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D.C.’s Slower-Than-Expected Return To Work Creating More Pain For Downtown Restaurants

Restaurants have faced a difficult year across the D.C. region, but downtown businesses have faced a particularly hard time, as office workers have yet to return in a meaningful way. 

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The Capital One Arena on Seventh Street NW in Chinatown, part of the Downtown D.C. BID.

Office landlords say their buildings are still less than 20% filled, even after months of installing safety measures and encouraging a return to work. Downtown restaurant operators, who are heavily dependent on business from office workers, say they are doing about one-third of their typical sales as the area remains quiet during the week. And they expect it will become even more challenging as the winter makes outdoor dining less appealing.

Downtown D.C. in October experienced about 18% of the overall economic activity that it had in the same month last year, according to a report from the Downtown D.C. BID. The report found that the percentage of workers coming into the office has increased from 5% over the summer to 10% in the fall, and downtown's daytime population increased from 35,000 in July to 47,000 in October. 

"The substantial decline from 2019 is largely due to the fact that only 10% of office workers are in their offices, up from 5% in July, our theaters and entertainment venues are closed, including the Capital One Arena and Walter E. Washington Convention Center, and our museums have just started to reopen with limited capacity," Downtown D.C. BID Executive Director Neil Albert wrote in a statement to Bisnow

Clyde's Restaurant Group President John McDonnell, who took the top job earlier this month, said the group's downtown restaurants — Clyde's Gallery Place, Old Ebbitt Grill and The Hamilton — are doing around 30% of their typical sales. He said the group's suburban Clyde's locations in Maryland and Virginia are at around 65% of normal sales.

"If you're downtown, office space drives a lot of the traffic," McDonnell said. "And if people aren't using those offices, it's a tough road to hoe."

ThinkFoodGroup Chief Operating Officer Eric Martino, whose restaurant group was founded by celebrity chef José Andrés and includes downtown restaurants Jaleo, Oyamel Cocina Mexicana and Zaytinya, said the group's sales are around 35% of typical levels. Another ThinkFoodGroup downtown restaurant, China Chilcano, is remaining closed through the winter.

"We're struggling," Martino said. "We're heavily dependent upon the business district, on Congress, on folks who come in for the power lunches during the day, and we benefit from Capital One Arena as well. ... I don't expect it to get any better. Probably it will get worse in terms of occupancy as we head into the winter."

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The Clyde's at Gallery Place restaurant on Seventh Street in Chinatown.

Office buildings in Downtown D.C. have remained emptier than their suburban counterparts, Brookfield Properties Executive Vice President Greg Meyer said.

Brookfield owns nine Downtown D.C. office buildings and several in the suburbs. He said the company's offices across the region are still about 10% filled on average, but some suburban buildings have experienced occupancy around 30%. 

"Occupancy has been higher the closer you get to residential neighborhoods," Meyer said. "We and our competitors have all spent a lot of time and money making sure our buildings are safe from a ventilation standpoint, with social distancing and signage. The buildings are safe, but they're still empty."

Carr Properties CEO Oliver Carr, whose firm owns a dozen office buildings in the D.C. area, said they are averaging around 10% to 15% of normal occupancy levels.

"The return of people to their offices has been a bit slower than expected," Carr said. 

He attributed this sluggish return to several factors, including the recent spike in COVID-19 cases, workers having child care responsibilities, concern about public transit and companies becoming more comfortable working from home. 

Carr said the restaurants on the ground floors of his company's downtown buildings have been hit hard by the lack of workers coming into the office. He said he has provided flexibility and reached agreements with retail tenants to help them get to the other side of the crisis. 

"Those operators are definitely hurting significantly," Carr said. "Very few people are in the city, so it's hard for those operators to survive."

In order to keep downtown restaurants alive, Carr said the D.C. business leaders should work with the city's elected officials and WMATA to encourage a safe return to work. 

"I look at this as a civic obligation," Carr said. "At some point, leaders in D.C., in the business community, really need to come together and put out a message that we need to get back to work. Because the city really depends on it. If we don't come back in the near term, it's going to be very hard to see how many of these small businesses can survive."

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The 655 New York Ave. NW office project comprises a huge new office building and more than 70K SF of retail space.

Brookfield brought its employees into its new regional office at 655 New York Ave. NW last month, Meyer said. He said it is staggering its work schedules, with about 40% of its 120 employees coming in Monday, Wednesday and Friday, and another 40% coming in Tuesday and Thursday. The remaining 20% are still fully working from home because of child care, health issues or other situations, he said. 

Meyer said he thinks more employers should follow suit and bring people back to the office in order to help provide business for downtown restaurants. 

"It's important that we start to decide we're going to be back in offices, not 100%, but following the mayor's protocols, largely so we're supporting the downtown and the retailers there and keeping them alive, because every day that goes by, we're hearing more cases of businesses that are closing permanently," Meyer said. 

Rockefeller Group Regional Development Officer Hilary Allard Goldfarb said the firm brought its D.C. employees into its new office at 1901 L St. NW, a redevelopment it delivered recently in partnership with The Meridian Group

The New York-based firm invested in that project, and in February it was part of a team selected to redevelop WMATA's Jackson Graham Building in Chinatown. She said Rockefeller Group remains bullish on investing in Downtown D.C. over the long term, despite the challenges it faces today.

"We believe in the resiliency of D.C., and we doubled down by building out our new office," Goldfarb said. 

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ThinkFoodGroup's Zaytinya restaurant in Penn Quarter

The executives at Clyde's Restaurant Group and ThinkFoodGroup said they are not banking on a significant inflow of office workers coming downtown during the winter. But they are taking a series of steps to prepare their restaurants for the coming months. 

Clyde's is leaning into the takeout and delivery business with a series of new concepts. McDonnell said it is rolling out three ghost kitchen offerings within its existing kitchens: a grilled cheese concept, a chicken-and-shrimp concept, and one with artisanal street pies and empanadas. 

The delivery concepts will provide three new business lines for the restaurant group without having to add any extra real estate or staffing. With the large kitchens at its restaurants doing only a fraction of their normal business, he said they have enough extra capacity to handle the three new offerings. 

"Those are things we can service off our existing lines without having more staff," McDonnell said. "It's like having more restaurants without more employees because you've got the capacity. Our lines downtown are used to doing three times as much business, so we can knock out some other concepts from the same equipment."

Clyde's Restaurant Group has also invested $120K across 10 restaurants to buy and install plexiglass barriers between its booths. 

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Customers dine inside Old Ebbitt Grill, where Clyde's Restaurant Group installed plexiglass barriers between tables.

McDonnell said these plexiglass barriers create a safer environment for people dining indoors, but they still can't seat two booths next to each other because of the District's 6-foot distancing requirements. He said he wants to see an exception to the distance requirement made for restaurants that have barriers between tables. 

"We put plexiglass barriers with booths in the hopes that at some point it will be changed to having 6 feet or a physical barrier, because COVID doesn't travel through walls," McDonnell said. "That would be a game-changer for us because we're at the point where on weekends our demand exceeds supply. ... We could do more business on the weekends to compensate for the empty offices."

Clyde's Restaurant Group has also bought propane heaters for outdoor dining. But McDonnell said it has much more space at its suburban Clyde's restaurants to create large outdoor seating areas than it does downtown. 

"Compared to the space we have in the suburbs, it's not even close [downtown], and that explains a lot of the discrepancy in sales," McDonnell said. 

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ThinkFoodGroup's Jaleo restaurant at Seventh and E streets NW has set up outdoor tents.

Martino said ThinkFoodGroup's first attempt to install outdoor tents at Jaleo didn't go well. On a windy day about three weeks ago, he said the wind coming down E Street knocked down the tents and ripped them apart. 

"We got some tents and spent about $5K, and every penny counts when we're talking about our revenues, and that got trashed because of the wind. The tents broke," Martino said. "So we got some better, heavy-duty stuff that we think will be more sustainable."

ThinkFoodGroup has also invested in heaters, bought vests for its employees and is offering complimentary warm beverages to guests when they sit down.

Martino said he is thinking every day about the ongoing rise in COVID-19 cases, and he has been concerned by other jurisdictions rolling back their reopening plans in response to the outbreaks. 

"It has me incredibly worried," Martino said. "I really hope we don't roll back because we need every seat we can."

McDonnell also doesn't want to see a rollback in the reopening process. He said restaurants are trying to bring in every dollar they can to make it through the winter because the news around effective vaccines means business could return to normal next year. 

"As people get vaccinated through the winter, it's probably going to loosen people up," McDonnell said. "So I'm hopeful in April or May, we'll start feeling some momentum, and I'm hopeful by the third quarter of next year we're back to being who we are."