Government workers returning to work is a big deal for downtown St. Paul, but not a silver bullet

The return of state employees to their offices in June, joining St. Paul city staff, could bring thousands of government workers back to downtown St. Paul.

But will that turn around the city’s fortunes?

A day after Gov. Tim Walz announced the return-to-work plan, downtown boosters said they’re hopeful the influx of white-collar workers will be enough to stop downtown St. Paul’s slide. But there are still big questions about how many workers will be back, how often, and whether they’ll linger long enough to keep downtown businesses alive — that is, the businesses that survived the pandemic and its aftermath.

Mayor Melvin Carter said he hopes a more regular flow of office workers will help downtown St. Paul and its struggling small businesses.

Wednesday lunchtime provided some signs of turnaround already, as some restaurants were bustling. The Loon Cafe’s tables were nearly full, the Afro Deli had a short line, and office workers speed-walked across downtown streets with plastic containers of salad and Chipotle bags.

“Having our state office workers come back to the office is going to be really, really important and powerful for downtown St. Paul,” said Joe Spencer, president of the nonprofit St. Paul Downtown Alliance. “You think about what that means to have that many more people grabbing coffee, going out for lunch, having breakfast meetings, getting a couple of those essential things on their way in or way out, picking up a gift in the middle of the day. All of those things, they really add up.”

But some downtowners wonder if the workers will be enough to bring vitality back to downtown.

“It’s not going to be night and day,” predicted Joe Furth, who owns Eclipse Records on Wabasha Street. “You can’t just do one thing. You’ve got to do multiple things.”

In the long term, the St. Paul Downtown Alliance wants to do just that: Better integrate office buildings in the central business district with more housing and entertainment.

Using census data, the Downtown Alliance estimated there are about 20,000 government jobs in ZIP codes encompassing downtown, the Capitol complex and the West 7th area. Those jobs, most of them with the state, make up roughly one-third of the area’s workforce.

Regions Hospital remains the largest single downtown employer, but there are more government workers than employees of Ecolab or Securian Financial, two Fortune 500 companies with major footprints downtown.

Government, at all levels, is also one of downtown’s biggest users of office space. According to the Greater St. Paul Building Owners and Managers Association’s (BOMA) annual market report from last fall, 34% of the more than 14 million square feet of office space in St. Paul’s core business district and Capitol campus is owned by government.

State agencies also lease space in a number of downtown buildings, including prominent spots such as the Great Northern Building and Town Square center.

In speaking about their decisions to push workers back into the office, Carter and Walz both said their primary focus was office culture and collaboration, though boosting downtown is an added benefit.

“The primary goal is the type of productivity, the type of synergy that we can create when we’re in spaces together,” Carter said. “To be greater than the sum of our parts. That’s something that’s hard to accomplish working remotely.”

Asked how much the distress of downtown St. Paul factored into his decision, Walz said, “It’s not solely based on that, but that’s certainly a benefit.”

Though downtowns across the country suffered in the pandemic, St. Paul faced some added challenges. Its once-largest property owner, Madison Equities, attempted to offload its entire office portfolio after the death of founder, Jim Crockarell, last year. Many of those buildings are largely vacant, deteriorating physically and financially.

Nearly a third of downtown space was vacant as of the end of last year, according to a quarterly report from the brokerage firm Colliers. Some of the most troubled properties have changed hands through foreclosures.

It is not yet clear how many workers will return to downtown St. Paul this spring.

Carter and Walz said the majority of city and state employees were already working in person, especially those who work as police or state patrol officers, firefighters, librarians and at recreation centers.

The shuttering of prominent restaurants, the decline of the Madison Equities portfolio and this week’s closure of the Lunds & Byerlys, downtown’s only grocery store, has some wondering what will be left for government workers downtown.

Walz said Lunds got a heads-up about the decision to bring state workers back to the office but decided to close anyway.

“That was not the sole factor for them to make the decision they made,” he said. “When I started to hear rumors that that was happening and we were working on this, it seemed to make sense to me that we should communicate that.”

Aaron Sorenson, a spokesperson for Lunds, said there were many factors contributing to the company’s decision but conceded the return of office workers will “strengthen downtown St. Paul’s vitality.”

Many of downtown’s largest private-sector employers have been working in their offices a few days a week for more than a year. Securian, which requires its roughly 2,300 employees based downtown to come in three days a week, cheered the news of the state’s impending return.

“Like state government, Securian Financial is a very long-time downtown employer that cares deeply about the place we both proudly call home,” spokesperson Jeff Bakken said in a statement. “We know that state employees being back in the office and in the skyways more regularly will unquestionably contribute positively to the many efforts underway to revitalize downtown.”

Other business owners, however, question how long they will be able to hold on, and if government workers will really support them.

Even before the pandemic, Furth, the record store owner, said the problem with downtown St. Paul was not a lack of office workers but rather that it closed at 5 p.m.

Now, he joked, office workers are more apt to leave downtown even earlier and finish their workdays at home.

There are fewer and fewer places to grab dinner, let alone to get a nightcap after a show at the Palace. Furth said he wondered who would want to rent an apartment downtown without a grocery store within walking distance.

Carter hopes to encourage office-to-residential conversions to boost the 24/7 population of downtown — which would, in turn, bring new businesses. He is also banking on events like the summer Minnesota Yacht Club music festival on Harriet Island, and events at the Xcel Energy Center to lure people to St. Paul.

Mike Tekeste, who owns the Red Sea Market convenience store near City Hall, is not sure office workers will come back in enough numbers to help him stay open.

“Downtown is like a ghost town.”

Briana Bierschbach and Ryan Faircloth of the Minnesota Star Tribune contributed to this story.