Special Briefing: Doom Loop or Boom Loop—Work from Home and the Challenges Facing US Cities

NEW ECONOMIC PROJECTIONS SHOW NEW YORK AND MAJOR U.S. CITIES ON VERGE OF "BOOM LOOP," ECONOMIC REVIVAL AS WORK FROM HOME BECOMES NEW NORMAL

Economic Experts Explain How Working from Home is Reshaping Economic Landscape in New York, San Francisco, Chicago, Philadelphia, Miami

“Over the years, cities like New York have repeatedly adapted to challenges,” said Dr. Richard Voith, Founding Principal, Econsult Solutions Inc. and Research Fellow, Penn Institute for Urban Research. “New York experienced near-bankruptcy in the 1970’s, but adapted and prospered in the 80’s and 90’s. After 9/11, many said that dense cities with skyscrapers were too dangerous. In late 2007, after the housing market downturn and financial collapse of Lehman Brothers precipitating the Great Recession, people once again predicted the decline of New York, but the city responded robustly in both instances. Work from home poses a direct and serious challenge in New York City, especially in the commercial office sector and public transportation, but work from home also potentially offers great opportunities for the city.”

“Recently, we've asked a series of qualitative questions in our surveys, asking people about returning to the office. What draws them to the office? Many firms said that they've done several big pushes to return to the office, which I think gives you a sense of how difficult it is for certain organizations, especially in knowledge work industries, to bring their people back,” said Jose Maria Barrero, Assistant Professor of Finance, Instituto Tecnológico Autónomo de México (ITAM) and cofounder of WFH Research. “Typically, [employees] want to collaborate with their colleagues in person – socializing and getting to know them – but things like the quality of the office space and the ease of access into the office is a big factor in drawing them in.”

David Stanek, PhD, Vice President at Econsult Solutions Inc. gave a closer look into the data of each city, citing San Francisco as the “poster child” for a difficult post-pandemic recovery due to the workforce being primarily dependent on the tech sector. In contrast, Miami has gained upwards of 100,000 jobs since the pandemic.

“There's been a flight from old, dingy office buildings to brand new buildings, and employers have shown they're willing to pay the price,” said Kathryn Wylde, President and CEO of the Partnership for New York City. “Employers’ real estate commitment to New York City is extremely positive. More than half are committed to at least maintaining their current footprint, more than 30% have actually increased or anticipate increasing their footprint in the next year, and only 10% are looking at reducing their footprint.”

Stijn Van Nieuwerburgh, Earle W. Kazis and Benjamin Schore Professor of Real Estate and Professor of Finance, Columbia University Graduate School of Business touched on the climate transition aspect of the issue. “We need to convert brown offices to green apartments, in a nutshell. Of course, there are both regulatory and financial obstacles to conversion. We've come to the conclusion that roughly 10% of the office stock is readily convertible based on its physical characteristics. In cities like New York or Chicago, where we have an older office stock, that number is probably closer to 30%.”