In world's finance centres, small businesses face a tough future
Crowd of people on their way from work. (Photo: iStock)
In the world’s financial centres, Thursday is the new Friday.
As ranks of office workers begin to return after months of lockdowns and working from home, the new pattern of commuting is imperiling thousands of small businesses in central business districts that relied on a steady flow of customers from Monday to Friday to cover expensive downtown rents and turn a profit.
Many staff members are opting to continue working from home or returning to the office for only three or four days a week.
Mondays and Fridays are particularly quiet in some business districts, and while customers are returning to theatres and bars in nations that have begun to reopen, other services that cater to office workers report that the number of customers is still as much as 40 per cent less than before the pandemic.
“What we’re seeing in the data is this real divide between the willingness to return to leisure and to return to offices,” said James Pomeroy, global economist for HSBC Bank in London.
“Some leisure activities — bars, restaurants, shows and sporting events — appear to be doing quite well, but those businesses that rely on the footfall of office workers are having to make do with maybe 25 per cent fewer people.”
In London, James Goolnick has run Bow Lane Dental Group for 22 years, catering to financiers and lawyers in nearby office buildings. As employees of a health service, his staff members were among the first to return after England’s lockdowns.
“It was like an apocalypse movie, because there was just us, Tesco and the butcher’s open in Watling Street,” he said, recalling his first return to the city in June 2020. “My friends who’ve got suburban and residential practices have been really, really busy.”
Mary Gillmore, owner of neighbouring salon Beauty Essence has also seen recessions come and go as owner for 26 years. “I’ve always managed to run successful businesses — which kind of stopped when we hit the pandemic.”
She estimates foot traffic on some days is 40 per cent of what it used to be.
Unable to rely on the flow of commuters, even in the medium term, Gillmore is relying on a grant from the City of London, which she is using to develop a social media and Internet campaign to try to attract a “wider, more residential client base”.
She said a lot of salons in central London are closing at Christmas because they are not making enough money. “They've run out of funds and they're giving up," she said.
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A key measure of survival is the high rents traditionally charged in city centres.
Gillmore was lucky. Her lease expired during the pandemic, and she was able to negotiate better terms. Instead of her rent rising, as she had expected, her landlord agreed to a reduction.
Not everyone has been so fortunate. Rajeshree Amin “argued and argued” to get a small rent reduction at the tobacconist she and her husband run in Cannon Street.
But they have faced the full rate since July. The landlords “are not going to budge anymore whether the customers come back to the city or not”, she said.
While there has been a noticeable improvement in traffic in the past month, they estimate that customer footfall is around 75 per cent to 80 per cent of where it was pre-pandemic.
"Customers have returned that we haven't seen in almost two years," said Rajeshree. And some sites that have been empty since early in the pandemic, such as small cafeterias, are being reoccupied to cater to a reviving lunchtime rush.
Yet Fridays are still noticeably quieter for the Amins who are hoping there will be a "big rush" of people coming back in January.
HAIR CUT
Half a world away in Sydney, Renée Baltov faced the same problem at her two luxury men’s barber shops. She said it became “almost impossible” to do enough haircuts to cover her rent during the months of lockdowns.
One of her outlets is in the city’s iconic Martin Place, a pedestrianised thoroughfare lined with heritage buildings that is home to the Reserve Bank of Australia and Macquarie Bank.
Before the pandemic, it was a jostling hive of activity.
Suburban barber shops have been “doing better than they ever have” as the working patterns of her once loyal customers changed, she said. It is “really hard to get someone to get out of that new habit”.
But predicting the new work pattern for offices is not easy. “We could definitely see the three-day week”, said Baltov. But “we could never predict which three days that would be”.
In Singapore, the government’s initial COVID-zero strategy, followed by renewed restrictions on office work as the country tries to adapt to an endemic virus, have caused many small businesses in the financial district to close.
Others are on their last legs.
At City Mobi, a small shop providing repair services and accessories for mobile phones, sales are down more than 60 per cent since the onset of the pandemic.
Manager Henry Tey said the store was only surviving thanks to a huge rental discount from the building's landlord — from around S$4,000 to S$1,500.
Even so, the three shops surrounding his — a massage clinic, an outlet selling used branded bags and a bakery — have shut down. City Mobi is likely to join them by the end of the year, said Tey.
"Even with the rental discount, it's still very hard to survive," said Tey, who has taken a part-time job delivering food.
It is not just the change in commuting pattern that is affecting traditional financial district vendors. A floor above City Mobi, men's tailor Verdi catered to bankers, lawyers and traders in nearby offices.
It has been surviving on owner Mohd Rafi’s retirement savings as he tried to keep his four seamstresses employed. Even so, their earnings have fallen by 70 per cent.
He closes his shop two hours earlier now and has slashed prices — a tailor-made suit of pure summer wool now costs S$950 compared to S$1,200 pre-pandemic.
But customers tell him that since they are returning to the office just a couple of days a week, they are allowed to dress down. They do not need suits.
"Without the 50 per cent rental discount, I would have probably shut the store," said Mohd Rafi.
"But I don't want to give up just yet. I've been in the business for 24 years and have seen ups and downs and I'm giving my last fight. Hopefully, the situation will improve by the first quarter next year."
A few blocks away at Far East Square, a stone's throw away from the office building that houses JPMorgan and Amazon, shoe-repair shop Mister Chuan sits among the ground floor cafes and restaurants.
Owner Khek Ah Chuan used to make at least S$3,000 to S$5,000 a month, now his income is not enough to pay the rent of less than S$2,000.
Khek has also been using his savings to stay afloat. "Luckily, my kids who are in their 20s are already working. Otherwise, how can I feed my family?" he said.
Khek said he will close the shop for good when the lease expires in May. "I am very, very disappointed,” he said. “I'm not sure what my next plan is."
Across the Pacific, San Francisco’s recovery has lagged behind many other US cities.
Labour Day was supposed to mark the beginning of the end of fully-remote work at major tech companies, but the Delta variant delayed several re-entry plans for Google, Twitter and others into next year.
At the end of October, just over a quarter of office workers had returned, according to building-security company Kastle Systems.
“We are seeing more people downtown now than we have seen in the past year and a half,” said Ryan Cole, who owns the Hi Neighbor Restaurant Group.
But the typical work days are now Tuesday through Thursday, and 9pm dinner reservations on Friday and Saturday are a thing of the past.
Ted Egan, San Francisco’s chief economist, says one way to lure people back to offices is to invest in the reopening of arts and other venues.
“All the good things are things you can do after work, when you're already in the city,” Egan said. “And the more that’s an opportunity, the more attractive coming into the office is.”
And while the pandemic has been largely bad for small city-centre shops and services, some products have benefitted.
Goolnik, the dentist in London, says the demand for mouth guards to wear overnight has tripled. “People are clenching, grinding and breaking teeth,” he said.
