Originally posted on Streets.MN.
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 milestones. We’ve learned to take our work home with us, or to adapt at work to stifling requirements and a sense of very real danger. So many have seen that that danger actualized in the sickness and loss of loved ones.
Among the worst things has been the sense of not knowing when it would all be over, and even then, knowing what “over” might look like. That uncertainty has compounded everything else. So much is bearable, like a shot in the arm, because you know when it’ll be finished with 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 a bit less clear. It would be strange if such a monumental global event had not permanently reshaped our society in some way. But which changes are the ones that will stick, and which are the ones that we will discard?
Reading the media, there’s plenty of reasons if you want to feel depressed. Not only have we spent over a year suffering the terror and pain of the COVID-19 virus, but also a national wave of interpersonal violence, and a deep social isolation. Cities have not been unique in their plight (in fact, many suburban and rural areas have been more badly 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 hard to find major doubts about their model.
I’m deeply invested in the future of American cities. I want them to succeed, and I think that at the root level, they are, as Edward Glaeser puts it, our “greatest invention.” Plagues are not new, technological and societal disruptions are not new, and yet cities have only become more prominent and productive over time. As a consequence of this, I’ve been skeptical since the early days of the pandemic of predictions of their demise. In some cases, that skepticism proved well founded. But in other ways it may ultimately prove blinkered. I’ve trained myself in so many ways to see the opportunities for cities that it’s entirely plausible 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 on paper, both to help organize them in my head, and to expose them to wider scrutiny. I’ve also tried to be honest about my doubts. Although I want to make the best case for my prediction, I’m more confident in some than others. I’ve tried to note that, and also tried to faithfully air some of the arguments I’m responding to.
Whether I am right or not will probably be difficult to say for a while, but I do hope that at least as an exercise, it will help me and others think more clearly about what we can expect in the near future.
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 would 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.” Throughout the pandemic, many employees have come to appreciate the newfound freedom to work in sweatpants and a thirty-second commute. Simultaneously, employers have noticed that productivity stayed high despite the dispersion of their workforce. It’s become a consensus view that demand for that office space is about to take a enormous blow.
People will still want to come to Thrivent’s brand new office building in Downtown East in the future. Probably.
It would be ridiculous to argue that this will not happen to some degree, since we already have ample examples of it already occurring. Just two weeks ago, for instance, the Target Corporation announced that they would be cutting their footprint in downtown Minneapolis by a third. That announcement came on the heels of Prime Theraputics announcing a consolidation of their offices that would close an outpost in Bloomington. There will surely be more news of the same variety to follow, in the Twin Cities and around the country.
Underpinning these changes is internal company data about employee preferences. Many companies are polling their employees and reporting widespread support for working from home several times a week at least. Prime Theraputics, for instance, apparently discovered that 93% of their employees were “okay or better” with working from home.
Yet predictions about “the commercial real estate apocalypse” still strike me as off the mark. At a base level, I’m 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 is being pushed by Prime Theraputics, where 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. It’s unclear 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. When everyone else is calling into meetings from their desks, 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, there are conveniences to being present in a single space and being able to work through issues in person that I suspect people will rediscover once it becomes possible to do so. Lastly, there is a social aspect to office work that 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.
All of this is not to say that nothing will change. It’s certainly true that working remotely is feasible and desirable for many people. 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 in and of itself does not necessarily portend the collapse of office work.
Commercial Office: … suburban Office Space Will get crushed
If everyone can agree that demand for office space will face at least some contraction, there’s been less agreement, or even discussion, about the spatial impact of this trend. Most coverage seems to focus primarily on the impact to downtown central business districts (CBDs), but mainly for ancillary reasons; CBDs are extremely visible, their commercial tax revenues drive many city budgets, and their daytime office populations support an economy of other businesses.
Are workers and employers going to choose to places like Bloomington’s South Loop if one alternative is a home office?
Triple-digit highway office parks however, face headwinds that seem quite a bit 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 the end 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 complimentary 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 easier to commute to than the one down the hallway?
However home offices 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 of early data portends 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% of the metro’s jobs are located. Meanwhile, leasing on the I-494 corridor plunged. This is just one slice of data from one point in time, but I highlight it as an example of what I think might 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 lower quality suburban commercial office offerings, with shorter leases and less-invested tenants, the nearer term future may be grim.
Residential: Trend Towards 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, and because Americans just aren’t particularly familiar with or curious about other places, it quickly became the conventional wisdom that urban density was a critical factor in the spread of the virus. Now a year later, after devastating outbreaks in places as diverse as rural South Dakota and suburban Phoenix, there is more understanding that urban density is not much of a factor in the spread of the virus.
But that thesis was the initial spark for a wave of articles and predictions about an exodus from American urban cores, especially among millennials. Movers were supposedly motivated by a fear of contracting the virus, or else were gaining a new appreciation for those passels of suburbia; big homes and big yards, where there was space to be had in a time of isolation.
People wanted to live in homes like these before the pandemic too.
It’s hard to shake the feeling that there has been a lack of rigor underpinning this analysis. For instance, a lot of writing about spatial living trends is extremely reliant on unsurprising anecdotes (like rich people buying more space—was COVID really the driving factor there?) or has turned out to come from mistaken reading of data. To take two examples, 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 suddenly having to move back in with parents.
It’s also the case that 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 have long relied on a certain kind of slight 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 ten years 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 that there’s 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 pandemic in better financial shape than they entered it. On aggregate, this would be expected to lead to more 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 suggests 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.
All of this to say that 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 it 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. I’m not staking myself to that prediction, but it 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 image 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, in April of 2020, an MIT economist named Jeffrey Harris published an infamous paper 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. It seems possible that the mythic linkage between the virus and public transit will 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 with higher density housing, public transit was not booming before the pandemic, and its near-term prospects face far greater challenges than just bad PR.
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.
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% 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.
To various extents, most transit agencies have been dealing with financial and social issues for their entire existences, and the main impact of the pandemic was to turn these problems up to 11. It’s the deeper question about the post-pandemic geography of work, which I discussed above, that has added a new, existential threat. American transit networks, to a greater extent than almost anywhere else in the world, have been built around the primary goal of ferrying commuters to central city jobs. Well before the thought of a pandemic had crossed anybody’s mind, transit advocates have been arguing that this focus on a portion of a portion of trips (20% of travel is commuting, and just under 20% of jobs in the Twin Cities, for example, are in downtown Minneapolis) was wrongheaded (here’s something I wrote about this issue three years ago). Now that undiversified approach seems not just counter-productive, but possibly even fatal if worst-case predictions about commercial office space pan out.
Federal aid has, for the time being, bailed out most transit operator’s budgets. 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. There is a very real fear that the COVID-19 pandemic may have dealt public transit in America such a critical blow, that it has permanently set it back to a new, lower baseline.
I’m simultaneously optimistic and pessimistic. There’s no question in my mind that transit can recover it ridership, as it has in other countries which more successfully contained the pandemic or suffered similar calamities in the past. Unfortunately, the more pressing question at this point seems to be whether some agencies want to.
Recently Boston’s MBTA announced substantial service cuts to save relatively money in spite of the federal aid. Only after withering criticism did they reverse those plans. Minutes from the Authority’s board meetings demonstrated that at least some board members were less concerned with fighting to win back riders, and more convinced that their task was to manage decline. But can they really be blamed? For decades, some of America’s most venerable transit systems have been disinvested in, leading to a host of crises even before the pandemic. In many American metro areas, transit has long been on the course of decline, retrenchment, and further decline. The risk is acute that the impacts of the pandemic may only strengthen this narrative in many places.
A different path is also open to cities that champion their transit, work towards 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 Philadelphia’s SEPTA and Minneapolis-St. Paul’s Metro Transit are in the process of modernizing their bus networks around this principle, and agencies like Houston have already done so. These are the systems that 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 or not individual transit agencies will recover from the pandemic will come down essentially to whether they and the local political milieu want it to happen. There already exists a stark divide in America between cities that are re-investing in the urban model of growth that is underpinned by transit, and those doubling down on the suburban model of growth that does not. That gap might widen even further in the near future.
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These are four predictions about the fate of post-COVID American cities, but they are probably better described as skepticism of other predictions. Cities have endured and adapted to so many shocks, 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, and that 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.
That doesn’t mean that I’m right in detail. Any one or all of these predictions may well prove spectacularly wrong. I’m confident in some things, less confident in others. But I’m most confident in the overall thesis, the root analysis, that conviction that the laws of human attraction and collaboration are still in play, and that their force in shaping the post-pandemic world cannot be discounted.