Cities Post-COVID

The extended remote working "experiment" that COVID has meant for most white-collar workers has some wondering about the future of cities.  As in, "why pay downtown rents and subject your employees to soul-crushing commutes when people can log in from anywhere?"  Indeed, Manhattan and San Francisco are seeing mass vacancies and commensurate office rent declines, albeit from eye-wateringly high levels.  Is this the end of cities as we know them?

Not so fast.  When the Internet first became a thing at the turn of the last century, many people similarly predicted a flight to wide-open utopian places, or at least a reduction in interest in cramped urban places.  Instead, the opposite happened: cities have been on a win streak that is two decades and running.  But will it be different with COVID, now that lots of people have been forced to work from home and are finding that virtual conferences, Zoom meetings, and Slack check-ins are...actually not a bad way to run an office?

It is absolutely true that this extended forced remote period has opened people's eyes to the fact that it's not only not bad but has a lot of pluses.  On the margins, more people will choose this full-time, and many more people will want this at least some of the time, whether a day a week, as needed because of contractors or child care, or for a season in life (living abroad, following a spouse for their job relocation).  

And, while there is certainly some pent-up desire for social interaction, the new norm after the fog lifts is likely to be a slight reduction in the ongoing equilibrium of face-to-face.  For example, people discovered during the pandemic that they like cooking and it saves money, so they'll splurge for the fancy restaurant once things open up but by and large will go out less post-COVID than they did pre-COVID.  

And, going back to Manhattan and San Francisco, more people are deciding that they don't need to live IN those places if it means paying so much that their whole life is a vicious cycle of high living costs supported by working insane hours for the job that is causing them to need to bear those high living costs in the first place.

And yet, most people will still need to live NEAR those places.  If you're in finance, access to Wall Street is not a prerequisite but is a huge plus, and therefore something people will pay a premium for.  Similar to tech and Silicon Valley, or entertainment and LA, or government and DC.  

When the Internet first came along, we all thought it would allow a thousand flowers to bloom, since we were shifting from a paradigm of a few big bets to one of many tiny ones.  And to some degree this is true.  Barriers to entry - in entertainment, business, and cultural expression - are so low that anyone can publish a book or start a new venture or put on a performance.  Yet the same technology that enables a thousand flowers to bloom also ties us all together, such that there is a homogeneity or at the very least an inter-connectedness to everything.  

So, yes, there are many nodes of tech besides the Silicon Valley, many nodes of finance besides Wall Street, and so on.  But if anything, those singular places have become more important, not less, in a world of many nodes.

Which means the places themselves, which once commanded sky-high prices and rents because of their uniqueness, are taking a haircut during COVID that I believe is lasting.  Which in turn creates an opportunity for much lower-cost places that are proximate to and accessible to the big hubs.  

Which is why I'm so bullish on places like Baltimore and Wilmington (and Philadelphia, for that matter, which is its own big city and has many more pockets of unaffordability, although it is still a steal compared to nearby high-cost cities).  Because what will increase in attractiveness in the years after COVID are places that offer legit big-city amenities - major league sports, world-class cultural amenities, waterfront space - and non-auto access to major job hub, at pennies on the dollar.  

 (A quick aside on Wilmington, by the way, where I've done a fair amount of work in my job.  I recall talking to financial services professionals there about how hard it is to recruit young talent to their city.  The way they put it is someone will get hired out of college, and they'll be given the choice to go to Manhattan, Wilmington, or Charlotte, and few choose Wilmington.  Which, no disrespect to Manhattan and Charlotte in terms of career and quality of life, but that seems like a missed opportunity.  Like I tell my daughter, if you ever get the itch to live in Manhattan, choose somewhere else close, pay way way way less in rent, and then take your friends to Manhattan one weekend a month and just live it up.  I guarantee you it is impossible to spend so much money that weekend that you won't still be better off than if you were paying Manhattan rents.)

America is wonderfully diverse, so I am making a ton of over-generalizations and glossing over a million nuances.  But, the numbers are there, as is the narrative: tomorrow's young professionals seek an urban, multi-modal location to make a name for themselves, which is not necessarily in our country's great hubs but has easy access to them.  Figure out where those places are - I've already given you Baltimore and Wilmington - and make a mint in real estate.