Kostas Fostieris grew nostalgic as he remembered the work crowds that once flocked to Greek Deli & Catering, a small restaurant a few blocks from the White House that he has operated for 35 years. At lunch, the line would stretch the entire block, Mr. Fostieris said. But then the coronavirus pandemic swept the country and the lunch crowds disappeared. They haven’t come back yet.
“It’s like night and day,” Mr. Fostieris lamented as he sat against a wall adorned with signed photographs of the current and former president as well as a plethora of framed reviews – some faded, all complimentary – from newspapers, magazines and guidebooks. .
Asked if business was particularly slow on certain days of the week, Mr. Fostieris quickly replied: “Every day.”
But unlike the other two, Seattle and San Francisco, Washington is not a technology hub but a business city that relies on a single employer to a degree unheard of elsewhere. The local economy is fueled by the District’s roughly 160,000 federal workers, who are only slowly returning to their workplaces from their suburban homes. Last fall, an annual survey of 625,568 federal workers found that more than two-thirds still worked remotely some of the time.
Nina Albert, the district’s deputy mayor for planning and economic development, said working with the federal government to persuade workers to return to the office was a “challenge.”
“We would like to see the federal government make a more concerted effort to get people back into power because we think it’s better for the federal government – as well as us,” she said.
This dynamic has put real estate companies and local businesses at odds with the federal government. The companies said the thousands of federal workers still sitting in their suburban offices were accelerating Washington’s fiscal and social decline.
“The federal government is now a hindrance rather than a boon to the district,” said Steven Teitelbaum, a former real estate lawyer who now teaches at American University.
A collapse in the commercial real estate market — vacancy rates topped 20% in Washington in late 2023 — would affect not only landlords and developers, but also the neighborhood itself. As buildings lose value, tax revenue could decline: Last year, the city’s finance director projected that Washington could lose $464 million between 2024 and 2026.
Executive branch agencies have released plans for returning to power, but, in a city where workers are strongly protected, these guidelines can be difficult to enforce. Each agency has its own rules for returning to the office. In September, the Justice Department told its 115,000 employees (about 20 percent of whom work in Washington) that they must work in the office six days every two weeks. But the notice made clear that managers could issue exceptions to the new rule. And it was unclear how the six-day minimum would be enforced.
In January, White House chief of staff Jeff Zients issued a memorandum calling for “concrete plans” from agency heads to bring workers back to the office.
“Returning to power is a priority for President Biden,” Zients said in an email to The New York Times.
Jacqueline Simon, political director of the American Federation of Government Employees, a union that represents some 750,000 federal workers, disputed suggestions that productivity was declining. She also challenged the argument that Washington’s civic fortunes depended on the presence of union members in office.
“The mission of the federal government is not to provide customers for restaurants and stores,” Ms. Simon said.
Yet the city’s shortage of office workers is pervasive and pronounced. The Public Buildings Reform Council, a federal agency created to help get rid of some of the government’s vast real estate holdings, has used cellphone location data to track office attendance at several federal agencies. The council’s findings, released in March, found that these agencies were using only 12 percent, on average, of their 90 million square feet of office space in the Washington region.
The board called for the sale of some federal properties so the city can find new uses for it and “avoid the worst effects of its deepening economic crisis.”
Stephen Buschbom, director of research at Trepp, a company that analyzes real estate financing, told Bloomberg in December that Washington had overtaken San Francisco for the highest share of office buildings with loans at risk of default, and that Washington “could be the new ground zero for office distress.”
Washington’s recovery is also complicated because the city has few working districts like Lower Manhattan, where some office towers were converted into apartments after the terrorist attacks of September 11, 2001. Even before the pandemic, the district had a lower ratio high number of day workers compared to city residents, said Tracy Hadden Loh, an urban affairs specialist at the Brookings Institution.
Muriel E. Bowser, Washington’s mayor, plans to invest $400 million to increase the downtown population by 15,000 residents to resuscitate the city. The plan calls for a more pedestrian-friendly streetscape and relaxed regulations for small businesses and real estate developers.
Building owners are also getting creative. A vacant building on M Street recently hosted an art fair.
But in the absence of what Nathan J. Edwards, a senior real estate analyst at Cushman & Wakefield, called “a significant infusion of capital,” he estimated that half of Washington’s unwanted office stock was headed toward an appointment. you with the wrecking ball as soon as interest rates drop. , making new construction more feasible.
Some blue-chip tenants continue to shrink their footprint or move their offices out of town. Mortgage giant Fannie Mae announced in January that it would end early the lease of Midtown Center, a gleaming new tower it has occupied since late 2017. Consulting firm Chemonics International announced in March that it would was preparing to sublet 153,000 square feet, or about half the space it rents in a building on New Jersey Avenue. And real estate data giant CoStar Group is moving its headquarters and about 500 employees to Arlington, Virginia, from downtown Washington.
“We are in a long, slow transition process,” said Stijn Van Nieuwerburgh, a real estate professor at Columbia University, speaking generally about the office sector. “Demand is very low and continues to weaken.”
George Marinakos sees this pain every day. His bar, the Exchange Saloon, is near the White House and across the street from the Consumer Financial Protection Bureau on G Street. He pointed to the agency’s windows, almost uniformly dark in the early afternoon of a recent Friday.
“It’s been brutal,” Mr. Marinakos said. “I think with the days they come in, they leave early.”
Before the pandemic, he said, he served an average of 200 lunches a day. Now he gives out 40 on the best days. Mr. Marinakos said he wants federal employees to see the remote work debate as more than just a personal cost-benefit calculation.
“It’s not just me that’s struggling,” he said.