Vacant housing is wreaking havoc on restaurants and retail stores in downtown Ann Arbor


ANN ARBOR, MI – Eugenia Pantely arrived at The Broken Egg after a long COVID-19 pandemic closure to find the first floor of popular downtown Ann Arbor flooded.

After facing challenges like this throughout the pandemic, and closing and reopening and re-closing throughout 2020 and 2021, Pantely closed the restaurant for good in early January.

Related: Despite its closure, The Broken Egg recipes will live on in family restaurants

Six months later, The Broken Egg’s logo – a rooster in a top hat with one foot resting on a cracked egg – is still in the empty space window behind it.

And The Broken Egg isn’t the only eye-catching empty storefront in downtown Ann Arbor.

Cloverleaf Restaurant at 201 E. Liberty St. and bd’s Mongolian Grill, 200 S. Main St. are two newer empty spaces downtown.

Related: 5 Remarkable Empty Storefronts in Downtown Ann Arbor

The pandemic has caused economic upheaval in downtown Ann Arbor. While some commercial spaces are slow to welcome new businesses, office spaces are slow to attract new occupants.

Some longtime empty spots — like the old Chela’s, 307 S. Fifth Ave., which is set to become a new Mediterranean rotisserie — have recently filled up, but notable ghostly storefronts still raise questions.

One is the former Urban Jewelers, 215 S. Main St., which closed in 2017 and has stood empty ever since.

“I’d like to know what’s going on with this space,” said Sandra Andrade, chief executive of the Main Street Association.

Neither the owner of the building nor the merchants could be reached to provide answers.

But, in general, companies say they are seeing a slow return to normal as they move away from the pandemic.

Data from Ann Arbor Colliers leasing agency shows vacancy rates for commercial space in Washtenaw County rose from less than 3% in the first quarter of 2020 to about 4% in the first quarter of 2021. While commercial space vacancy rates fell again throughout 2021, the rate increased again at the end of the first quarter of 2022.

Mike Moshier, manager of Fjallraven, which adjoins the former location of Urban Jewelers, said he was most concerned about a continued drop in foot traffic at his store during working hours.

“Our traffic has definitely gone down,” he said. “We are sort of going back to around 2019 numbers, but they are still a bit down. Daytime traffic was generally made up of people working in offices that are probably all virtual right now.

Fleet Feet, 123 E. Liberty St., sees heavy morning and late afternoon traffic on weekdays, with traffic peaking in the early afternoon on weekends, manager Paul Livingstone said. .

“Things are more or less back to normal, at least for now,” Livingstone said.

Despite retail recovery, restaurants are still seeing changes

Although retail is back to 2019 levels, restaurants are not, especially in their hours.

Alan Zakalik, owner of Café Zola, 112 W. Washington St., said he saw a difference in early morning customers. While it used to open at 7 a.m. to accommodate corporate business meetings, it now opens at 8 a.m.

Places that were usually open for breakfast or brunch are now opening later, Andrade said. But people still come downtown as a whole, she said, pointing to the success of Sonic Lunch and A2 Summer Streets.

Zakalik blames a changing office culture for fluctuating restaurant hours. But street closures sponsored by the Main Street Association, which kept Washington Street closed 24 hours a day, helped attract customers.

“It creates a draw, so even during the week people like to come and even have breakfast or lunch in the summer,” Zakalik said.

Vacant offices impact downtown businesses

There are fewer employees downtown.

MLive/The Ann Arbor News toured a 24-block area of ​​downtown Ann Arbor in June, including William Street from First Street to South Fifth Avenue, First Street from West William Street to West Kingsley Street, Kingsley Street from North First Street to North Fifth Avenue and Fifth Avenue from East William Street to East Kingsley Street.

Of the 28 vacant buildings in this area, 23 were office space. Buildings east of Main Street saw the most vacancies at 12, 11 of which are empty offices.

The vacancies are a continuation of 2021 trends, said Michael Giraud, vice president of real estate company Ann Arbor Swisher Commercial.

“It looks to me like the market is continuing to fall,” Giraud said. “We’re getting more office space and more vacancies, and there’s no corresponding increase in the number of people looking.”

The 2021 Swisher Report, which studies Ann Arbor’s commercial buildings 5,000 square feet or more, showed vacancy rates in downtown Ann Arbor soared from 5.7% to 14.2% vacancy from 2019 to 2021.

Related: Office and flex space vacancy rates have nearly doubled since 2019 in Ann Arbor

More recent data from Colliers shows similar trends. Figures released for Washtenaw County in February show office vacancy rates at 10.4%, topping retail at 3.7% and industrial at 4.7%.

Leased office spaces are getting smaller as companies continue to use a hybrid work environment, the Colliers and Swisher groups said.

“We don’t have a lot of larger deals,” Colliers partner Eric Rudland said, adding that the agency typically sees at least several leases between 30,000 and 60,000 square feet a year. “But we haven’t had one for a few years.”

Giraud is concerned about the impact of empty offices on the city center on weekdays.

“It doesn’t take long to look downtown and see the parking lot that’s not being used, the restaurants or cafes that aren’t as busy as they used to be. There just aren’t that many people downtown,” he said.

The future of offices remains uncertain

Despite the prominent empty storefronts, at least one real estate agent remains carefree.

“These contracts usually take a long time to come together, negotiate, then get awarded, then design, build,” said Wonwoo Lee, real estate manager at commercial real estate agency Ann Arbor Oxford Companies. “I would say a few months is not something to really worry about.”

Demand for office space will increase as businesses continue to “right-size” their spaces, Lee said.

“You talk about mentoring; you talk about coaching; you talk about team building,” Lee said. “These things really can’t be done that efficiently on Zoom. Although the rental speed of downtown offices (spaces) is still relatively slower than it was before the pandemic, I believe this is temporary and people will continue to invest in real estate good quality desktop.

A recent push for strong downtowns has made them “resilient,” Lee said, especially since retail and restaurant spaces haven’t suffered as much as offices.

A deeper concern surrounds leases set to expire in the coming months, Giraud said.

“Those of us who have been in the industry a long time, we’ve seen situations where there are more vacancies than there are now, but that’s different,” Giraud said. “It’s unique because it’s economic, but it’s not based on some kind of economic downturn. It’s based on lack of need.

Although some office space is technically rented, companies don’t actually use all — or in some cases, even some — of the space, said Randy Maas, a sales representative for Swisher. And some companies are opting for office space outside the city center.

While office vacancy rates are unlikely to double again in the next Swisher report, it looks like those numbers will continue to rise, Maas said.

“When these leases expire, it remains to be seen what these tenants will do. Will they downsize? Are they just going to tell the owner “I’m not renewing?” Maas said. “We just don’t know.”

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