Six-week shutdown could mean a ‘year without Christmas’ for Philly businesses

Office occupancy is down 85% from what it was pre-pandemic. That’s just one of the challenges facing Philly businesses this year.

Outside Century 21 on East Market Street. The iconic department store announced in September that its 13 locations would be shutting down for good because of "unforeseen circumstances” of the pandemic.Read moreTOM GRALISH / Staff Photographer

by Sam Wood and Katie Park

Published Nov. 18, 2020, 5:08 a.m. ET

Beleaguered business owners and city residents, who had reconfigured their work lives to survive the pandemic’s first wave, latched onto a now-ubiquitous sentiment on Tuesday: Hang on. It’s going to be a bumpy ride.

The City of Philadelphia imposed new business restrictions on Monday that will go into effect at the end of the week. Sectors of the local economy will be required to shut down or severely curtail operations until at least Jan. 1.

“For millions of people, this could be the year without a Christmas,” said Stephen Mullin, principal at Econsult Solutions and a former city director of commerce during the Rendell administration. “We’ll see unemployment bouncing up significantly again."

The poor will be hit disproportionately as minimum wage jobs in retail, hospitality, and restaurants disappear, he predicted. The next six weeks will be tougher than in the spring and will probably endure into the new year. And businesses are pushing back and taking their complaints directly to City Hall.

“The one question I have is this,” Mullin said: “ ‘What will happen between now and January in Congress to create a safety net to try to keep people from starving to death?’ ”

Mullin’s prediction was not an outlier.

A rising number of infections has compelled the city to impose restrictions that include the closing of indoor dining, gyms, casinos, and museums. Its effect on city businesses is likely to be profound across a range of sectors, from restaurants to retailers.

And federal aid may be the only way to keep the business climate from tanking for the foreseeable future, said Lauren Gilchrist, director of research for the Philadelphia office of JLL, a multinational commercial real estate services company. The situation demands “another much needed round of economic stimulus,” she said.

“I don’t see us going off the cliff, because we’ve already jumped off that cliff!,” Gilchrist added. “The time has come to batten down the hatches and see if we can weather the storm.”

The shutdown order comes at a critical time. It’s only with the holiday shopping season that many retailers begin to generate their best sales of the year. The order also puts a kibosh on Christmas parties and the peak of tourism in Philadelphia.

“With fewer sights to see we will have fewer visitors," said Jeff Guaracino, CEO of Visit Philadelphia. “For some artists, businesses and performers, this could result in their losing their dreams, their retirements. This changes their entire lives.”

The city’s economy has suffered one calamity after another this year. Already grinding through a stay-at-home order imposed in March, the Minneapolis police-killing of George Floyd in May set off a wave of vandalism and looting in many of the city’s business districts resulting in widespread damages. The plywood was coming down when Philadelphia police shot and killed Walter Wallace Jr. on Oct. 26, triggering another wave of unrest and fortified businesses.

As colder weather has set in, the number of COVID-19 cases in Pennsylvania has grown — there were 5,900 more reports of infected people on Tuesday, taking the commonwealth’s total to 275,513 — and analysts expected a slowdown for many stores and businesses this holiday season.

This week, gyms and fitness centers across Philadelphia were already limited to operating at 50% capacity because of COVID-19. Now, they will be shuttered until the new year.

Fran Cassidy, general manager of the Sporting Club at the Bellevue, was furious at the shutdown orders, which he considers unnecessarily draconian.

Business at the luxury fitness center had already crashed to 50% of its pre-pandemic level, Cassidy said. Of his 4,200 members, just 2,000 had returned. Though he believes there “hasn’t been a single case of COVID-19 among his clients,” he will have to issue pink slips to the Sporting Club’s entire staff.

“They’re devastated. How can you not be? It’s the holiday season. We had to tell 90 employees they’d be laid off,” Cassidy said. “In eight or nine days, it’ll be Thanksgiving. And that’s the news we had to deliver.”

Some restaurateurs, meanwhile, are announcing temporary or permanent shutdowns, while retailers must limit the number of people in a store to five people per 1,000 square-feet — about half of a singles tennis court — and continue to require customers to wear masks and keep six feet apart from one another.

On Tuesday, more than 250 owners of restaurants and bars in the region wrote an open letter to elected officials, demanding “a seat at the table” before edicts are issued that may destroy their businesses.

The city ordered a total ban on indoor dining and limits outdoor dining groups to four members of the same household.

The signatories, who include a who’s who of restaurateurs and bar owners, said with current COVID-19 restrictions in place there have been no “documented mass restaurant staff infection events.”

“If restaurants were in fact ‘hot spots’ and to blame for the recent surge, restaurant EMPLOYEES would have been affected first and gotten sick en masse, before guests,” the letter continued. “That simply has not happened.”

Mullin bemoans what he sees as the city’s lack of transparency. “The city has the data,” Mullin said. “But when I look on the website, the stuff I’ve seen reported is very, very general. … Doing it this way is going to be very, very costly. From the information I’ve seen, I have no way to know whether it’s the most efficient way to stem the [pandemic’s] growth.”

Brick-and-mortar retailers in Center City are destined to take a serious hit, said Gilchrist, of JLL.

“There’ll be no comparison with the 2019 holiday season,” she said. “That’s for sure.”

That’s largely because the built-in customers — commuters from the suburbs — have been working from home since March. Office occupancy is down 85% from what it was pre-pandemic.

“We went from 90% ‘butts-in-seats’ and fell to 2% ‘butts in seats’,” Gilchrist said. “It’s returned to about 15%. Office workers usually number about 300,000 in the city. But that’s dwindled to about 45,000 overall. Since office workers have not returned we’ve already seen a sharp spending dropoff by office workers.”

Individual retailers said they were already hurting.

“It’s been so challenging, and this just makes it more challenging,” said Mike Cangi, cofounder of United by Blue, an apparel store and cafe. “But from a health and safety standpoint, I get it.”

Business compared to last year has fallen “between 60 to 80%" month-over-month, Cangi said. The company’s e-commerce sales have been “better than expected.” But those sales weren’t enough to make up for losses in their storefronts, which Cangi said have lost money every month during the pandemic.

“The store doesn’t make any sense right now,” he said. “We’re keeping [one] store open to serve the community and keep our team employed.”

For shops, a robust online presence is a lifeline.

“If you don’t have the digital platform, this is going to be a very challenging holiday shopping season,” said Garrick Brown, vice president of retail intelligence for the Chicago-based real estate services company Cushman & Wakefield.

Brown said online giants such as Amazon are very likely to perform well during the holiday season.

“There have been two divergent trends,” he said. “The gap in the have and have-nots.”

Small businesses “basically got the scraps left over from the PPP [Paycheck Protection Program],” Brown said. “ … It wasn’t that much money to begin with.”

Still, others said they would persevere. Justin Moore, general manager for Uncle Bobbie’s Cafe & Books in Philadelphia, said he didn’t expect the store to change much.

“We’ve always monitored the number of people in the store,” he said, and added that the independent bookstore attracts extra attention with its online shopping and support from the local community.

“Our motto,” Moore said, “is just to keep pushing and moving forward.”