Detroit. Occupancy rates have been around 20% this winter, compared to occupancy rates of around 70% year-round for downtown hotels before COVID-19.
Resuming travel is an open question which may depend on the timing of vaccinations.
The Detroit Metro Convention & Visitors Bureau does not track the annual number of downtown visitors, although President and CEO Claude Molinari has said he expects a slow build-up of visitors this summer and fall, with a potential return to “normalcy” by the first quarter of 2022. However, a full return to pre-COVID19 visitor levels may not occur until 2023, he said.
Businesses in downtown Detroit are not expecting any recall this year from the North American International Auto Show, which will not take place in 2021.
Instead, there will be a smaller and abbreviated auto show called Motor Bella, which will be held September 21-26 at M1 Concourse in Pontiac.
The new show plans to attract around 150,000 people during its four public days, plus another 20,000 during industry and media days. The Detroit auto show traditionally attracts about 800,000 paying customers on public days.
Sports teams are also hanging on
Businesses in downtown Detroit will feel some relief when large-scale live participation returns for Pistons, Tigers, Red Wings and Lions games. So far, Whitmer is only allowing 1,000 fans at Comerica Park for opening day on April 1, less than 3% of the 41,083 stadium’s capacity.
A representative for the Tigers did not respond to a message seeking comment on the financial impact of COVID-19 and the capacity rules for the 2021 season.