$40 million grant program would help inner-city recover from remote shift

AAs businesses take varied approaches to in-person and remote working, commercial real estate experts generally agree that office square footage requirements will likely decrease with the adoption of more hybrid workspaces.

To address the shift in office real estate caused by the COVID-19 pandemic, Governor Gretchen Whitmer’s budget proposal released last month includes a one-time $40 million program to help communities transform offices vacant spaces into new uses through local transition support grants.

The budget proposal recognizes the difficult real estate situation of communities caused by the pandemic, said John LaMacchia II, director of state and federal affairs for the Michigan Municipal League.

“It’s the recognition of what the pandemic has had on communities and then the future impact on those communities from a remote work perspective,” LaMacchia said. “It’s about finding ways to help address these issues and sticking to that investment mentality and the things that matter to our members.”

The Michigan Municipal League supports the proposed program, which would require legislative approval as the budget process unfolds before the start of the next fiscal year on Oct. 1.

Eligible local government units across the state could apply for up to $5 million in funding under the Transition Support Grant program. Municipalities should demonstrate the effect COVID-19 has had on their in-person workforce, such as showing increases in income tax refunds due to shifting employment to remote work , declines in the value of commercial properties within the community, an increase in vacancies in commercial buildings. , or the departure of employers and their workforce.

Grants could support activities such as the rehabilitation of vacant buildings, the demolition of structures that no longer serve the community, as well as programs to help existing businesses and incubator sites.

Most commercial real estate experts say they are cautiously optimistic that more workers will show up for office this year compared to 2020 and 2021, which could lead employers to maintain their long-term leases. However, most forecasts also predict that remote working will help increase office vacancy rates.

In addition, the decreasing number of office workers has slowed downtown activity. In Grand Rapids, downtown employee foot traffic is 39% lower this year than the five-year average in previous years, said Downtown Grand Rapids Inc. President and CEO Tim Kelly. The lack of lunchtime crowds, in particular, has been a challenge for downtown restaurants that relied on the office worker segment before the pandemic, he added.

“We would welcome any tools to move forward,” Kelly said in reference to Whitmer’s budget proposal.

Franklin Partners LLC Director Don Shoemaker believes communities have yet to see the worst of office market developments as companies with five- or 10-year leases have yet to make renewal decisions, he said. -he declares.

“I think there will be way more office space than the world needs because of our ability to hold (virtual) meetings,” Shoemaker said. “We are not yet feeling the impact of the change in the world because the leases do not all expire at the same time. Companies still had three or four years left on their lease when COVID-19 hit.

Jeff Karger, Senior Vice President of JLL inc., noted that some employers are still taking the “wait and see” approach to regularly calling employees back to work in person. Meanwhile, some landlords are considering reallocating their office spaces to new uses, he said.

“Whether they go ahead with those plans or not will depend on the economy,” Karger said.

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