Covid closed downtown D.C. businesses. Many reopened — in the suburbs.

D.C. business owners left downtown, major corridors for survival, flexibility

Katie Stack, owner of Stitch & Rivet, sews leather bags that she is preparing to sell at a crafts fair. Stack moved her business from a storefront to her home during the pandemic.
Katie Stack, owner of Stitch & Rivet, sews leather bags that she is preparing to sell at a crafts fair. Stack moved her business from a storefront to her home during the pandemic. (Robb Hill for The Washington Post)
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correction

A previous version of this article incorrectly referred to Kendra Rubinfeld and her husband, Travis Hare, as "the Rubinfelds." The couple lived in Dupont Circle, not Logan Circle. Rubinfeld worked out of her kitchen closet, not a cupboard. Rubinfeld also worked out of a local coffee shop, not a Starbucks. The article has been corrected.

Jamie Morton was one of the first to feel the effects the coronavirus pandemic had on small businesses. She runs a company in D.C. that provides portable toilets for events and construction sites — so when gatherings stopped and construction slowed in 2020, so did her cash flow.

“I was at a standstill,” Morton said. “We went from making $10,000 a month to $100.”

The situation forced Morton to give up her downtown K Street office in favor of Ward 8 in Southeast D.C., where she now rents space at The Hive, a co-working nonprofit.

“It forced my hand,” she said. “It was either that or go out of business. And that was one thing I did not want to do.”

Two-plus years later, her company is still struggling to make ends meet, she said — but she credits the move to a cheaper space with helping keep her business running.

Morton’s business was one of thousands that left downtown and other major retail corridors since the pandemic hit, according to a Washington Post analysis of U.S. Postal Service address-change data.

From February 2020 to March 2022, more than 2,300 businesses moved away from downtown D.C., The Post’s analysis shows. Another few hundred more left major commercial corridors that include Shaw, Logan Circle and Georgetown.

Many businesses left D.C.

during the pandemic

Number of businesses that departed by Zip code from March 2020 to March 2022

0

500

1,000

2,000

Data unavailable

NE

NW

SW

SE

More than 1,800

businesses left

downtown Zip code

20036 from March

2020 to Jan. 2022

Source: U.S. Postal Service

HANNAH DORMIDO/THE WASHINGTON POST

Many businesses left D.C.

during the pandemic

Number of businesses that departed by Zip code from March 2020 to March 2022

2,000

0

500

1,000

1,500

Data unavailable

NE

NW

SW

SE

More than 1,800 businesses

left downtown Zip code 20036

from March 2020 to March 2022

Source: U.S. Postal Service

HANNAH DORMIDO/THE WASHINGTON POST

NE

NW

Many businesses left D.C.

during the pandemic

SW

SE

Number of businesses that departed by Zip code from March 2020 to March 2022

2,000

0

500

1,000

1,500

Data unavailable

More than 1,800 businesses

left downtown Zip code 20036

from March 2020 to March 2022

Source: U.S. Postal Service

HANNAH DORMIDO/THE WASHINGTON POST

The data includes a combination of businesses that may have closed their doors permanently or simply relocated. Bureau of Labor Statistics data show more than 1,000 establishments in the region closed in the first part of 2020. Many of those fell into such sectors as food services, construction, entertainment and wholesale trade. And while the city is trying to revive its downtown, the malaise has serious implications for its budget — revenue from general sales and use taxes, which fund services like health care and road construction, was down almost $400 million over fiscal 2019 to 2021, according to data from the Office of the Chief Financial Officer.

But the pain hasn’t been felt across all parts of the region. Data shows many businesses relocated to less densely populated areas of the region — many to Maryland and Virginia.

BLS data show that the region saw a noticeable increase in the number of new establishments in the next few quarters after the pandemic began — with increases in educational services, health care, construction and finance.

Postal Service data analyzed by The Post suggests the suburbs became more appealing for business owners when lockdowns went into effect and as many workers were forced to work remotely from home.

That includes Zip codes in Potomac just outside Bethesda. And in Virginia, Zip codes in Loudoun County have seen some of the largest gains of businesses relocating. Office vacancies in that Washington suburb are only slightly lower than they were before the pandemic — and there was even an increase in new businesses, a recent county economic report found.

Fleeing from the city

Loudoun County is where Kendra Rubinfeld and her husband, Travis Hare decided to go. The couple runs KRPR, a PR and marketing firm, which they previously operated from their home in Dupont Circle.

Rubinfeld divided her time between working from her home office — a kitchen closet — and a local coffee shop before the pandemic. But when coffee shop closed early in the pandemic, sending her back to her cramped home office. she realized just how cramped her home office was.

The couple decided to pursue their long-standing dream of living in a rural area, so they boxed up their 700-square-foot condominium for a bigger home in Virginia, where they could also have more space to work.

“All of the things that we loved about [the District] basically went away,” Hare said. “And the apartment just felt smaller than ever.”

That’s similar to what Katie Stack experienced. Every workday for seven years, Stack drove the 45 minutes from her Herndon, Va., home to her Brookland store Stitch & Rivet, a studio where she made and sold handmade leather goods. But when the pandemic forced nonessential businesses to close in mid-March 2020, Stack locked her D.C. studio and let the lease expire.

She packed up and converted her kitchen into a workshop — only bringing out her dining room table for occasions like Thanksgiving or Christmas.

“I brought home all my equipment from my shop that I could. And what I didn’t have room for, I dispersed between the people who had been working for me,” Stack said. “I just made the active decision that I was going to make my business just a little bit smaller so that I could manage on my own.”

Stephanie Landrum, the chief executive of the public-private Alexandria Economic Development Partnership, said the trend of “suburban flight” among small businesses during the pandemic underscores the value of mixed-use neighborhoods like the city’s historic Old Town.

A wealthy, riverfront area filled with rowhouses and brick-cobbled streets, the neighborhood boasts an abundance of restaurant and retail space tucked in between small office buildings, hotels and the occasional colonial site. Old Town has always seen regular churn in storefronts, Landrum said, but that turnover was no faster during the pandemic than before it.

As a matter of fact, small regional chains such as Foxtrot or Fresh Baguette have increasingly been choosing to open new locations there, she said.

These kinds of fast-casual restaurants might have previously chosen to locate themselves in a denser, more commercially oriented business district like downtown D.C., where they could cater to the 9-to-5 office crowd.

“But now that’s not necessarily true,” Landrum said. “We’re sitting here in the middle, and our strategy of being mixed-use in every neighborhood since, you know, the 1800s, it’s paying off. It’s back in vogue, it is what’s desirable right now.”

A budgetary loss

The business exodus to the suburbs has forced D.C. officials to grapple with the city’s budget, which is projected to see a dramatic decline in tax revenue in the coming years.

D.C. Chief Financial Officer Fitzroy Lee told council members in early March that the city would begin seeing the financial effects lockdowns had on the city in the 2022 tax assessments. His office estimated in February that commercial office building assessments were down about 10.8 percent in 2022. Most of the properties are in the central business district.

Meanwhile, a large share of the decline in sales tax is from the lost downtown activity of commuters, residents working downtown and visitors. From fiscal 2019 to 2021, revenue from general sales and use taxes was down almost $400 million, according to the office.

Data released by D.C. Mayor Muriel E. Bowser’s office in her budget proposal in mid-March 2022 indicated the city continues to struggle to fill commercial real estate spaces. Between March 2020 and January 2022, more than 3.3 million square feet of office space were vacated.

That’s on top of the already 13.3 million square feet that sat empty before the pandemic, according to data obtained by The Post.

D.C.'s city council has poured millions of dollars into helping sustain existing businesses and lure new tenants to the city’s urban center, hoping to restore the area to pre-pandemic levels.

But the city’s reliance on office space — and businesses serving those offices — in the heart of the city oppose recent trends in which workers prefer working closer to home.

A Brookings Institution report revealed the daytime population in the nation’s capital fell 82 percent from February 2020 to February 2021. The report also stated that American downtowns were already in decline before the pandemic.

“For a long time downtown has been heavily commercial offices,” said Gerren Price, the DowntownDC Business Improvement District president and chief executive. “Not having sort of that dynamic mixed-use vibrant feel has actually caused us to be disproportionately impacted by the effects of the pandemic.”

As offices stay empty, downtown D.C. looks for post-pandemic identity

He said other neighborhoods in D.C. have some offices and residential properties that fared pretty well because they weren’t so heavily concentrated in one use. But the struggle to retain business in downtowns across the country has been a problem for years.

“I think it’s important that people understand what has happened,” Price said. “[Downtown generates] a lot of revenue that the city relies on for a number of social programs and a number of other services. And so having a healthy downtown means we have a healthier city.”

But officials hope new initiatives will fill some of that space.

The D.C. mayor’s proposed 2022 budget laid out a plan to spur downtown recovery, including more than $12 million to attract businesses and renovate office spaces in downtown.

It’s the latest in several attempts to shore up businesses of all kinds in the city. Since the pandemic began, the District has made available more than $155 million to provide relief to local companies, on top of more than $138 million in federal small business loans to support city businesses.

In January, the mayor’s office announced it would give another $40 million to support bricks-and-mortar businesses in the restaurant, entertainment and retail sectors.

“Our small businesses are still recovering from revenue losses experienced during the first two years of the pandemic and the impact of the new COVID variants,” Bowser (D) said in a statement at the time.

The dense commercial areas in downtown D.C. around Virginia and Maryland will have to figure out what they want to be in the coming years, addressing why businesses have left, said John Haltiwanger, an economics professor at the University of Maryland at College Park.

The District has tried hard to lure workers out of their homes and back into the office, such as by making renovations downtown. But D.C.may have to compete with the flexibility of working from home.

Stack said that working from home has relieved her of some of the stress that comes with running a business from a bricks-and-mortar location.

“I absolutely don't miss trying to figure out how I'm going to keep the studio warm in the winter and how I'm going to keep it cool in the summer,” she said.

Recovery ahead

The economic outlook for the District’s economy is for continued recovery but at a pace slightly below the U.S. average over the next year, according to the city’s economic outlook report from February.

As the pandemic recedes, the long-lasting effects will become more apparent, officials noted in the economic report. It is expected that 20 to 25 percent of office workers will participate in remote work compared with less than 10 percent before the pandemic, according to D.C. officials.

Depending on how remote work evolves, there may be a more significant negative impact on office space demand than is currently assumed, according to the report. But by March 2022, employment in several industries was still below pre-pandemic levels.

Haltiwanger said it’s too early to say if the city’s efforts will take hold and impact the outlook. He said that it may be about five years before the region understands the new landscape, adding that it might be wise for local leaders to avoid re-creating what downtown D.C. looked like before the pandemic.

“It’s not so clear that the thing to do is to try to make [downtown] look like February 2020 again,” he said.

Teo Armus contributed to this report.

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