Annually, we, at Penn IUR, ask an array of experts to share their views on a critical topic for the year ahead. This time, nearly four years after the onset of COVID-19 began a structural shift to working from home, we asked scholars and practitioners to share their responses to this question: What do you expect will happen to remote work trends in the future? How should cities respond to remote work’s impact on the value of their real estate, tax bases, and more broadly, urban life?
Our commentators universally agree that the trend of remote work is here to stay. In fact, Stijn van Nieuwerburgh, Earle W. Kazis and Benjamin Schore Professor of Real Estate and Professor of Finance, Columbia University, notes that commercial real estate is expected to cumulatively lose up to 45 percent in value by the end of this year ($600 billion in lost value). Heartily agreeing, Dick Voith, Chairman and Founding Principal, Econsult Solutions cautions that such benefits of remote work as increased worker flexibility in terms of time and location, may drive increased social isolation and climate unfriendly development patterns. As of the fourth quarter of 2023, Moody’s Analytics found that 19.6 percent of office space was vacant, and according to Kastle System’s 10-city survey of office buildings using their key cards, peak office occupancy has reached just 50 percent of pre-pandemic levels.
Nonetheless, others see some brighter outcomes for cities, arguing that over time, they have responded to challenges with innovations and will do so in the future. Clarence E. Anthony, CEO and Executive Director, National League of Cities, notes that despite the expected decline in office occupancy, cities, towns, and villages across America will “lead the way as they revitalize their downtowns and reinvigorate their economic centers.” Harriet Tregoning, Director, New Urban Mobility (NUMO) alliance, sees adaptive reuse of real estate and more flexible development going forward. Tracy Hadden Loh, Fellow, The Brookings Institution, observes that contrary to most beliefs, foot traffic in cities comes from casual visitors not office workers; but warns that they require different experiences in cities. She calls for downtowns to be “welcoming, legible, and needed by a broad diversity of people.” Marc Morial, President and CEO, National Urban League and Former Mayor of New Orleans, adds that remote work can be a tool to address cities' racial inequalities, if used responsibly. And Prema Gupta, President and CEO, Center City District, argues that downtowns can show “the way forward for our society to address its goals of equity, climate adaptation, and opportunity.”
Further, experts view technology as playing a major role in the future of cities where work from home (WFH) is prominent. Nicholas A. Bloom, William D. Eberle Professor of Economics, Stanford University, likens the WFH trajectory to a “Nike swoosh.” It rose extremely quickly between 2020-22, flattened in 2023, and by 2025, will rise again due to anticipated improvements in technology. Bruce Katz, Director, Nowak Metro Finance Lab, Drexel University, believes that defense tech, fin tech, medtech and other technology sector startups (along with new university / corporate centers of excellence) will help re-invigorate downtowns. For Richard Florida, University Professor, Rotman School of Management and School of Cities, University of Toronto, technology has created a new kind of urbanism – the Meta City, which “adds digital connectivity to physical clustering and agglomeration, enabling cities to expand their hinterlands far outside of their geographic reach.”
More provocative insights about how this year’s guests view the course and impacts of remote work in cities are below.
- Susan Wachter and Genie Birch, Co-Directors, Penn Institute for Urban Research
Cities Can Be More Livable in the Future | Clarence E. Anthony
Work From Home Has Stabilized, But Will Grow in the Future | Nicholas A. Bloom
The Rise of the Meta City | Richard Florida
Downtowns Can Offer Equity, Climate Adaptation, and Opportunity | Prema Gupta
Remote Work and the Next Downtown | Bruce Katz
Navigating The Perception and Reality of Remote Work | Tracy Hadden Loh
Remote Work Can Be a Tool to Repair Racial Inequalities | Marc Morial
Cities Should Plan for Adaptation and Flexible Development | Harriet Tregoning
Work from Home Has Resulted in Massive Real Estate Losses | Stijn van Nieuwerburg
An Economic Outlook on the Impacts of Work from Home | Dick Voith
Cities Can Be More Livable in the FutureWith fewer workers coming into offices and more buildings standing empty, cities, towns, and villages across America are leading the way as they revitalize their downtowns and reinvigorate their economic centers. These challenges present incredible opportunities – chances to reimagine the ways residents can better engage with their physical surroundings every day.
Of course, there’s no one silver bullet solution: smart and strategic local leaders will have to employ – and in many cases, are already using – a variety of approaches to bring back the vibrancy of their pre-pandemic neighborhoods.
Many communities are creating new financial incentives, modifying building codes, and rethinking zoning and land use policies to transform vacant office buildings into housing, increase density, and grow development downtown. For example, cities such as Boston and Minneapolis are offering tax breaks as high as 75 percent to developers who transform office space into residential housing – particularly if new projects help meet the cities’ affordable housing and sustainability goals. New York City has created an innovative “Office Conversion Accelerator” division within its city government, meant to serve as one primary contact for developers to work with on conversion projects and issue permits quickly.
Beyond office conversion projects, investing in city parks, art, restaurants, and other community amenities can have a significant impact on bringing people back to city centers. For instance, Salt Lake City has seen its downtown foot traffic grow nearly 140 percent since 2020, managing to grow even beyond its pre-pandemic levels. Local leaders there attribute this success to the city’s emphasis on revitalizing parks, cultural attractions, and other factors that impact livability downtown, encouraging people to move in and grow the local economy as a result.
All of these approaches – in tandem with robust affordable housing and public health strategies – are essential pieces of the puzzle for local leaders to consider as they work to create downtowns where residents want to live and spend their time. But it’s not on city leaders to do this work alone. To be effective, local governments need all of their partners – local organizations, state and federal governments, and the private sector – at the table to help come up with solutions and ensure that our cities are both safe and vibrant and are perceived as safe and vibrant places to live. This is a daunting task, but it will be made easier with strong partnership across all sectors of our communities. This challenge is our chance to build better, more livable cities of the future together in the years to come.
Clarence E. Anthony is the CEO and Executive Director of the National League of Cities and previously served as the Mayor of South Bay, Florida.
Work From Home Has Stabilized, But Will Grow in the Future Working from home (WFH) is following a Nike swoosh. The first phase was 2020 to 2022, when levels of WFH fell by roughly half, dropping from the early pandemic high of 60 percent in early 2020 to 30 percent by the end of 2022. The second phase has been 2023 and likely 2024, where WFH levels have remained flat. The return to the office movement died at the end of 2022 and WFH levels stabilized at about 30 percent of days. The third phase is likely to start in around 2025 when WFH levels will start to slowly rise again, driven by ever improving technologies. This includes everything from better audio, video, and laptops, to virtual reality, holograms, and new apps. If you look back over the last 50 years, we see WFH has been continuously rising, driven by better technology, from personal computers in the 1980s, laptops in the 1990s, to the internet in the 2000s, and cloud video-calls and file-sharing in the 2010s. This technology continues to improve and will bring rising levels of WFH with it within the next couple of years. When all of us can enjoy Star Wars-style holographic meetings with fantastic sound and vision, we will collectively spend fewer days each week in person in the office.
For cities, this will mean increasingly moving from a place of work to a place of leisure and consumption. Office use will remain, but more on a hybrid basis with occupancy focused on a few days a week, typically Tuesday to Thursday. The rest of the week will see activity more focused around residential activities and entertainment. The key to the continued growth of cities is focusing on supporting these activities. This requires good public infrastructure, and improved services like education and police. To attract residents, shoppers, and diners, cities must provide appealing services and control crime. The future of cities looks healthy, but it is different – less office and more leisure focused.
Nicholas A. Bloom is the William D. Eberle Professor of Economics at Stanford University, and co-founder of www.wfhresearch.com.
The Rise of the Meta CityNot long ago we were besieged with predictions of how the COVID-19 pandemic and the shift to remote work would lead to the imminent death of great global cities. But far from being eclipsed, global cities are being reinvented in new and more powerful ways.
In a recent article in Harvard Business Review with collaborators Vladislav Boutenko, and Antoine Vetrano, and Sara Saloo of BCG from which this essay is drawn, we point to the rise of a new, expanded form of city, the “Meta City,” which adds digital connectivity to physical clustering and agglomeration, enabling cities to expand their hinterlands far outside of their geographic reach.
Historically, cities essentially provided everything for their residents — jobs and economic opportunities on the one hand, and housing, schools, and quality-of-life amenities on the other. But with the rise of digital technology and remote work, the places where we work and live have essentially become unbundled. The share of American workers engaged in remote work tripled from roughly 6 percent in 2019 to almost 18 percent in 2021. Remote workers can access significant quality of life at far more affordable prices in smaller cities, suburbs, and rural areas.
Remote work is often seen as enabling people to move out of expensive cities to more-affordable places. This is typically viewed as a zero-sum game that benefits up-and-coming areas at the expense of established superstar cities. But this perspective misses the crucial linkages between and across cities. It is not so much that Austin is talking tech talent away from San Francisco, but that Austin’s rise is best understood as a satellite of San Francisco’s long-established tech hub. Similarly, it is not that Miami is taking finance and real estate corporations and talent away from New York City, but that Miami is enmeshed in New York City’s long-established finance and real estate complex. The rise of the Meta City informs a counterintuitive logic: Leading superstar cities are seeing their role as economic hub expand, even as talent and industry disperse to satellite centers.
For all of human history, cities have faced physical limits to their ability to scale — caught in a vexing trade-off between the scale economies that come from clustering and the diseconomies of congestion. Similar to the ways that new transportation technologies have functioned to relieve such physical constraints in the past, the rise of new digital technologies today enables cities to scale and grow in new, complex ways.
Cities and communities of all shapes and sizes should develop strategies based on their role in the Meta City network. As places of living become unbundled from places of work, some cities may come to specialize as economic hubs and others as centers of residential living. Hub cities may be able to capture more-economic connectivity functions, even as they lose population to more-affordable places. Satellite communities must work to improve their positions in the network through transportation and other means while also improving the value proposition they offer to potential residents.
Instead of being eclipsed by new technology, the boundaries of our cities have once again been expanded and redrawn. The post-pandemic age of remote work has brought with it a new kind of city that combine elements of the physical and digital worlds.
Richard Florida is a University Professor at Rotman School of Management and School of Citie at the University of Toronto and author of Rise of the Creative Class (2002) and The New Urban Crisis (2017).
Downtowns Can Offer Equity, Climate Adaptation, and Opportunity Modern portfolio theory applies to downtowns; the hearts of cities perform best when they are diversified. Philadelphia proves this. Today, foot traffic on Center City sidewalks is approaching pre-pandemic levels, despite the fact that, on a daily basis, 73 percent of non-resident workers have returned. Residents, and increasingly tourists, have animated streets and generated economic activity that has insulated downtown retail and restaurants from a more pronounced downturn. Demand from residents and visitors for parks, shopping, museums, and theater will sustain the amenities that entice more office workers downtown.
In Center City Philadelphia, office-to-residential conversion is not a new concept. A quarter-century of successful conversions of old office buildings, while new ones have been added, has yielded a highly diversified downtown with one of the country’s largest residential populations. There are now more people living in greater Center City than before the pandemic, with 2,800 units of new housing built in 2022.
There is still more to be done. A Center City that is clean and safe remains the priority of my organization, Center City District. Supporting downtown is about equity: two-thirds of jobs downtown don’t require a college degree. Climate is also increasingly important, and to address climate change we will need to double down on density and public transportation. Not only is Center City where people can live and work, but it is also the way forward for our society to address its goals of equity, climate adaptation, and opportunity.
Prema Gupta is President and CEO of Center City District in Philadelphia.
Remote Work and the Next DowntownFor 25 years, the rebound of central business districts has been a driving force in the rebirth of U.S. cities. That positive dynamic is now threatened as the rise of remote work drives detrimental, domino-like effects on commercial real estate, small businesses, transit ridership, and municipal tax generation.
Remote work is now a structural feature of the post-pandemic economy, not a cyclical aberration. There will be no bounce back to the pre-COVID era. As a result, cities need to move fast to diversify their downtown economically, amplify their downtown culturally, and remake their downtowns physically.
To achieve this, cities must link downtown revival with the mega-forces and unprecedented federal spending that are reshaping the broader US economy. Remote work is not the only market or capital dynamic that has been unleashed post pandemic and the future of downtowns cannot be treated in isolation. The reshoring of production, the decarbonization of the economy, and transformative federal investments around climate, manufacturing, and infrastructure are restructuring the U.S. economy in ways that demand continuous product and process innovation that, if mastered, revalue downtowns and the employment and residential diversity they bring.
Now downtowns are not going to suddenly house super-sized semiconductor facilities. But they can play an essential role in the new economic order by, among other things:
• becoming a home for the innovative parts of universities, health care facilities, and major industrial companies and next generation centers of excellence, industry/academy vertical campuses, and test labs;
• becoming a platform for startups and scale ups in sectors such as defense tech, clean tech, med tech, and fintech;
• leading the transition to climate friendly buildings, renewable energies, and the modern grid;
• modernizing transportation infrastructure by decking over or reconfiguring freeways that divided neighborhoods and diminished economic potential;
• enabling the scaled conversion of office towers (and areas around rail stations) to residential buildings, via new financial stacks and policies; and
• growing the entertainment, sports and experiential economy at scale.
In sum, the revival and remake of downtowns must become part of the broader economic restructuring.
Bruce Katz is a Distinguished Fellow at the Lindy Institute and Founding Director of Nowak Metro Finance Lab at Drexel University.
Navigating The Perception and Reality of Remote WorkMost U.S. metro areas have not yet arrived at a “new normal” for working from home (WFH), but the evidence points to one key imperative: Cities can’t give up on downtowns as hubs of office-based work. Downtowns thrive on density, and office employment is the single densest land use. While diversifying downtown activities by adding housing, entertainment, and dynamic public spaces (including adaptive reuse of old office buildings and parking) is complimentary to office recovery, it is not a substitute.
Cities and regions should strengthen demand for offices in all activity centers, including downtowns, by eliminating obsolete office product; ensuring frequent, reliable, and safe transit access; and building housing not just in, but around downtowns. This has the added moral and political benefit of leaning in to policies that more equitably benefit more people and places, instead of picking favorites or sides. In addition, similarly framed smarter public safety policies and solutions for homelessness can more effectively serve both downtowns and neighborhoods.
Figure 1 shows the rates of WFH as estimated by the American Community Survey in 2021 and 2022 for the top 20 U.S. metro areas by population.
There are two key insights here. First, WFH rates vary tremendously across metro areas; San Francisco’s reality is not Detroit’s. Second, WFH rates were changing at different rates across metro areas between these years. Tampa may have reached a “new normal,” but double-digit declines in regions as varied as Riverside, Houston, New York, Minneapolis, Boston, and Washington, D.C. suggest that we might yet see more movement.
I fear that by focusing too much on remote work, we are missing the bigger picture. In a typical U.S. downtown, the majority of foot traffic—both before the pandemic and during recovery—comes from casual visitors. Does your city offer a downtown that is welcoming, legible, and needed by a broad diversity of people, be they a suburban visitor meeting their lawyer or an international tourist here for the first time? This is the key question for cities to ask…and answer.
Tracy Hadden Loh is a Fellow at the Brookings Institution studying commercial real estate, and a contributing author to Hyperlocal: Governance in a Fragmented World (2022).
Remote Work Can Be a Tool to Repair Racial Inequalities For many Black Americans, remote work has offered a respite from uncomfortable and even hostile workplaces. It has opened up employment opportunities for those who are reluctant to relocate to less diverse communities. Surveys conducted during the pandemic showed that Black employees are more likely than white workers to choose remote work.
At first glance, remote work seems like an ideal path for companies to achieve more diverse workforces. A deeper look, however, reveals that path is riddled with pitfalls that can reinforce racial inequities in the workplace.
In hybrid work environments, top executives spend more time in the office than lower-level employees, and the employees they encounter there are more likely to be white. Without clear and specific diversity, equity, and inclusion policies and guidelines, this "proximity bias" can lead to more support and opportunities for advancement for white employees, and less support and fewer opportunities for Black employees.
As the National Urban League illuminated in The State of Black America, the COVID-19 pandemic unmasked the deep structural racial inequities in American society. Remote work can be a tool to help repair them. But like any tool, it can be wielded recklessly and irresponsibly to cause more harm than good. Opening the doors to diverse employment candidates is a hollow gesture if the stairways to achievement remain blocked.
Marc H. Morial, President and CEO, National Urban League and Former Mayor of New Orleans.
Cities Should Plan for Adaptation and Flexible DevelopmentRemote work isn’t going away, and the pandemic-driven change in commuting patterns is a preview of the kinds of shifts society will increasingly face in the years to come. Alongside remote work, disruptions like artificial intelligence and a rapidly changing climate will shift the nature of work, the types of jobs that will be in demand, and how and where we live and work.
Adaptability will not shield us from the impacts of societal change, but it will blunt some of the negative impacts. Inflexible zoning around narrowly defined uses has crippled responses to plummeting downtown office occupancies. Downtowns zoned for office-only are suffering more than those zoned for mixed use, especially in places where housing demand is strong. Moreover, converting office to housing has been impeded by restrictive building codes that often require a certain number of windows per bedroom, excessive parking, and ceiling heights that make electrical and HVAC retrofits impossible. These standards may be appropriate for new construction but result in older buildings sitting under-utilized.
What if we were to design new buildings from the very beginning to be able to shift uses, unit sizes, or even a varying mix of residential, commercial, retail, and light manufacturing tenants? Parking is one of those uses that is especially ripe for adaptation. Flat, level parking floor plates are being daylit and converted for office occupancy or storage, while parking with sloping floor plates is hard to repurpose. The only stand-alone, above-ground parking structure I allowed to be built during my tenure as planning director in Washington, D.C., was in a formerly industrial area, but permission was contingent upon the structure being retrofitted for housing as the area gained density, destinations, and a mix of uses that would lower parking demand. As sea level rises, construction in our often densely populated coastal areas may need to be designed to be temporary and moveable as the coastline recedes.
Creative, multipurpose thinking will allow cities to be nimble and address disruptions and challenges as they inevitably come.
Harriet Tregoning is the Director of the New Urban Mobility (NUMO) alliance, housed at the World Resource Institute, where she works to make cities and their transportation and land use more accessible, sustainable, joyful, and just.
Work from Home Has Resulted in Massive Real Estate LossesWorking from home is here to stay. It has brought much needed flexibility to employees, who overwhelmingly love it, without causing noticeable productivity declines. By consolidating office space, employers can save on one of their largest expenses. Next year will see companies further optimize on how to bring the right teams of people in the office at the right time, how much and what kind of spaces to rent, and how to redesign their offices accordingly.
As companies continue to right-size their pre-pandemic leases for the new post-pandemic hybrid work environment, the net effect will be a further reduction in demand for office. Office vacancy rates, already at a 40 year high, will increase further. High vacancy rates will continue to exert downward pressure on net effective rents. Office values, which have already fallen 35 percent according to Greenstreet, will fall by at least another 10 percent points, causing $600 billion in lost value.
These massive declines in office and neighboring retail real estate will result in many mortgage and mezzanine loan defaults next year. Lenders, especially regional banks and mortgage REITs, will suffer losses and take the keys back on many offices. Cities, especially those whose revenues are most dependent on commercial property tax revenues, will be forced to cut spending. Service cuts will lower the quality of life and may prompt population loss which aggravates the problem in an “urban doom loop” dynamic.
Cities should promote office to residential conversions by fast-tracking the approval processes, creating regulatory flexibility, providing technical assistance, and by financially supporting conversions in the form of property tax abatements and below-market rate loans. Financial incentives and density bonuses could be increasing in the share of affordable housing produced as part of the conversions. Conversions will help stabilize the office market, bring new vibrancy to downtown neighborhoods, create much-needed housing, and reduce greenhouse gas emissions.
Stijn van Nieuwerburgh is the Earle W. Kazis and Benjamin Schore Professor of Real Estate and Professor of Finance at Columbia University’s Graduate School of Business; and co-author of “Work from Home and the Office Real Estate Apocalypse” (2022), source of the “doom loop” diagnosis for downtowns.
An Economic Outlook on the Impacts of Work from Home While a significant amount of remote work is here to stay, markets will continue to adapt to remote work for years. From a macroeconomic perspective, the extent of remote work that will prevail has not been tested by recession. So far, remote work has been adopted in a time of historically tight labor market that has provided considerable leverage for workers. From a more micro perspective, the longer-term impacts of remote work on people’s career ladders which are frequently built on personal relationships are still largely unknown. Only time will tell.
Even though the response to remote work is still evolving there are several aspects of the labor market that are not likely to return to pre-pandemic patterns.
How should cities adapt? The primary reason for cities is to provide economic and social interaction. The benefits of agglomeration have not been eliminated, but the possibility of remote work makes the coordination problem of achieving sufficient density challenging. Remote work may provide very significant savings for the remote worker, but it also may undermine not only their productivity but also the productivity of in-person workers. Policies are needed to ensure that private decisions are consistent with the best level of density with its attendant agglomeration benefits.
More than ever the quality of experience in cities will affect cities’ long-term outcomes, as well as the long-term outcome for the income and wealth of the nation. If cities are unattractive, consumption and productivity agglomerations will not be sustained which would likely render significant investment in public and private infrastructure obsolete. Thus, not only will agglomeration benefits be lost, but infrastructure will have to be created in other places. Note also that it would likely result in car-dependent, climate unfriendly development.
In the new world of remote work, commuting cost is the enemy of cities because it is a force against in-person work. Transit remains essential to sustaining cities, but it will need to evolve into a service that is less peak focused and mirrors the all-day flexibility of the new work environment.
Housing affordability is a global problem for cities. To sustain the urban agglomerations in light of remote work, cities have to reduce the barriers to adding to the supply of housing by both the private and public sectors. Preserving access to affordable housing in attractive, successful cities will require some public investment in affordable housing in locations with economic opportunities. Note that the market will provide affordable housing through filtering, but will not fully address the need for housing of moderate income households in a location-efficient manner.
Dick Voith is Chairman and Founding Principal at Econsult Solutions Inc.
Providing expert commentary on urban topics and highlighting Penn IUR's research in the context of pressing urban issues.
