Some Relatively Optimistic Predictions About Post-COVID Cities

These have been — as the ad copy cliché has it — uncertain times. Most of us have now spent a year involuntarily estranged from our families and friends. We’ve canceled trips and delayed celebrations of milestones. We’ve learned to take our work home with us or adapt at work to stifling requirements and a sense of very real danger. Too many have seen that danger actualized in the sickness and loss of loved ones.

Among the worst things has been not knowing when it would all be over, and even then, not knowing what “over” might look like. That uncertainty has compounded everything else. So much in life is bearable, like a shot in the arm, if you know when it will be finished and what lies on the other side.

These days, we can finally start to see the end of the pandemic. But the shape of post-pandemic life still seems unclear. It would be strange if such a monumental global event had not permanently reshaped our society in some way. But which changes will stick, and which ones will we discard?

In the media there are plenty of reasons to feel depressed. A national wave of interpersonal violence and a deep social isolation have accompanied the terror and pain of the COVID-19 virus. Cities have not been unique in their plight (in fact, many suburban and rural areas have been harder hit), but they have been the most visible battlegrounds. Now, as cities pivot from protecting life to regaining vitality, you don’t have to look far to find major doubts about the urban model.

I’m resistant to such doubts, because I am deeply invested in the future of American cities. I want them to succeed. At root, I think they are our “greatest invention,” as urban economist Edward Glaeser puts it. Plagues are not new, technological and societal disruptions are not new, and yet cities have become only more prominent and productive over time. As a result, I have been skeptical since the early days of the pandemic about predictions of their demise. In some cases, that skepticism proved well founded. But it may ultimately prove blinkered. I’ve trained myself in so many ways to see the opportunities for cities that I may not be able to clearly see the threats.

Is it right to be optimistic about the future of cities? I’ve tried laying out my thoughts, both to help organize them in my head and to expose them to wider scrutiny.

Commercial Office: Downtowns Will Mostly Recover

One of the most durable and widely held predictions about post-pandemic life has been that office work as we knew it will not survive. It’s hard to disagree. After public health measures forced most office workers to work from home, employers and employees settled remarkably quickly into a new normal. The technology already existed to support remote operations, and even before the pandemic an increasing share of workers had been telecommuting. A year later, many employees have come to appreciate the newfound freedom to work in sweatpants and make a 30-second commute. Simultaneously, employers have noticed that productivity has remained high despite the dispersion of their workforce. It’s become a consensus view that demand for office space is about to take an enormous blow.

Ample examples of this already are occurring. Target Corporation announced on March 12 that it would be cutting its footprint in downtown Minneapolis by a third. That announcement came on the heels of Prime Theraputics announcing a consolidation of its offices that would close an outpost in Bloomington. Similar news is sure to follow, in the Twin Cities and nationwide.

People will still want to come to Thrivent’s brand new office building in Downtown East in the future. Probably. (Photo by author)

Many companies are polling their employees and reporting widespread support for working from home several times a week at least. Prime Theraputics, for instance, learned that 93 percent of its employees were “OK or better” with working from home.

Yet predictions about the “commercial real estate apocalypse” still strike me as off the mark. I am skeptical that a permanent shift to remote work or flex work will pay off for both employers and employees — whatever they are doing or saying right now. Consider the “Hub and Home” model that Prime Theraputics is pushing: Employees would work from home a majority of the time, but come into the office for meetings and work from shared desks. This sounds suspiciously like a rebranding of “hot desking” (also known as hoteling), which was a hot office trend before the pandemic, and notable for being hated by everyone. A bit like the trend of “open offices,” employers looking to squeeze efficiency out of their leases quickly found that employees liked having dedicated, private or semi-private work space, and that their morale and productivity declined over time when they didn’t. I’m unsure why any of this will have fundamentally changed.

I’m also dubious that working from home will retain its popularity once it stops being all but mandatory. As an example, when everyone else is calling into meetings from their desks, consider how there’s no downside to doing the same. But when a meeting is taking place around a conference table, anyone who calls in is at an enormous disadvantage. Similarly, I suspect that people will rediscover the convenience of being present in a single space and being able to work through issues in person once it becomes possible to do so. The social aspect of office work may be difficult to resist for people starved of socialization. If half of employees returned tomorrow to working most days from an office, there would be an increasing cost to the half who do not.

I think there is an inherent difficulty in predicting the future when the present is so strange and unfamiliar. Currently, working from home is the only option for millions of workers. It seems impossible to fairly evaluate its performance or approval when it has no competition. But when working from home has to compete against working from an office, is it so obvious that the former will win out?

Maybe! But maybe not.

Working remotely is feasible and desirable for many people, including those with long commutes or family responsibilities. While that was also the case pre-pandemic, I expect employees (and employers) will enjoy more flexible working arrangements in the future, now that both are practiced at it. But that does not necessarily portend the collapse of demand for commercial office space in the long term.

Commercial Office: Suburban Office Space Will Get Crushed

If everyone can agree that demand for office space will face at least some contraction, there has been less agreement, or even discussion, about the spatial impact of this trend. Most coverage focuses on the impact to downtown central business districts (CBDs), but mainly for ancillary reasons; CBDs are visible, their commercial tax revenues tend to drive city budgets and their daytime office populations support an economy of other businesses.

Triple-digit highway office parks, however, face headwinds that seem stiffer than those faced by downtown skyscrapers.

Prior to the pandemic, suburban offices competed on cost and access. Employers enjoyed a lower rent per square foot, while employees enjoyed less-congested commutes with plentiful and free parking at their destination. In contrast, downtown offices competed on prestige, agglomeration and amenities. Employers liked having the visibility and status of a downtown address, and the hard-to-quantify effects of being in the proximity of similar and complementary businesses. Employees enjoyed the perks of working close to good food and after-work entertainment.

Adding home offices into the mix as a third option for employers and employees undercuts the competitive advantages of suburban offices to a far greater degree than those of downtown offices. Home offices crush suburban offices on price and access. What could be cheaper for an employer than offloading all utility costs onto employees? What office could be an easier commute than the one down the hallway?

Are workers and employers going to choose places like Bloomington’s South Loop if one alternative is a home office? (Photo by author)

Homes offices, however, cannot compete with downtown offices on their strengths. What corporate visibility or prestige is offered by working from home? What are the long-term impacts of missing out on agglomeration effects? What options remain for after-work activities in a landscape shaped by American single-use zoning?

Some early data portend a split in the fate of different types of commercial real estate. In the fourth quarter of last year, over half of all Twin Cities office leasing activity took place in downtown Minneapolis, where just 15 percent of the metro’s jobs are located. Meanwhile, leasing on the I-494 corridor plunged. This is one slice of data from one point in time, but it could be emblematic of a larger medium-term trend.

This again, does not mean that all suburban office locations will be wiped away. Plenty of corporations have invested heavily in suburban campuses with amenities designed to make employees happy to come to work. As with a lot of the office market, there is an immediate sunk cost that large employers may be less willing to part with, and that might act as something of a bridge towards future years where the pandemic looms less large.

But for lower quality suburban commercial office offerings, with shorter leases and less-invested tenants, the nearer term future may be grim.

Residential: Trend Toward Urban Living Will Continue (Medium Confidence)

Because the first wave of the COVID-19 pandemic in America did the most damage in New York City, the conventional wisdom developed that urban density was a critical factor in the virus’ spread. Now a year later, after devastating outbreaks in places as diverse as rural South Dakota and suburban Phoenix, there is more understanding that variables like the number of people who live within a single dwelling are more of a factor in the spread of the virus than the number of people who live within a square mile.

But that thesis was the initial spark for a wave of articles and predictions about an exodus from American urban cores, especially among millennials. Those moving supposedly were motivated by a fear of contracting the virus, or else they were gaining a new appreciation for suburbia’s big homes and big yards, where there was space to be had in a time of isolation.

A lack of rigor has characterized these narratives. For instance, a lot of writing about spatial living trends relies on unsurprising anecdotes (like rich people buying more space; was COVID really the driving factor there?) or comes from mistaken reading of data. A widely reported surge in Californians leaving the state turned out to be mostly inaccurate (most people were moving within the state), and a lot of early data suggesting major pandemic-related shifts in living was, in fact, driven by college kids choosing to move back in with parents.

People wanted to live in homes like these before the pandemic, too. (Photo by author)

Similar articles predicting a suburban exodus have been in circulation for as long as there has been evidence of an urban boom, long predating the pandemic. These articles rely on a certain sleight of hand, in which the living preferences of a fixed group of people are tracked as they get older, instead of the living preferences of fixed ages over time. It’s no surprise that people who are now 35 are more likely to own suburban homes than they were when they were 25. But it also turns out that people who are now 35 are less likely to own suburban homes than were people who were 35 a decade ago. Across metro areas, that demographic shift has been a major driver of the urban living boom of the last decade. As the blog City Observatory has extensively and exhaustively chronicled this past year, the evidence for a reversal in this trend due to the COVID-19 pandemic has simply not been strong.

That’s not to say there have been no effects. Rents, especially in the most expensive cities, have fallen in the past year, while home prices have soared, suggesting falling demand for the former and surging demand for the latter. But the causes of this are likely more mundane. Against all odds, young professional workers have largely gotten through the pandemic in better financial shape than they entered it. On aggregate, this would be expected to lead to an increase in settling down, starting families and traveling the well-worn path to home ownership.

It does not imply, however, a growing advantage for suburbs over cities. The relationship between those two markets changed little in the past year. Nor does it imply a change in the geography of living preferences. The available data still suggest that Americans are more likely to prefer urban living than people of the same age in past years. Few of the large-scale, social trends that have been credited with the urban shift (e.g., marrying and having children later in life) appear likely to change as a result of the tumult of the past year.

Without strong evidence of a spatial shift in either direction, it seems prudent to expect the urban trend that held sway before the pandemic to largely continue after COVID abates. Indeed, it’s easy to imagine that cities may benefit from, say, increased demand for social activities and a new flood of older adults who resisted downsizing during the pandemic now seizing the opportunity while home prices remain high and their kids move back out. That prediction seems more plausible to me than the reverse.

Public Transport: American Transit Agencies Will Rebound If They Want To (Medium Confidence)

An early casualty of the early COVID media coverage was the reputation of public transportation across the country. New York City accounts for about half of the nation’s daily public transit trips, and images of packed subway trains loom large in the popular imagination of life in that city. Adding the appearance of precision to natural intuition, an MIT economist named Jeffrey Harris published an infamous paper in April 2020 arguing that the subway system had been the primary cause of viral spread through the city. Although anyone with a rudimentary understanding of the city’s geography had ample reason for doubt from the start (the hardest-hit neighborhoods were some of the worst-served by transit), it took months to debunk the false narrative, and even longer for an organized pushback. The mythic linkage between the virus and public transit could remain a persistent thorn in the side of public transit agencies and advocates for years to come.

As with higher density housing, it’s hard to entirely separate today’s bearish predictions about the future of public transit from the discredited media assumptions that still linger from the pandemic’s early days. But unlike higher density housing, public transit was languishing before the pandemic, and its near-term prospects face far greater challenges than just bad PR.

In the United States, the most recent peak of public transit use came in 2014. Since then, cheap oil, easy auto credit, a strong economy and inconsistent governmental support have all combined to push ridership down. Then in 2020, the collapse of rush hour commuting and social activities, mixed with fear about safety, caused ridership to plummet. Nationwide, ridership in Q4 of last year was down 62 percent from Q4 of the year prior.

This calamity created a chain of others. Without fare revenue, transit agencies began to hemorrhage money, in some cases millions of dollars a day. Without a critical mass of riders to enforce norms, many transit agencies subsequently saw huge spikes in anti-social behavior on their systems, leading to significant physical and societal costs that have yet to be fully accounted for.

Most transit agencies have been dealing with financial and social issues for their entire existences, and the pandemic simply turned up these problems to 11. It’s the deeper question about the post-pandemic geography of work that has added a new, existential threat. American transit networks, more than almost anywhere else in the world, have been built around the primary goal of ferrying commuters to central-city jobs. Well before the possibility of a pandemic had crossed anybody’s mind, transit advocates had been arguing that this focus on a portion of trips (20 percent of travel is commuting, and just under 20 percent of jobs in the Twin Cities are in downtown Minneapolis) was wrongheaded (here’s something I wrote about this issue three years ago). Now that undiversified approach seems not only counter-productive but possibly even fatal if worst-case predictions about commercial office space actually pan out.

Transit agencies will need to fight for a post-pandemic future if they want to succeed. It won’t be easy, but it’s far preferable to accepting a paradigm of managed decline. (Photo by author)

Federal aid has bailed out most transit operators’ budgets, for the time being. Many of the larger social issues plaguing public transit agencies will at least partly fade as the pandemic abates. But the question of whether transit agencies themselves will recover their ridership and grow in the medium to long term is an open question. The COVID-19 pandemic may have dealt public transit in America such a critical blow that transit is permanently set back to a new, lower baseline.

I don’t doubt that transit can recover its ridership, as it has in other countries that more successfully contained the pandemic or suffered similar calamities in the past. Unfortunately, the more pressing question seems to be whether some agencies want to.

Recently the Massachusetts Bay Transportation Authority in Boston announced substantial service cuts to save relatively little money in spite of the federal aid. Only after withering criticism did the MBTA reverse those plans. At least some board members were less concerned with fighting to win back riders and more convinced that their task was to manage decline, according to board meeting minutes. But can they really be blamed? For decades, government has disinvested in some of America’s most venerable transit systems, leading to a host of crises even before the pandemic, including decline, retrenchment and further decline. The pandemic may only strengthen this narrative in many places.

A different path is open to those metro areas that champion their transit, work toward recovering ridership and reinvigorating their systems, and invest in better models of operation. The expected decline of the traditional 9-to-5 workday, whatever its depth, provides an imperative for agencies to refocus their priorities and rethink their networks for all-hours everywhere-to-everywhere travel. Agencies like the Southeastern Pennsylvania Transportation Authority (SEPTA) in Philadelphia and Metro Transit in Minneapolis-St. Paul are in the process of modernizing their bus networks around this principle, and agencies like METRO in Houston have already done so. These systems stand the best chance of becoming stronger in the post-pandemic years.

This may not pass for especially sophisticated analysis, but I believe that whether individual transit agencies recover from the pandemic will come down to whether they and the local political milieu want it to happen. A stark divide already exists in America between cities that are re-investing in an urban model of growth underpinned by transit and those doubling down on the suburban model of growth that favors freeways instead. That gap might widen further in the near future.

***

My four predictions about the fate of post-COVID American cities may best be described as skepticism of other predictions. Cities have endured and adapted to many shock waves, both long and short, and they have consistently defied the predictions of the dreamers and the skeptics. Cities are highly efficient and flexible machines, undergirded by some basic truths:

  • Humans like to be with other humans.
  • Human creativity and productivity increases in the aggregate when we all live and work together.
  • The best way to achieve this is to create places where everyone can live, work and socialize together.

That is the root of my belief in cities overall, from which specific critiques, analysis and predictions all grow.

Any one of these predictions may well prove spectacularly wrong. But I am most confident in the overall thesis, the root analysis, that the laws of human attraction and collaboration are still in play, and their force in shaping the post-pandemic world cannot be discounted.

Alex Schieferdecker

About Alex Schieferdecker

Alex Schieferdecker is from New York City, lived in Minnesota for six years, and now lives in Philadelphia. He is still unhealthily invested in Twin Cities politics and development. Please help. His twitter handle is @alexschief.

4 thoughts on “Some Relatively Optimistic Predictions About Post-COVID Cities

  1. Dan MarshallDan Marshall

    Alex, this is an excellent and thoughtful analysis. We won’t fully understand the long term impact of CV19 for many years. Here’s a couple other things to consider.

    First, I think cities have yet to realize the pandemic’s impact on small businesses. We may be very surprised to see how many restaurants, performance spaces, escape rooms, movie theaters, skyway shops, specialty stores, etc, won’t be with us when things return to a semblance of normal. Some have adapted with take out, online, or curbside models but for others this just wasn’t possible. The result will be a mix of opportunities and losses for urban neighborhoods that will likely feed into other urban trends like the need to build more housing. For example, the owner of Dixie’s on Grand Ave in Saint Paul is looking to save two of his restaurants by razing them and building a five story multi purpose housing development. We may see many more of these types of opportunities in urban centers. But we may also be seeing a lot more vacant storefronts.

    Suburban malls, however, were already facing an uphill battle pre-CV19 and 2020 has been catastrophic to more many of them. With Amazon surging by some 60% in the past year, CV19 has accelerated the retail apocalypse and we may soon witness the end of many suburban big box and mall stores. It’s unclear whether many of them can pivot to remain relevant. The result may be a rapidly declining tax base in some suburbs that coincides unpleasantly with aging infrastructure.

    Lastly, one of the predictions early in the pandemic was that we’d see a CV19 baby boom. In fact, the opposite has happened and our already low birth rate has gone even lower, probably because CV19 has economically impacted millennials much more than older generations. We’ll be living through the consequences of this for generations.

  2. Tom Quinn

    An inevitable consequence of working from home is the employer’s ability to hire workers who are better trained and less costly from anywhere in the world. Once geography becomes irrelevant, workers will have to compete with each other on a global basis. IT workers had already seen many of their jobs outsourced to other countries prior to Covid, but I would expect this to now extend to any kind of office work that is done remotely.

    1. Brian

      Training, experience, and productivity is the issue. I have seen outsourcing where the overseas workers simply didn’t have the experience to be productive. In one case they needed five overseas workers to try to replace one American worker. The overseas workers were not productive and the American kept his job all the way until the software was retired and both the American worker and the overseas workers were let go.

      There probably will be some additional work sent overseas, but if every job is sent overseas there will be nobody left in n the USA to buy products and services from businesses.

  3. Andrew E

    I would like to make counter-point to the otherwise well thought out problems facing the Suburban office complex: The Half-day. That is, with shorter (and easier) commutes, these complexes seem to be perfectly situated for the employer that wants to offer a half-and-half work environment. Employees come in at the normal 9 AM start time, and work 3-4 hours at the office, getting through all (or most) meetings, project updates, and other multi-person tasks in person. Come lunch time, around the noon-1 PM slot, the employees are heading off to home where they’ll have a couple of hours of time to work before the kids start getting back from school. They can then continue to work, at times convenient for them, into the early evening hours while saving money on childcare and enjoying increased freedom.

    An employee with a 10-20 minute commute might find this type of schedule extremely appealing – whereas someone having a 30-45 minute commute would find this a lot less appealing. This model might also actually increase productivity and moral (as well as general health and wellness), by combining the in-person contact and sharing of the office with the peace and freedom of the home.

    All in all a pretty interesting (and for the most part likely) take. I may quibble with some of the conclusions or interpretations of underlying data, but in a matter of degree and not kind.

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