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State Government Workers’ Hybrid Schedules Continue to Batter Capitals

Retailers and restaurants suffer as office-based workers stay partly or largely home in numerous states

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The Big Easy of Trenton, a restaurant about a seven-minute walk from the New Jersey State House, has been doling out sandwiches to starved state workers hungry for lunch for decades now. But even though owner Olugbala Sababu has more than 35 years under his belt, he wasn’t ready for what the pandemic and technological progress had served up.

“That had a phenomenal impact on downtown businesses,” said Sababu, a Trenton native. “Where there was traffic on the street, it’s been reduced. And it hasn’t improved since the pandemic because state workers are still working remotely from home two to three days a week. So, post-pandemic, if that’s where we are, with the inflated food prices, all that factors in.”

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By his reckoning, business in Sababu’s Warren Street eatery is down by about 30 percent. And for the retail that surrounds his restaurant, it’s little different. Retail storefronts that depend on a steady stream of state workers are hurting.

Their status hasn’t gone unheard at Trenton City Hall. In an April 10 statement to the Commercial Observer, Trenton Mayor W. Reed Gusciora, a former state assemblyman, said he was calling upon New Jersey Gov. Phil Murphy to raise state aid to the city. The mayor wants the state to either resume in-person work for workers who not too long ago flocked to Trenton, in part due to a deliberate state strategy to use its workforce to energize the capital city, or discontinue state leases on key buildings.

Such a byproduct of the pandemic is happening all over America. State government workers, often used to help downtowns regain their edge after years of losses of industry and shopping, want the same as their brothers and sisters in the private sector: the flexibility to work from home or from a remote location and avoid a dreary and energy-wasting commute, especially if they can perform their jobs on a computer that can be anywhere, not tied into a mainframe at the office. But government officials also have to deal with pressure from locals not to abandon capital cities’ downtowns that otherwise often struggle to remain relevant.

And, of course, even if an employee is coming in three days a week, instead of the historically routine five, that’s two days that person isn’t eating their lunch at a local eatery or shopping downtown after work. 

“It’s a huge challenge for urban centers,” said Stephan Meier, a professor of business at Columbia University and chair of the business school’s management division. “It’s not just the public sector. (When) people don’t come in and businesses actually close offices or reduce them, tax revenue goes down. People might move out of city centers. You can potentially see a downward spiral.” 

It doesn’t help that employees in the private sector are having a hard time getting into the mood to resume their pre-pandemic work and commuting routines. According to Kastle Systems, a workplace security firm that measures security card swipes at office buildings, office occupancy on April 12 was 46.3 percent in the 10 central business districts Kastle tracks, a drop from the 48.5 percent a week earlier, but one that might be blamed on the Passover and Easter holidays.  The previous two weekly measurements were 48.4 percent on March 22 and 49 percent on March 29. Its post-pandemic peak was a still-middling 50.4 percent in late January.

In a February report, CBRE (CBRE), the world’s largest real estate services firm, found that in the U.S. capital region of Washington, D.C., which includes suburban Maryland and Virginia, some 80 percent of its 311,500 federal workers are in jobs capable of being done remotely. Almost half of those workers, not surprisingly, were telecommuting three days or more per week. This has caused grave problems for the Washington region’s office market, and prompted calls on President Joe Biden from the commercial real estate industry to force workers back

In Trenton, the State of New Jersey employed some 56,000 state workers pre-COVID  in a city of only about 90,000 people, according to the mayor.

“If the state returned to pre-pandemic levels of staffing in Trenton, this would support our efforts to revitalize the capital city,” Gusciora said. “However, if this new normal of telework for state workers is the new norm, there needs to be a re-evaluation of levels of state aid that the city receives.”

In a statement, Murphy’s deputy press secretary, Christi Peace, said the administration took Trenton’s predicament into consideration in developing the state’s telework program. She said state employees are required to work in-person three days a week.

“The current pilot program enabling a hybrid work schedule for many state workers was implemented in recognition of the changing workforce landscape,” Peace said. “Offering a part-time telework schedule similar to that of many private companies allows public sector jobs to compete with the private sector.”

In his statement, Gusciora made reference to a similar call by Wanda Williams, the mayor of Harrisburg, Pennsylvania’s capital, for state workers to return. Pennsylvania Gov. Josh Shapiro announced that, effective March 6, all senior managers, governor’s office staff and cabinet members would be in the office at least three days a week. About 2,300 state employees were impacted by this announcement, according to the governor’s  office. In a statement to CO, the governor said about 75 percent of the commonwealth’s 72,000 employees report to their offices 100 percent of the time.

Mayor Williams pronounced herself “pleased by the Shapiro administration’s decision to bring people back to work and get state government moving in-person again.”

“It is a work-in-progress,” said Marc Pfeiffer, assistant director of Rutgers University’s Bloustein Local Government Research Center. “We are seeing some cases where the primary employer is government, and the mayor has asked the governor to require employees to come back full time, typically because of the impact on businesses. The impact of work from home and hybrid are exacerbated in a place like Trenton.”

It’s not necessarily a zero-sum game, noted Matthew Kwatinetz, director of the Urban Lab at New York University and clinical assistant professor at NYU’s Schack Institute of Real Estate. You could have more businesses downtown, he said, making up for the fact that some legacy businesses might have reduced the presence of staff or reduced their footprint. 

The game is playing out in other state capitals. “Like most of the central business districts in the country, our office space is in flux at the moment, (with) higher levels of vacancy than we’ve seen in many many years,” said Michael Nichols, president of the Downtown Boston Business Improvement District, which covers a lot of the seat of Massachusetts government. “As the largest city and the economic center of the state and, really, the New England region — and the state’s capital — we’ve got a fair amount of state office space, in addition to federal and other municipal space.”

Massachusetts’ last governor, Charlie Baker, announced plans in December to vacate about 355,000 of the commonwealth’s 900,000 square feet of Downtown Boston space, with another 96,000 square feet in question, Nichols noted.

“We of the Downtown Boston BID and other stakeholders in the Boston commercial real estate community think (this) was a mistake,” he said. “At a time of this much uncertainty, you have the state, which has the goal of supporting small businesses and seeing a stabilization of the real estate environment, to actually be a player in further volatility in the downtown area I think was a really significant mistake.”

The BID is now counting on new governor, Maura Healey, to reverse Baker’s course, Nichols said. A call and an email to Healey’s office were not returned.

In Connecticut, according to a Wall Street Journal story from a year ago, the state said it would allow its workers to telecommute as many as four days a week permanently. As a result, only a fraction of the roughly 13,000 state workers based in the state capital of Hartford were returning, thus setting back the city’s revitalization efforts. Hartford is also headquarters for giant insurance companies Aetna and Travelers, and drugstore godzilla CVS, which have also made allowances for working from home and for hybrid work. 

California in March announced that it would cut 1.16 million square feet of state offices, impacting 132 leases, following on a 767,000-square-foot cut last year. Also, in January, the nation’s most populous state announced a plan to convert three state office buildings in Sacramento, the state capital, into housing, according to California Public Radio. The move had the support of Sacramento’s mayor, Darrell Steinberg, Capradio reported

Not all public jobs can be done from home, or from a remote location, Kwatinetz noted. So if accommodations are made and those employees get a new benefit at the negotiating table, it might have to be offset by another benefit given to those who can do their jobs only on-site, like a patrolman, or a hospital worker or, Zoom notwithstanding, a teacher. A union also might be tempted to trade the benefit for higher salaries. 

“The housing situation for municipal workers has been increasingly difficult,” Kwatinetz said. “To work from home has a much larger impact on them and their family life in the amount of time they have to be with their families. I could see them using that as a great negotiating point to give benefits to their workers.”

Fred Carstensen, a business professor at the University of Connecticut, said the university itself remains on hybrid scheduling, underscoring the point that institutions are reluctant to make the radical decision to go back to the way things used to be. And it’s not alone.

“Downtown Manhattan is still pretty desolate,’’ he said. “Obviously, your restaurants and your lunch places, they just don’t have the same level of business because the workers aren’t there.  If you’re working from home, you’re probably going to be eating your meals from home.”