In 2017, about 7 million workers (4.4%) did so from home. In 2023, over 17% of the labor force was found working at home, well over 30 million total. Office buildings which were formerly bursting at the seams are now substantially underutilized, and the bean counters are increasingly agitated at the notion of completing the ten year lease. Pundits warn of the next financial crisis being led by the collapse of commercial real estate.
Many companies, both large and small, are engaged in an all-out effort to get their employees back to the office, either be enticement or coercion. This may be like trying to return one of those new foam mattresses by forcing it back into the remarkably small container in which it arrived on your porch courtesy of Amazon.
We recently read that 78% of the office workers are back in Manhattan (Manhattan return-to-office rate hits 78%: JPMorgan | Crain’s New York Business (crainsnewyork.com) based on mobile location data. This has been extremely difficult for many companies to achieve.
Will it return to 93%? We sincerely doubt it.
Many of the dramatic shifts have already settled back to their pre-pandemic levels. Not so with working at home, the sudden imposition of which was effectively a ‘try before you buy’ trial for many employees.
So, what are the long term implications from a demographic perspective?
As readers of our blog may recall, our crystal ball was destroyed some years ago by a New Year’s Eve party guest who, late in the evening, mistook it for a snow globe. Sadly, it did not survive the vigorous shaking. So, we must rely on our wits, which is always dangerous.
The population share of the largest cities has continued to grow over the past few decades, but we expect that this will reverse over the coming decades. Many of us really don’t want to live in the big city, but one moves to where the good jobs are. The decentralization of work will inevitably slow the growth of large, congested urban areas. Vacant offices result in empty seats at restaurants and fewer people sticking around on a Friday night to enjoy the nightlife. Transit systems will require more subsidies from cash strapped cities. The result can be a self-reinforcing downward spiral, and we expect this will be felt most in those cities with a finance and information focus.
Mid-size cities, long bypassed by these key sectors, could see a resurgence since they offer big city amenities without the drawbacks. Small towns with major quality of life amenities – beaches, mountains, climate – should thrive.
The information economy frees its workers from the tyranny of distance, and with that will likely come a decentralization of wealth and power that could ultimately impoverish the largest cities. If the industrial revolution shifted the locus of wealth and power from large landowners to the cities, the next revolution will have a decentralizing effect.
What we find interesting is that this comes at a time when governments at all levels are desperately trying to increase densities and to make cities walkable and compact to lower carbon emissions, when the centrifugal forces are strengthening in the opposite direction. What seems to be occurring in just a few cities now – San Francisco, New York, Los Angeles – may become a widespread phenomenon. Governments will of course intervene by foolishly pushing the conversion of office space to subsidized housing and promoting transport and energy policies which will ultimately be seen as a malinvestment. Market forces will always prevail without the use of coercive force.
The information revolution will be as disruptive to the spatial organization of society as was the industrial revolution which came before it. We are now just seeing the foreshocks of what are likely some major economic earthquakes in the century ahead, and the increase in remote work is just one of many dashboard lights that are starting to blink red. Strap yourselves in folks, there is turbulence ahead.
Recent Comments