With California lifting statewide COVID-19 restrictions Tuesday, L.A.’s small businesses are poised to fully reopen. For most businesses, the indoor capacity limits and mask mandates are gone.
But does that mean their customers will come back?
That’s the big question for many L.A. restaurants, gyms and coffee shops that rely on office workers coming in every day.
Office employees have gotten used to working from home during the pandemic. Many would love to ditch their commute permanently. And some companies plan to let them keep working from home full-time.
Cafes, Gyms And Restaurants Fear Many Will Keep Working From Home
Only about 25% of L.A. area office workers have been keying into their buildings lately, said Eric Willett, director of research at commercial real estate firm CBRE.
The loss of foot traffic means “there’s absolutely been an impact … on these ancillary services,” he said.
Location, Location, Location
At Cafe Ruisseau in Playa Vista, barista Daniel Sernas said he’s starting to notice customers trickling in from nearby offices. But business is still nowhere near pre-pandemic levels.
“It was pretty slow when we first reopened due to COVID,” Sernas said. “Not a lot of people from the community knew that we were here.”
That’s because Cafe Ruisseau isn’t exactly easy to find. It’s tucked away in a business center courtyard, sandwiched between gleaming office buildings and a large concrete parking structure.
Cafe owner Edward Ackah-Miezah said when he first moved in five years ago, the location provided plenty of steady customers.
“I’d say 85% of the customer base was made up of office workers,” he said.
But when COVID-19 struck last year, those customers vanished overnight.
Office employees started Zooming into work from their apartments — and brewing their own coffee at home. This pocket of Playa Vista became a ghost town.
Ackah-Miezah had to attract customers from the surrounding community. He put up signs on nearby streets, changed the cafe’s hours and kept it open during weekends.
“We’ve really made sure that people know that we’re here,” he said. “We’re a Black-owned business. We’re on different lists of Black-owned coffee shops. So people have been intentional about coming to see us, which has been great.”
But sales are still only about one-third of what they used to be.
Cafe Ruisseau is one of many small businesses in L.A. that once thrived on catering to office workers. It remains to be seen whether those customers will ever fully come back.
Office Vacancy Rates Have Spiked — Especially On The Westside
Confusion around indoor masking could be a deterrent for some office workers. California’s workplace safety board still needs to approve rules allowing vaccinated employees to go maskless in the office. That vote is expected on June 17.
Beyond that, many workers still don’t know how often they’ll be expected to come in. Experts say employers are likely to strike a balance between remote and in-person work.
“It’s such a butterfly effect. They’ll never have heard of Guerilla [Tacos], and never tried it, never have brought a friend, never have recommended it to a friend. It’s just as if it doesn’t exist.”
— Guerilla Tacos owner Brittney Valles
“We expect most jobs to involve going to the office, although there will be more flexibility,” said economist Jerry Nickelsburg, director of the UCLA Anderson Forecast.
Nickelsburg predicts a robust recovery for California’s economy as the state begins to reopen. But he said the hard-hit leisure and hospitality sector will take the longest to fully recover, largely due to the downturn in international tourism.
He said service sector businesses have also adopted technology during the pandemic that will cut down on staffing needs. For example, many restaurants now have mobile ordering options.
“Office workers might order their lunch before they leave the office using their smartphone, and then arrive at the restaurant with the order ready for them,” Nickelsburg said. “The restaurant will have the ability to serve them with fewer table servers and fewer waitstaff … That means fewer jobs for restaurant workers.”
Demand for desk salads and to-go lattes could also decline as large employers choose to downsize their office footprints.
Office vacancy rates in L.A. have spiked to 17% during the pandemic — the highest level since 2012, according to CBRE’s Willett. Sublease offerings have nearly doubled. A recent CBRE quarterly report predicts L.A.’s office market won’t recover until 2023.
Those trends have been dramatic in certain parts of the city, Willett said.
“The biggest shift that we’ve seen has been in West L.A., which — entering into the pandemic — had one of the lowest vacancy rates,” he said. “Over the past year, [West L.A.] has seen some of the most significant deterioration.”
‘It’s Population Zero’
Westside tech and entertainment companies have been subleasing their office space, moving to new headquarters or deciding not to renew their leases. Gina Baski has seen that reality up close.
Baski co-owns a gym called TriFit, located in a sprawling Santa Moncia office park called the Colorado Center.
“We’re on a one million square foot campus, and it’s population zero,” Baski said. “I tell people it looks like a runway that you could land an airplane on.”
COVID-19 forced TriFit to close its doors for more than a year. Even now, the gym’s staff is down by three-quarters.
Workers at nearby companies like Hulu, Oracle and HBO made up the majority of TriFit’s clientele. Those employees used to come in and exercise after work, waiting for rush hour traffic to die down.
But now, some companies have left (HBO recently moved out) and others have struggled during the pandemic (Bird, the e-scooter company, reportedly put its Colorado Center headquarters up for sublease last year).
Baski doesn’t expect the remaining workforce to come in every day. The outlook for her gym feels dire, she said. TriFit used to have 15 corporate partnerships with nearby employers, offering deals and perks to their office staff. Now it only has five.
“Work-from-home has really hit us very hard,” she said. “We just kind of don’t know how many more punches we can take.”
‘A Butterfly Effect’
In downtown L.A.’s Arts District, the disappearance of creative industry office workers has led to a number of restaurants and bars closing their doors for good, said Guerilla Tacos owner Brittney Valles. Her restaurant has managed to hold on, but she said business in the neighborhood is far from normal.
“We are still down 50%, because a lot of companies are not back in their offices,” Valles said.
In recent years, companies like the Warner Music Group and Spotify have set up regional headquarters in the Arts District. Spotify signed a lease for more than 100,000 square feet of office space in the neighborhood back in 2018.
But now, the Swedish streaming giant plans to give employees the choice to keep working from home full-time.
“Giving our people more flexibility will support better work-life balance and help tap into new talent pools,” the company said in a blog post earlier this year announcing the policy.
Valles worries that if Arts District workers choose to stay home permanently, Guerilla Tacos won’t just lose lunch sales and happy hour business — it’ll lose word of mouth.
“It’s such a butterfly effect,” she said. “They’ll never have heard of Guerilla, and never tried it, never have brought a friend, never have recommended it to a friend. It’s just as if it doesn’t exist.”
WFH Seen As A Threat To ‘Building Community’
Back at the Playa Vista office campus that houses Cafe Ruisseau, Media RED employee Erica Ripperger stepped out of her WeWork space to pick up lunch. She said workers like her need to support nearby businesses.
“Playa Vista is a working community,” she said. “It’s all big tech companies. And if all the people are gone, how are these places supposed to survive?”
Cafe Ruisseau owner Ackah-Miezah said if working from home gives people more freedom, he’s all for it. But he thinks staying home full-time may cost workers something more intangible.
“Connecting with people, building community, and really sharing experiences together — that’s what I want to do,” he said. “And obviously, I can’t do it by myself. So I’m looking forward to people coming back.”
For now, Ackah-Miezah is trying to set realistic expectations. He said if workers who used to come to the office every day start coming back twice a week, he’ll be happy.
What questions do you have about business and the economy in Southern California?
David Wagner focuses on Southern Californians getting left behind in an economy beset by soaring unemployment, pandemic-related business closures and high housing costs.
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