The Future of Cities, Remote Work, and Return to the Office
Though the end of the pandemic may seem in sight, many questions remain regarding which trends of the past year are permanent. Edward Glaeser and Richard Florida join Richard Peiser and Richard K. Green to confer on the potential outcomes for land use in the US.
While both Glaeser and Florida agree that cities at large will return to full strength and influence, they also see individual cities as vulnerable. Regarding office work, Glaeser cites studies that indicate maintaining office culture via remote channels performs well, but growing a company remotely brings significant challenges for both management and employee advancement. Florida sees shifts towards remote and remote-flexible work as a potential revolution in the real estate industry, particularly as amenity-rich smaller cities have an opportunity to build hubs using compact urban models similar to the 15-minute city.
- Lemme begin by introducing, we have just this truly all-star panel of two. Two of the best known writers on cities in the world with us. Ed Glaeser, the Glimp Professor at Harvard who among other things has been editor of some of the most important journals in economics including "The Quarterly Journal of Economics", "The Journal of Urban Economics." He has written some of the most influential articles in urban economics particularly on things like how does industry mix influence the growth of cities going forward and did a remarkable job of taking sure that the qualitative musings of Jane Jacobs from 60 years ago and quantifying them in a way, testing them in a way that actually showed at least my interpretation that's work that Jacob's got an awful lot right sitting on her stoop and observing the world go by. And of course wrote a book three or four years ago called "Triumph of the City" which among other things got him a spot on the daily show. And you know a lot of people NB get Ed for a lot of very good reasons but for me that he got to be on the daily show is sort of the ultimate thing to envy. I'm sorry about that. Richard Florida is university professor at the University of Toronto. Again has published widely. I think coin the term and Richard if I'm wrong about this you can correct me the creative class and wrote about the importance of creativity in the development of cities. And again wrote a very famous book called "The Rise of the Creative class." He has actually had a revision of it. Again, it's a book that is very widely shared and Richard has been advising mayors of cities about how to make their cities better for more years than he probably would like to admit. So Ed is already correcting me on my interpretation of his paper on... Okay, well, that's true and I'll I agree with you. And so with that I'm gonna ask them to kick it off with just the following question. What is the, we have seen people fleeing Manhattan and San Francisco over the course of the last 11 to 12 months. It's hard to dispute that. You look at vacancy rates in those cities and they've risen quite dramatically. Is this something that's permanent or will these cities come back? What does it imply for the system of cities? How long might it take to see things play out? So Ed we'll start with you. And thank you again so much for being here and take it away.
- Oh Richard thank you so much for having me. It's always great to do stuff with my old friend and comrade and urbanist arms, Richard Florida. And it's amazing to be part of this fantastic group who's on the call. I assume when you said 30 minutes you don't actually want me to go for 15 minutes straight on this feature-
- No, no, no, no, no, no.
- When you said...
- No I-
- Just check it.
- What I imagine is you guys each talk for three or four minutes.
- [Edward] Of course. Of course.
- And then we want this conversation. Yes.
- Sure. So I think first of all, I think there there are sort of two visions of the future. One, which thanks to the vaccines that have already been mentioned seems to be receding slightly. But it's a very dark vision one in which the variants on COVID-19 outrun the vaccines. One in which a new pandemic emerges in the next five to 10 years that's even deadlier. That is an enormously dark future for cities for the world, for the urban service industries that employed 32 million Americans before the COVID outbreak. Leisure, hospitality and retail trade they're are really devastated by the declining ability of people to enjoy connecting with other humans in real spaces. In the good version of, in the version in which we get our vaccines by the end of the year perhaps and we don't have another pandemic going forward. We are still gonna be in for a bumpy ride but cities will come back. It will not even be as bad as the 1970s but it will be tough. And I wanna just sketch for you a little bit of what I think lies behind that. Most importantly I think the enduring strength of cities comes from the fact that we are a deeply social species that loves being around other human beings, right? Not all of them maybe but a lot of them. And every time we've ended lock downs we have seen young people by the millions crowd out to be around other young people to enjoy the pleasures of connecting with the rest of humanity. This is what cities do. This is what cities will do in the, have done in the past and will do in the future. Urban spaces will come back. In offices for many of us who are over the age of 50 perhaps and have comfortable home offices, this doesn't seem too bad. For 23 year olds who are just getting started, right? And are working from home in their apartment and I know a lot of them, this is pretty hellacious. They are in fact not looking forward to a world of working from home at all. They are looking forward to getting back with other 20 three-year-olds in their workspaces and talking and learning and connecting. Related point, the office will come back in part because face-to-face contact is our best way for actually learning new things, right? Learning new tasks. And one thing that we've heard a lot from Silicon Valley about how, you know, tech workers are just as productive when they're at home as when they're at work. And we've seen this from earlier surveys of call center workers who work with Nick Bloom, work with my students, Natalia Manuel and Anna Harrington shows that call center workers are perfectly effective at making calls without being in the office. But if you look at what's happened to new hires in technology workers, if you look at what's happened to new hires in computer programmers, that's down by over 40% on Burning Glass, right? So pre-existing relationships can coast along but they're not hiring new tech workers. Moreover, the working from home studies of call center workers showed that those workers were much less likely to be promoted when they worked from home. What does a call center worker get promoted to? You get promoted from a person who handles easy calls to a person who handles hard calls. How do you learn how to handle hard calls? You're around other people and you see what they do. And your boss needs to be able to identify you which is a lot easier when your boss is next to you. So the sense of cities as places where the mysteries of the trade become no mystery but are as it were in the air as Alfred Marshall said 140 years ago, right? That is not going away. Now while city life is a whole and offices is a whole, I think have a robust future. Cities, individual cities, individual downtown areas are more vulnerable than ever. There is no reason why, right, you can't see more tech companies relocating to Austin. There is no reason why you cannot see financial service companies relocating to Miami, right? Zoom has made that easier and that will be something in the future. And I am particularly worried right now that we'll have a little bit of a replay of the 1970s as cities for entirely understandable reasons decide to pick up the progressive lats and pay for it with taxes on the wealthy and in businesses who then just decide to leave, right? And I think all of us should be watching, for example, the mayoral race in New York and see how that falls out. Because while cities as a whole are I think safe and robust and the future of the world will continue to be urban, every city is more vulnerable. The urban markets are more competitive than ever and cities really need to up their game in order to be places of continued economic vitality.
- Let me build on what Ed said but first give him a plug. I don't think anyone mentioned it and I don't think Ed mentioned it. Ed has just submitted a new book. I hope you're okay with me mentioning this Ed. I think it's called "Survival of the City" and it's going to be remarkable. I've not read it but I think it's going to be a remarkable take and a very timely take so congratulations. Everyone get ready because there's a new Glaeser book which will be a touchstone for all of us thinking about city's future. Thank you Ed for that link.
- Thank you.
- I think Ed has provided the big picture and I'll just put some exclamation points around some of his. I think that what we saw at the beginning of this pandemic was a very American. And someone you can see Toronto, an American who spends at least half of the year in Toronto. A very American take about the deaths of cities and I think the gloomsters and doomsters came out of the woodwork. That wasn't unexpected to me. But you know, I went back, I read Ed's work. I read a lot about pandemics, Ed and I've talked about this and others. And cities have survived bigger and worse. They will survive again. And I think, you know, it's very interesting, you know and seeing how fast things are coming back to normal. I'm speaking to you from our winter home in Miami beach where like it or not things are almost back to normal. They're certainly too normal for me. And there's an increasing expectation among people here that people intend in-person meetings. I mean I find that ridiculous and I'm over 60 and I'm worried but there is an increasing expectation and almost everyone I talk to has visited Miami beach. I came on a plane, you know, I went there with my family. So, look I think things are gonna return to normal. Or something, not normal, but something like normal. And by the way, I fully expect this summer to be a big boom in US tourism. Gonna be hard to visit Paris, gonna be hard to visit Venice. If you go to Canada, you gotta go to a COVID hotel. You're not gonna go to the Greek Isles. You're not going to go to the Amalfi Coast. Where are people gonna come? They're gonna come to Malibu and California beaches. And they'll probably take their family to Disney. I wouldn't, but they would. They'll go to Orlando and they'll end up in New York city. And I fully expect this to be quite a bit more rambunctious than many others. Look for all of you, I think this is the biggest revolution in real estate I've ever seen. And part of this is because I've never been to, I'm not a real estate professor and I'm not an economist. I'm an urban planner. As Richard said I advise governments. I've never been so drafted to be part of real estate things in my life. That's telling me something. That people are looking for different kinds of thinking. And the reason is your industry is changing in big ways. Maybe not as big as say the 1920s and 30s when suburbanization took hold and people began in the 40s and 50s to write about malls but in fairly significant ways. Part of this is that we kind of focused, you know, it's funny, I gave a talk at WeWork several years ago and the folks at WeWork I said why are you building these coworking spaces in the suburbs? And they laughed me out of the room. Like there was cacophonous hysterical laughter. Why would we build a WeWork in the suburbs? Well the fact of the matter is more people live and work in suburbs than do in cities. And we've done a lot of very interesting thing in cities but not such interesting stuff in the suburbs. So I think there's a lot of emphasis on this. Part of the emphasis is how do we configure a home for remote work and remote learning. And you know we know how to make the fantasy kitchen but how do we make the home work better? You know, for remote work and remote learning. But how do we make ecosystems for remote work? Not only in urban centers where these young folks, the 23 year olds are gonna go. Look young people are gonna go to cities in droves. They're not gonna be happy to stay in mom and dad's basement. You know we're in the house in the country, they're gonna be flocking back to cities, you know, on mass. But for other folks, people who are our age, who have families, who want better schools, the suburbs aren't the place for many and also in rural areas. I think one of the things the pandemic has done and Ed I'd love your comments on this. The metropolitan area is defined typically as a labor market commuting shed. Now that's still going to be true but I think what it's done is when my dad had to buy a house, my dad worked in a factory in New Jersey. He lived in Newark. He moved about 10 minutes away to North Arlington, New Jersey. Now I think with remote work, you can have a farther range of moves out of the so-called say Metro and you can consider Austin or Miami or Bentonville or Bozeman or Park City, whatever. The other one is I think the office. I think Ed is absolutely right that our central business districts, maybe New York comes back strong. And I have a hypothesis about New York that it will attract more global headquarters. You know, right now if you're in Toronto you can't travel, you can't leave or come back. But if you're in New York eventually, you know, you'll be able... And I think it will attract more global companies from London, from Hong Kong and others. But what about Detroit? What about Toledo? What about Akron? What about Chicago even? So I think there will be some re-composition of the central business district and some adding of residential and some reconfiguration and the office in a sense becomes a perk and it's no longer a cubicle where you plug your laptop in, it's more experiential. And the way I like to think of it, you plan your your day at the office like a local business trip. You're meeting colleagues, you're doing a meeting, you're going to lunch, your grabbing coffee. But I think the big opportunity is for office in the suburbs. And, you know, Richard Pizer said something about industrial. This is very fascinating to me, the idea, and you know we're working on this in Tulsa with Tulsa Remote. How would you build a new kind of office park if you will or a new kind of office environment, a hub of activity perhaps mixed use, 15 minute neighborhood in a suburban or rural configuration which attracts remote workers but gives them many of the semblance of the things Ed has written about city amenities? A coffee place, a fitness facility, whatever it be. So I think what's fascinating about this from the perspective of the home, the multi-family development, the office park, there is an incredible time of re-invention and disruption in real estate. Which is from my mind one of those maybe the most interesting time in my life.
- So Richard lemme pick up on the theme that you've just raised about the suburbs. I think, well, I don't know if you're surprised. I'm surprised at how much prices and actually home building has gone up where they have land in suburban and even remote suburban locations. The question and I'll start with Ed again. Is this shift to the suburbs permanent or just a reversal of the return to the city that everybody's been so excited about over the last 10 years? Or do you expect it to revert once things return to normal?
- I don't know. I mean I'm with Richard in the sense that this is a deeply interesting exciting area, time to be in. And there's no question that zoom has in some sense reduced effective commuting costs. Because you can certainly imagine that you would commute only three days a week. That's sort of a very natural thing to think about. And that may mean that you're gonna commute from somewhere really far away. And it may mean that you're gonna commute close. I mean, certainly what I imagine, the relocation's made possible by zoom. I sort of imagine the whole sort of small tech startup relocating from Silicon Valley to Vail because they love skiing or Honolulu because they love surfing. But still being in a place sort of urban enough for them to connect. But it is certainly true that America is, you know, an overwhelmingly suburban nation and there is a great deal of hunger for urban amenities in a suburban space. So I think that's entirely right but I think it's gonna depend a lot on the nature of the suburb and the nature of the market. So, you know, again, no place is guaranteed of success. A general, being a general anchor for high skilled people either because you're a university, because you have other forms of local amenities are, is gonna be really powerful. The other thing to remember in terms of the the office and I think Richard's exactly right that we really wanna think about, you know, office as a future is being more like playgrounds for the high end of the market. But it is worthwhile remembering there are still office workers and maybe those jobs won't remain but there are still office workers who do jobs that are sufficiently hard to define that you can't just send them home and tell them to do it. You know, the ability to sort of monitor people is also a valuable asset on this. So it's, and that's less of a playground office. That's more of an office in which everyone can sort of work together and make sure that they're doing what they're supposed to be doing.
- And now we're talking about this beforehand. It's interesting the signals coming out of the finance, insurance and real estate community and you saw the comments by Goldman Sachs we're coming back to the office. My friends who run big real estate firms in Toronto, New York, folks are gonna come back to work. But in the tech community, they're saying no, no, no, no, no. You know, we'll go remote at the same time and Ed and I were talking about this as well. Facebook and Google and Apple are snapping up those buildings in New York city and I think for exactly the reasons I talk about the young people. There are going to be places that you're gonna onboard this young talent which gravitates to these superstar cities. But one other comment, I think that there will be more losers than winners from this. And I think the winners, Ed has written about this but there's something very fascinating about this. It is going to be those that have a lot of amenities. There, that amenity, if you will, both he mentioned Vail. Remember you mentioned Vail skiing or Honolulu for surfing. If you're a place with natural amenities and you could be a smaller place, you could be Jackson Hole or Bozeman or you could be the Hudson Valley outside of New York. You know, lovely places in Vermont. Natural amenities will attract people and there'll be these younger folks. And then people who love an urban vibe who'll be attracted to big cities where that unique bundle of amenities you get in New York city you can't really get in many other places or any places in the world. I think the generic places have a tougher time. So I do think this price premium will go to places with amenity. And then the only other one I would add is if you can define yourself enough around making remote work desirable, if you could create development capacity, real estate development capacity just for a remote worker, we have an ecosystem that's more appropriate for you that could elevate a few places that are more generic that could compete on that one characteristic.
- So. I'm sorry.
- I just wanna add one thing. One thing to think about when you think about amenities is there are some amenities that are, you know, low density outdoor amenities that are more likely to be associated with a more suburban future, that's Vail, that's any place in which sort of the great outdoors is what's going on. And then there are places like New York or Paris where in fact it's the central city that has the amenities, right? It has centuries of investment in architecture and art museums and a thriving scene. And those are areas in which I think we should think to expect to see the central city be more dominant going going forward as well.
- So I'm gonna have a two-part question here is it relates to Los Angeles. So we have a lot of people in this meeting who do work in Los Angeles which sort of doesn't fit either of your categories. It is unique. It's not exactly suburban but it doesn't have a central city which is the focus of jobs. There is no particular job center in Los Angeles that has more than I think 6% of the jobs in metropolitan area. They're scattered all over the place. So what does all this mean for a place like Los Angeles which is arguably a unique place in this regard? Although Richard, I think Toronto may have more in common with Los Angeles than any other American city. It's pretty spread out. Although it has pretty well-defined central business district. And more specifically one of the drivers of Los Angeles economy has been creative people. My colleague Elizabeth Karen Hellcat writes about how there are more artists in Los Angeles than there are in New York. That's not artists per capita, that's number of artists Los Angeles is a smaller city than New York. How do artists work? I mean part of being an artist is being lonely and being in your studio and painting or writing and not letting people bother you. But a lot of the arts involves people actually being together. You can't do theater without being people together. You can't make movies without being together. You can't play music without people being together. So thoughts about what all this means for Los Angeles and in particular for cities where the arts are an important driver of people's desire to be there.
- So lemme start. We did a report with a fellow named Mike Seaman who's an expert like Elizabeth. We both known for a long time on the creative industries. I think he documented that there's been 50% unemployment among visual and performing artists. So it's been an absolute decimation. I mean, it's probably the hardest impact economic sector I even looked closely it may have but it's been an absolute decimation. You know artists have multiple careers streams. They learn how to make like the background behind me or they hook up on my lighting rig and they can freelance but it's not like having your career.
- They're also waiters. And those jobs are taken-
- The artists have taken it tough. I think on Los Angeles, I bet on Los Angeles, you know I go back to a stupid statistic that I remember looking at. That the place that gained the most population after the Spanish flu that moved into the top 10, went from outside the top 10 US Metros in population to number five was Los Angeles. So I think one of the peculiar things that I've seen in this pandemic is people moving to warm outdoorsy places. And that goes more for Miami and Texas and less for Los Angeles. But I think Los Angeles has a lot to offer. I think what I've seen for migration out of Los Angeles is driven by two things. One is simply cost. And you know, I say this all the time and Ed may get a kick out of this. You know, people talk about the exit is from New York city and I said if I can get a five bedroom townhouse in New York city for the same price that I can get a five bedroom house in Charlotte, I'll take it. And I bet I'm not the only American. So price has a lot to do. I mean you're all an economist you know this. And Los Angeles is horrifically expensive at the Metro Level much more expensive than New York Metro. But the other thing I think that's challenged Los Angeles and that you see a lot in the headlines is there are wealthy people, members of the .001% who don't like to pay as much taxes and are worried about tax increases. Both coming from the Biden administration and you hear lots of rumors, Richard I'd like your comment on this, about a wealth tax in California. So whether that's true or not, I don't know, I haven't kept up. But what I see from friends moving to Miami is we're leaving California because not because we didn't like it, not because it's not lovely, not because the weather is not nice, it's nicer than Miami. We're worried about taxes. And I think we shouldn't make too many predictions. So my hunch is Los Angeles remains an attractive place. Prices go down maybe a little bit but maybe it does lose some high net worth people.
- So a couple of things I agree completely with everything that Richard said. A couple of things, I put in the chat room a link to a paper that I did in over the summer which was serving small business owners. And we've certainly found that the arts was easily among the most devastated industries by COVID that the closure rates were just absolutely extraordinary. And, you know, that's, it's of course gonna be one of the industries that's gonna be most eager to leap back once vaccines are widespread. Like Richard I see a lot to like in Los Angeles's climate. I mean, it has been an allure for migrants for 150 years. And it's likely to be even more important in a world in which as he said we care about face to face connections outdoors rather than inside. You know, it's, I've got a foot and a half of snow outside my house right now. And it's pretty hard for me to use outside space to meet people. So it's, but lemme riff a little bit more on his comments about the sort of political challenges facing LA. I, one of the chapters in my new book focuses on gentrification in Boyle Heights which unfortunately I didn't get to visit. Usually I like to actually visit the places that I write about but I did watch all eight episodes of Gentefied just try to get myself into the moon which was about it. The sort of story of the battles over gentrification, really for me the background of that is the collapse of a building in California. That if you sort of think back in 1970, right? We didn't have battles over these things because it was easy to build. In fact, it was easy to build in Boyle Heights when it was one sort of a builder's paradise that provided affordable housing for middle income Los Angelenos. And for the last 50 years and I don't know where you wanna take your points in the inflection point, Friends of Mammoth or whatever change of the building environment, it is become just a very different world in terms of building in Los Angeles. And it's not as if there isn't land, it's a medium or low density metropolitan area by global standards but it is very difficult to build. And so the competition over the space that remains is incredibly fierce, right? And it gets highly politicized and it gets part of this sort of progressive wave that we see in, you know, the potential for wealth taxes, the potential for all sorts of things which are coming from an understandably angry place. And since we're plugging each other's books, let me urge you to, you know, read Richard's, "A New Urban Crisis" from 2017, 2016 something like that, which you know, is presently pointing out how things are going wrong in our seemingly beautiful cities. And that in some sense is the great trouble with the pandemic is it's hitting cities not as 9/11 did at their most robust, at their most triumphant. It's hitting cities at a place where cities are already troubled. Troubled by anger over race in policing, troubled by anger over gentrification, troubled by anger over affordability. And I think ultimately for me at least what lurks at the back of all these problems is a tendency of our society increasingly to prioritize insiders over outsiders. So the things that happen in California since 1970 including for example Prop 13 are things which meant that if you bought a house in Los Angeles in 1970, you did fantastically well. But if you were a kid born somewhere else hoping to move into Los Angeles in 2010 or 2015, right? These changes were not taking care of you in part because the real estate industry was not empowered to take care of you as it had historically by building the kind of space that you would need. And I think going forward as we try to address the very real complaints of the outsiders in our system, we need to do so in a way that doesn't induce the, you know, insiders who actually run the institutions and hire people and create jobs from leaving our productive cities like Los Angeles. So while I'm entirely behind the view that we need to do, you know, more to promote upward mobility, to promote affordability, I believe there are ways of doing that in a way that does not have a zero sum aspect where you're basically robbing one person to take care of the other.
- I wanna say just two more things about Los Angeles, Richard because so many colleagues from Los Angeles are on the line. First of all, it's a city you know that I love. I enjoyed my time with you all at the center. I think Los Angeles faces kind of two challenges and two opportunities. One challenge which it's politically incorrect to talk about but this fellow named David Milner sent, I think Ed was on the list. He sent it around an interesting essay that he published. He's a downtown development expert called downtown discontent. And it was about this wave not just of crime but this wave of, you know, I talked to the mayor of Miami, the county, Daniella Levine Cava and she called it COVID stir crazy is what she used for it. This wave of petty crime, car thefts, I read today in the New York post which is my daily reading that Lady's Gaga dog walker you probably saw this got shot and her dogs were kidnapped in Los Angeles. You know, we see this in malls. We see this in my neighborhood in Toronto where 70 cars were stolen over the summer my small neighborhood. Look there's something there that we've got to wrap our arms around and we can't keep pushing under the rug. The second thing, you know, with regard to Los Angeles that I learned when I was visiting Richard Green is that schools typically are very far away from people where people live. It was not uncommon for me to talk to colleagues at USC that were driving their kids a half hour 45 minutes or an hour to a private school. That's tough for most parents I think. So those are two on the negative side. On the positive side, I think this idea of less commuting more remote working, the 15 minute neighborhood advantages a city that was gridlocked like Los Angeles. If you can get cars off the highways, my Lord it makes the prospect of living in Los Angeles much better. And I'd say one more thing. When I wrote "Rise of the Creative Class", the hot cities were the Bay area, Austin, New York. If I taught young people today post-college I might put Los Angeles at the very top of that list. It's New York is there still, but boy oh boy there's something in the popular mind that these youngsters love. You know and it's downtown Los Angeles and maybe it's Venice and maybe it's Santa Monica, you know the communities better than I do. The West End. There is something in the popular consciousness that makes me think that Los Angeles will have a fair shot and a good shot at attracting these young talented people who in the past would have gone to Boston, New York and maybe Washington in the Bay area.
- Well, I think one thing is, you know we saw a very large increase in presence of tech companies and what's called Silicon beach. And I think part of it for young people is as expensive as LA is, it's much less expensive than the Bay area. If you can get a Google type salary or you get a Netflix salary and Netflix apparently pays very very well and you can live in Venice for less money than it costs to live in Milpitas, then LA looks pretty good if that's, if you're focusing on California.
- Yeah if I can pick up on housing prices I, we're kind of in an asset price bubble now because interest rates are so low. Do you see that continuing? Is there much hope for really getting a lot more affordable housing on?
- I would not wanna be a buyer or a person who bought a suburban house or a house in the Hamptons or waterfront house in Miami now. I just think this... And we've already seen stories about it. This pandemic... All of my relatives are in the Michigan suburbs where people are paying for homes in the Michigan suburbs or in Northern Michigan just boggles my mind. So I think you're right Rick that there's something gone on that's related to the COVID crisis and starts with the country that there is a bubble.
- And just to just to echo that, you know the point that I made, I gave the ELAN Lecture for the American Economics Association about six years and it was titled, "A Nation of Gamblers, a History of Real Estate Speculation in the US" where I sort of emphasized that betting on real estate was America's greatest pastime and had been so for the past 400 years. The point that I tried to make is that the mistake that investors have made for centuries is to underestimate the power of supply to determine prices in the long run. So that gives you relatively little guidance in a market like Los Angeles where supply is really constraint but you're not gonna convince me that suburban housing in Michigan can't essentially be produced, you know, forever. Which means that paying substantially over, you know, the normal premium over construction costs for housing in those areas that's almost surely gonna lead to buyer's remorse at some point in time.