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How have cities transformed under the crush of the pandemic, and what does the future hold for urban landscapes as health risks subside and remote work continues to shape living and working spaces?

Image courtesy of interviewee. November 22, 2024

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This video reflects on the societal and economic shifts brought about by the COVID-19 pandemic, particularly concerning urban living and remote work. During the pandemic, people adapted to spending more time at home and engaging in regular meetings, both virtually and in smaller groups. This video led to discussions on the implications of remote work for cities.

Historically, urban areas have thrived due to technological advancements, but the pandemic presented unique challenges and opportunities. There were observable trends in real estate, with housing prices soaring in suburbs as remote work made commuting less critical. A phenomenon termed the "commuting dividend" emerged, highlighting the increased satisfaction from working at home and reduced commuting burdens.

As individuals adjusted to working from home, many sought increased living space to accommodate home offices. Consequently, there was a growing demand for larger homes, especially in suburban areas, leading to an increase in housing prices. Meanwhile, downtown areas struggled, losing their traditional economic vibrancy rooted in the "dinner economy," which relied heavily on daytime office workers.

The return to work dynamics also shifted, with a notable segment of the workforce preferring flexibility in their work schedules. Younger professionals increasingly negotiated remote work options as part of their employment arrangements.

As cities adapt to these changes, the long-term implications on urban planning and housing markets will evolve. Housing demand could remain high in suburbs due to the continued preference for remote work, while downtown areas may face challenges in attracting residents and businesses moving forward. The concept of agglomeration—where businesses benefit from being near each other—may also transform, leading to a different urban landscape in the future.

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Here are five key points from the video:

1. **Pandemic-Driven Changes in Work Dynamics**: The video discusses how the COVID-19 pandemic initiated significant changes in work behavior, emphasizing that many individuals and households adapted to remote work and found it beneficial, leading to a preference for hybrid work arrangements.

2. **Commuting Dividend**: The concept of a "commuting dividend" is introduced, referring to the advantages workers gain from working from home, including time savings and reduction in commuting costs. This has led to an increased desire for housing that accommodates home offices, pushing demand and prices in suburban areas.

3. **Urban vs. Suburban Housing Trends**: It describes a shift in housing demand, with suburbs becoming more attractive due to lower reliance on commuting. Urban centers, particularly in cities like Philadelphia and New York, are experiencing a decline in office occupancy and retail activity, contributing to rising prices in suburban areas as people seek more space.

4. **Economic Impacts on Downtown Areas**: The video highlights the negative impact on downtown economies, particularly the decline in the "dinner economy" and "lunch economy," which rely on professionals working in offices. Many downtown areas have not fully recovered from the pandemic, resulting in retail and job losses along with concerns about urban depopulation.

5. **Long-term Future of Work**: The discussion touches on the evolving nature of work arrangements, suggesting that employers will need to adapt to the desire for flexibility among workers, especially in larger cities. The video implies that remote working trends will likely persist, and organizations must learn to operate effectively in hybrid environments to remain competitive in attracting talent.

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Here are some key quotes extracted from the video you :

1. **Reflections on the Pandemic:**
- “It's going back to the dark days of the pandemic. We were spending a lot of days at home...”

2. **Work from Home and Productivity:**
- “...as soon as we were no longer stuck home, people discovered that they were quite happy to work from home, at least some of the time.”

3. **Commuting Dividend:**
- “So we call that a commuting dividend… if you're able to stay and work from home, it's as if you are making five to ten percent of an equivalent wage.”

4. **Changes in Housing Demand:**
- “...you want to consume more housing... for many households, you know, if suddenly you go from zero space to work at home, to two home offices for two different members of the household, that's actually a pretty big increase in your demand for housing.”

5. **Urban vs. Suburban Living:**
- “The price of housing in the center has gone up... whereas in the suburbs, universally they became more attractive and places went up.”

6. **Long-term Impacts of Housing Shortage:**
- “...at this point we have high prices... but long run, you know, there's going to be some more building happening.”

7. **The Dinner and Lunch Economy:**
- “Downtowns were being sustained by... the lunch economy... if the lunch economy disappears, the economy is finding lots of problems.”

8. **Changing Office Dynamics:**
- “...there’s a fear that downtowns are going to depopulate... going back to a 1960s sort of vicious circle...”

9. **Flexibility in Work Preferences:**
- “Young people... want to go like, I want to work in an office no more than three days a week or no more than two days a week...”

10. **Future of Remote Work:**
- “...this flexibility is really important, especially when you have a young family...”

11. **New Labor Market Realities:**
- “...the labor market of New York City could expand well outside...”

These quotes encapsulate major themes from the discussion about the impact of the pandemic on work habits, housing trends, urban vs. suburban living, economic changes in city centers, and the growing desire for flexibility in employment.

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It's going back to the dark days of the pandemic.

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We were spending a lot of days at home

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and with my colleagues, we had decided we'd be meeting

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at least once a week, all of us,

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and also somewhat regularly,

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somewhat regularly in pairs.

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So I had this great colleague called Jesse Berry,

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who was on her way to get tenure

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before tenure, collaborating with a young colleague.

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He is a double-edged worker for that person, but

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after tenure, she was free to, to widen a set of courses,

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including the old guys like me in our department.

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So one of the discussions we had was, you know,

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it's a major, major shock happening,

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so far in the last whatever, a hundred years,

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all the big technological shocks have been favorable, mostly

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to cities on urban living, with some exceptions about stuff

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that happened in the us CCA 1960 were doing well

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by expanding, people wanted to flop

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to them and so on and so forth.

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So all of that, was great,

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including actually some clear downsides of the price

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of living in successful cities becoming incredibly high.

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And suddenly here's the pandemic.

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And we see lots of bizarre things happening,

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potentially a major threat to cities.

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But some of them actually,

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every time there was a house on sale in my neighborhood in

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Philadelphia, people were going crazy.

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Like things I'd never done, I'd never seen before.

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Like people waiting for an open day, people

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bidding on top of each other for, old houses.

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Suddenly the prices of those houses going up,

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we could at the same time see, the center

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of Philadelphia and certainly the, mid will midtown

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and downtown with Manhattan, like not doing very, very well.

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My day job is for real estate department.

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So we teach real estate to students.

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Uh, we are in close contact with the industry,

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and people from the industry were like in despair with

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what was happening on the office markets,

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with potentially staff that would unravel

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for many more years after that.

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Uh, retail kind of doing not well,

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but well, depending on where, all sorts

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of interesting patterns,

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where clearly suburbs were doing better and all of that.

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And we, you know,

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some academic pieces were coming out documenting like one

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damn fact after another, which, you know,

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it was perfectly interesting.

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But we thought with micro Jesse bury, it was perhaps time

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to tell a story around that

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and come up with, a more unified,

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a more unified explanation.

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Not a story of everything about, you know, all trying

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to explain all why work from home.

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You know, we, we took work from home at that point,

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has given and try to understand the implications

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of work from home for cities.

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We could see, we could see people being, you know,

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they were stock homes, so they were very unhappy

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With that. But

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as soon as we were no longer stuck home, people

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discovered that they were quite happy to work from home,

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at least some of the time,

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including in my, in my own household.

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As soon as, you know, we went back to some sort

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of new normal, my wife said, okay, she negotiated

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two days a week for employer,

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and she asked me to stay,

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to stay home at least one day a week, you know,

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to do a number of things and stuff.

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So meaning that you are saving time,

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not having to go to work.

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So that's a commuting dividend.

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But we know from a lot of past research that, you know,

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commuting, we spent a lot of time traveling.

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Uh, your typical American household, your typical member

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of an American household will spend more than an hour a day

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doing four errands.

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Uh, you know, only one of them on average will be,

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will be, will be commuting.

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Actually, we will commute.

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Commutes are one mile in four and one trip in six in the us

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and that's, you know, we don't like, we like being places,

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but traveling is a cost, particularly so for commutes,

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because these are the most congested times of the day.

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This is not something we enjoy doing beyond 10, 50 minutes.

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And unfortunately, most of us actually commute,

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20 minutes or more, or 30 minutes or more.

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So there's a big gain of actually not having to commute.

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So we call that a commuting dividend.

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And you know, if you're not working, the wage cost

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of not being, having to work

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or being able to stay at home two days a week for lots

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of workers seem to be in the order of five

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to 10% of an equivalent wage.

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So if you're able to stay

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and work from home, it's as if, you are making five,

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10% more in terms of direct satisfaction, not having

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to spend that time in your car

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that you really dislike actually.

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And the, and even the cost of that mileage, like in my own,

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in my household, we could go down one

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car and so on and so forth.

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So you can, you, you're going to save from that.

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And we are calling that the commuting dividend.

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So all the paper we wrote was fairly technical

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because we wanted to be able to quantify that,

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and put that in a startup framework of demand

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for housing in different locations

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around the city and so on and so forth.

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But what we found actually, both in terms of the effects

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that it had and the,

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and the spatial well component of it for people

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were living closer, gaining less versus

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who were living further away while gaining more, which meant

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that people then wanted to live further away

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because suddenly more remote locations

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were becoming relatively more attractive

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because their lack of access

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to jobs was becoming less important.

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We started formalizing with those ideas.

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So that's the commuting dividend.

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But at the same time, at the peak of the pandemic,

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I'm sure many of us were in the same situation where we had

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to work from home, but we had to work in all sorts

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of locations at home.

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For me, that was the bedroom,

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that was the last, our, our bedroom.

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That was the last place that was available.

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And after a while, you know, there was a word for that.

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When you spend 20 hours a day in the same room,

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it's a jail cell, right?

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So, you want to have actually more space in your house

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so that you can have an independent office,

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which we eventually got when one of the kids left home.

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Uh, so we have an independent office,

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for my wife had had already one, now we have two.

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And you know, it means

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that you want to consume more housing.

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So we were lucky because we had one

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kid, were living the house.

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But for many households, you know,

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if suddenly you go from zero space to work at home,

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to two home, two home officers for two different members

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of the household, that's actually a pretty big

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increase in your demand for housing.

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So we had, we had this first force where you no longer need

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to commute at the,

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or you need to commute less, which leads you to want

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to live further away, but lots of people have the same idea.

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So prices will go up in those locations.

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And because you also want to consume housing, more housing

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and people everywhere wanting to consume more housing,

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that's also going to lower well the price of housing.

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So you see like relatively, the centers are losing

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because their better access becomes less variable.

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So, the decline, the suburbs increase,

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but at the same time, everybody wants

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to consume more housing, which is also pushing

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things up for everyone.

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So the resulting effect between this plus

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and this minus for centers in some cases,

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like Philadelphia, I think it's a plus.

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Uh, the price of housing in Philadelphia in the center has

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gone up some in part

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because you had people moving out of New York

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and all of those complications, whereas in the suburbs,

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universally they became more attractive and places went up.

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One thing here that is, is really important to understand is

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that this is what happened in the space of three

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or four years, but those adjustments are going

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to take place over very long periods of time.

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Uh, in part because we build housing only very slowly.

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Uh, lots more people probably want

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to live in more remote locations,

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but if there's no housing,

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they need to outbeat somebody else.

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So, so, so at this point we have high prices and,

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and people, you know, not much left, well,

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that's available for people who want

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to move from the center, but a long run, you know,

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there's going to be some more building happening.

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There'll be some differences across cities

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where in the US you have, places like Boston where,

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you know, 50 mile reduced from Boston.

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Nobody can build anything anywhere near anyone.

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Uh, banana, no,

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it's build absolutely nothing anywhere near anyone.

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Uh, where on the other hand, you have places like Charlotte,

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in North Carolina where, you know, things can expand

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and eventually there'll be a lot more building taking place.

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And that city, like all the cities that actually let,

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building happening, they are going to grow

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and, and gain population.

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So you have both a special, with a special

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but dimension within the city.

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But then depending on how cities react

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or how liberal the cities are with respect to housing,

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you are going to have growth or non-growth.

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That's also something that, it's actually why we were,

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we were able approach by the New York Fed

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to actually buy this piece for the reopening,

206
00:09:22.905 --> 00:09:25.285
for the reopening world conference at the end of Covid.

207
00:09:26.185 --> 00:09:29.085
And so cities exist

208
00:09:29.085 --> 00:09:31.725
because you have benefits in terms of production,

209
00:09:32.105 --> 00:09:33.725
and historically this is what matters

210
00:09:34.345 --> 00:09:37.005
and benefits in terms of, in terms

211
00:09:37.065 --> 00:09:38.805
of amenities and consumption.

212
00:09:40.925 --> 00:09:45.265
We, we decided we wanted to make our mind on that.

213
00:09:45.965 --> 00:09:50.305
So amenities, we, we quickly came looking at the facts

214
00:09:50.325 --> 00:09:51.945
around us and what was happening,

215
00:09:51.945 --> 00:09:54.825
including actually new stuff opening in our suburbs.

216
00:09:55.065 --> 00:09:57.345
I think, you know, we've been validated on that one that,

217
00:09:57.425 --> 00:10:00.105
I mean, it is come and go reasonably easily.

218
00:10:00.765 --> 00:10:03.825
So if it's an attractive place, more stuff will come,

219
00:10:03.845 --> 00:10:05.065
if it's an an attractive place.

220
00:10:05.245 --> 00:10:07.665
So there's chicken and egg sort of problem here.

221
00:10:08.605 --> 00:10:11.785
And the way we're thinking about that is that downtowns,

222
00:10:12.255 --> 00:10:15.025
they were being sustained by, you know, you have

223
00:10:15.135 --> 00:10:16.545
what we call the dinner economy

224
00:10:16.645 --> 00:10:18.665
or the shopping economy where people come

225
00:10:19.445 --> 00:10:22.105
and, you know, they have dinner at the, in the evening,

226
00:10:22.535 --> 00:10:24.465
they go to the cinemas, they do stuff, they go

227
00:10:24.465 --> 00:10:28.065
to the theater, they go and buy stuff on Saturday afternoon.

228
00:10:28.085 --> 00:10:30.985
Before that, all sorts of, with all sorts

229
00:10:30.985 --> 00:10:32.745
of specialized retail and so on and so forth.

230
00:10:33.525 --> 00:10:37.625
Uh, at the same time we realized that this dinner economy

231
00:10:37.725 --> 00:10:39.705
and shopping economy, we are being sustained

232
00:10:39.725 --> 00:10:41.225
by the lunch economy.

233
00:10:41.225 --> 00:10:44.065
Because as a restaurant, if you are only open for dinner,

234
00:10:44.285 --> 00:10:45.865
you are not going to make money.

235
00:10:46.085 --> 00:10:47.945
And that's going to be very, very difficult.

236
00:10:48.685 --> 00:10:50.665
And also, lots of the people

237
00:10:50.665 --> 00:10:53.785
that participated in the economy, they were already here

238
00:10:53.785 --> 00:10:55.945
for work and part of the launch economy.

239
00:10:56.045 --> 00:10:58.425
But if the launch economy disappears,

240
00:10:58.425 --> 00:11:00.785
the economy is finding lots of pro is,

241
00:11:01.165 --> 00:11:02.945
is encountering very serious problems.

242
00:11:03.445 --> 00:11:05.265
And indeed what we've seen is

243
00:11:05.855 --> 00:11:07.705
many downtowns have not recovered.

244
00:11:08.365 --> 00:11:10.105
You know, they've recovered some for some,

245
00:11:10.165 --> 00:11:13.785
but many have actually lost retail lost jobs,

246
00:11:14.125 --> 00:11:15.545
and that's not coming back.

247
00:11:15.655 --> 00:11:20.105
Whereas we've seen a lot more opening of retails

248
00:11:20.245 --> 00:11:23.545
and all sorts of service places in the suburbs

249
00:11:23.875 --> 00:11:26.105
where people tend to hang out a lot more.

250
00:11:26.485 --> 00:11:28.265
Uh, you know, you may be working from home,

251
00:11:28.325 --> 00:11:31.305
but you, you have lunch with, with a friend and stuff.

252
00:11:31.605 --> 00:11:33.425
I'm not very sociable, so I'm not doing that.

253
00:11:33.445 --> 00:11:36.585
But I can see my wife, I can see my wife where will do that.

254
00:11:36.585 --> 00:11:38.545
Like, she's working from home two days a week

255
00:11:38.545 --> 00:11:41.465
and she's meeting with somebody for lunch at least one day.

256
00:11:41.465 --> 00:11:42.865
We can very often, that's actually

257
00:11:43.505 --> 00:11:46.065
somebody from work in a broad science who,

258
00:11:46.485 --> 00:11:47.665
you know, it's Philadelphia.

259
00:11:47.815 --> 00:11:50.345
It's not a huge place and it's big, but not that big.

260
00:11:50.685 --> 00:11:52.585
So they can meet actually within,

261
00:11:53.275 --> 00:11:55.805
Well within a, within a few kilometers will of each other.

262
00:11:56.145 --> 00:11:58.125
And they will be, and they will be having lunch

263
00:11:58.305 --> 00:11:59.965
as if they had lunch close to work.

264
00:12:00.105 --> 00:12:01.205
That's a big unknown.

265
00:12:01.585 --> 00:12:05.125
We are seeing housing becoming expensive in many,

266
00:12:05.125 --> 00:12:06.645
many more places in the suburbs.

267
00:12:07.775 --> 00:12:11.155
Uh, so long term that's

268
00:12:12.735 --> 00:12:14.895
creating a problem because people is only

269
00:12:14.955 --> 00:12:17.055
so far down in terms of consumption

270
00:12:17.075 --> 00:12:18.375
of housing that you can go.

271
00:12:18.515 --> 00:12:21.175
So, this is not our object today,

272
00:12:21.175 --> 00:12:22.575
but that leads to homelessness

273
00:12:22.635 --> 00:12:24.215
and all sorts of other complications.

274
00:12:25.115 --> 00:12:28.855
Uh, there's a fear that downtowns are going to depopulate

275
00:12:29.155 --> 00:12:31.895
or attract only very poor people.

276
00:12:32.035 --> 00:12:36.535
And going back to a 1960s sort of vicious circle of

277
00:12:37.085 --> 00:12:41.215
poverty, low amenities, crime, that plays a usual,

278
00:12:41.265 --> 00:12:42.535
especially in the US

279
00:12:43.335 --> 00:12:45.335
'cause when this crime in the US it's really, really bad

280
00:12:45.335 --> 00:12:47.015
with people having guns and all of that.

281
00:12:47.635 --> 00:12:51.935
So, and then this, this negative, well,

282
00:12:51.935 --> 00:12:55.735
this negative circle at the same time, you know, we,

283
00:12:55.735 --> 00:12:59.215
people tend to forget that there are prices, especially

284
00:12:59.235 --> 00:13:00.455
for commercial real estate.

285
00:13:00.705 --> 00:13:03.495
Those prices are slow to adjust in part

286
00:13:03.495 --> 00:13:07.135
because what you have is, what you have is,

287
00:13:07.135 --> 00:13:09.815
when you sign a contract for commercial real estate,

288
00:13:09.845 --> 00:13:11.735
it's not a contract for an apartment.

289
00:13:12.405 --> 00:13:14.015
It's actually a long-term contract,

290
00:13:14.545 --> 00:13:16.095
which will have an initial price

291
00:13:16.555 --> 00:13:19.815
and then a close that stipulates how much by how much,

292
00:13:19.815 --> 00:13:21.855
where the price will go up every year.

293
00:13:22.315 --> 00:13:23.855
Uh, who's going to take care of this?

294
00:13:23.855 --> 00:13:26.175
Who's going to take care of, of minor maintenance,

295
00:13:26.175 --> 00:13:28.015
major maintenance, and this and that stuff.

296
00:13:28.065 --> 00:13:32.255
These are contr, you know, new space needs to be organized

297
00:13:32.275 --> 00:13:33.535
for your needs and all of that.

298
00:13:33.595 --> 00:13:34.975
So there's a huge discuss.

299
00:13:34.975 --> 00:13:37.615
You want to have a security for 15, 20 years.

300
00:13:37.835 --> 00:13:39.775
That's why when you sign all those long lease

301
00:13:40.155 --> 00:13:42.655
and those lease, typically it's hard to go

302
00:13:42.715 --> 00:13:44.375
before they expire.

303
00:13:44.995 --> 00:13:47.215
But as they expire, we are seeing actually

304
00:13:47.795 --> 00:13:52.615
the slow movements of firms moving out, downsizing

305
00:13:52.685 --> 00:13:54.215
with greatly and so on and so forth.

306
00:13:54.215 --> 00:13:57.335
Moving to cheaper, went to cheaper places,

307
00:13:58.195 --> 00:14:00.055
and that's not very good.

308
00:14:00.075 --> 00:14:01.975
So that's, that's actually this very slow,

309
00:14:02.395 --> 00:14:06.815
but at the same time, eventually prices will go down,

310
00:14:06.885 --> 00:14:07.975
perhaps by a lot.

311
00:14:08.055 --> 00:14:10.415
I mean, we are already seeing situations

312
00:14:10.415 --> 00:14:14.415
where people are buying some office towers for tenths

313
00:14:14.415 --> 00:14:17.735
of the price in San Francisco, relative to what,

314
00:14:17.875 --> 00:14:19.375
was the price like 10 years ago.

315
00:14:19.435 --> 00:14:20.975
So that's, at some level,

316
00:14:21.005 --> 00:14:23.895
this is a good development in the sense that yes, it's going

317
00:14:23.895 --> 00:14:27.415
to let, lots of investors with lots

318
00:14:27.415 --> 00:14:28.815
of problems and so on and so forth.

319
00:14:29.005 --> 00:14:31.175
Hopefully that will not become systemic.

320
00:14:31.315 --> 00:14:35.095
But as prices go down, some firms will find that attractive.

321
00:14:35.835 --> 00:14:37.735
And, you know, you were a firm that

322
00:14:37.735 --> 00:14:40.295
before was bringing everybody to the office,

323
00:14:40.875 --> 00:14:43.215
but maybe the accountant doesn't need to be here

324
00:14:43.355 --> 00:14:46.775
or maybe may just need to come once a month in person.

325
00:14:48.445 --> 00:14:50.815
Lots of people were to the office just because they

326
00:14:50.815 --> 00:14:51.815
Were told to. Here

327
00:14:51.815 --> 00:14:53.925
you will have firms that actually say, okay,

328
00:14:54.135 --> 00:14:55.925
those guys, they want to be in the office,

329
00:14:55.995 --> 00:14:57.005
they want to be here.

330
00:14:57.395 --> 00:14:59.645
They're the creative and communicative types.

331
00:14:59.675 --> 00:15:00.845
They need to be with each other.

332
00:15:00.915 --> 00:15:03.925
They need to be close to, to other firms and so on forth.

333
00:15:04.305 --> 00:15:07.285
So maybe when that world actually, without having a lot

334
00:15:07.285 --> 00:15:09.805
of back office that was serving no real purpose

335
00:15:10.225 --> 00:15:13.085
for those agglomeration effect to have stronger

336
00:15:13.305 --> 00:15:17.205
and even more vibrant centers, the issue is that,

337
00:15:17.425 --> 00:15:19.485
not everyone maybe will, will, will long run

338
00:15:19.485 --> 00:15:21.165
because there's only so many.

339
00:15:22.465 --> 00:15:24.085
So maybe Manhattan will come back,

340
00:15:24.185 --> 00:15:26.765
but maybe downtown X will not.

341
00:15:27.745 --> 00:15:30.965
And even in New York, sub centers

342
00:15:31.195 --> 00:15:34.245
that were quite vibrant, whatever, pretty far,

343
00:15:34.615 --> 00:15:36.245
let's say pretty far, when in Brooklyn,

344
00:15:36.305 --> 00:15:39.365
I'm not saying Queens, but pretty far, when in Brooklyn,

345
00:15:39.535 --> 00:15:43.005
maybe those places will not wake up, anytime soon

346
00:15:43.005 --> 00:15:44.885
because, well,

347
00:15:44.885 --> 00:15:46.565
because again, there's so many types

348
00:15:46.675 --> 00:15:48.485
that I want to be at work.

349
00:15:48.985 --> 00:15:50.405
Uh, you know, I'm happy to go

350
00:15:50.405 --> 00:15:51.725
to work at least four days a week

351
00:15:51.725 --> 00:15:53.085
because I get to talk to colleagues.

352
00:15:53.105 --> 00:15:54.805
We exchange ideas. That's

353
00:15:54.805 --> 00:15:57.285
what actually feel like if I stay home more than three days,

354
00:15:57.825 --> 00:15:59.525
I'm becoming somewhat dry and empty.

355
00:15:59.885 --> 00:16:01.485
I think there's lots of people will like me.

356
00:16:01.485 --> 00:16:02.725
It really depends what you're doing.

357
00:16:03.025 --> 00:16:05.925
We work from home and there's lots of enemies.

358
00:16:07.205 --> 00:16:11.465
Uh, I was involved in some discussions with the city

359
00:16:11.465 --> 00:16:15.585
of New York and there was this thing, this, you know,

360
00:16:15.585 --> 00:16:16.985
it was like Chinese opera.

361
00:16:17.475 --> 00:16:20.825
Every six months or so, Jamie Demand would go,

362
00:16:20.825 --> 00:16:24.305
like people, you go back to work five days a week,

363
00:16:24.925 --> 00:16:27.785
and, the mayor of world of New York, Eric say, yeah,

364
00:16:27.785 --> 00:16:28.785
we can revive New York.

365
00:16:28.845 --> 00:16:30.905
No worry about anything and stuff.

366
00:16:30.905 --> 00:16:33.705
We just need, we just need where people to go back to work.

367
00:16:34.805 --> 00:16:37.945
And well, they've tried many, many times and,

368
00:16:38.405 --> 00:16:40.705
and they're not, and they've raised all sorts of threats

369
00:16:40.705 --> 00:16:42.705
and we're going to fire you and stuff, but people,

370
00:16:43.205 --> 00:16:45.065
and you get people now who actually,

371
00:16:45.065 --> 00:16:47.705
when they negotiate their contracts, young people, I mean,

372
00:16:48.225 --> 00:16:50.225
I teach in a, I teach in a business school.

373
00:16:50.245 --> 00:16:53.305
So you have people in their late twenties finishing their

374
00:16:53.505 --> 00:16:55.465
MBA who want to go like, I want

375
00:16:55.465 --> 00:16:57.985
to work in an office no more than three days a week

376
00:16:58.125 --> 00:16:59.905
or no more than two days a week, or whatever.

377
00:17:00.725 --> 00:17:04.665
And, firms grubbing and stuff and not liking it,

378
00:17:04.725 --> 00:17:06.585
but they, they need to hire people

379
00:17:06.965 --> 00:17:09.745
and you know, they will need to adapt.

380
00:17:09.945 --> 00:17:11.305
I think this is here to stay.

381
00:17:11.365 --> 00:17:15.025
So whether this is here to stay at 30, 40%

382
00:17:15.085 --> 00:17:16.385
or 20, I don't know,

383
00:17:16.765 --> 00:17:19.665
but it used to be less than five what before covid.

384
00:17:19.885 --> 00:17:22.945
So we've seen this huge acceleration, which I think,

385
00:17:22.945 --> 00:17:26.745
you know, is the arc of whatever human evolution or,

386
00:17:27.325 --> 00:17:30.785
or economic growth where, you know, as we

387
00:17:31.495 --> 00:17:33.745
live in this world with lots more convenience

388
00:17:33.745 --> 00:17:36.865
and so on, we also want to have a flexibility that we,

389
00:17:37.085 --> 00:17:38.585
we we are starting to prize.

390
00:17:38.605 --> 00:17:39.785
And we've realized through covid

391
00:17:39.815 --> 00:17:42.065
that this flexibility is really important,

392
00:17:42.155 --> 00:17:44.345
especially when you have a young family

393
00:17:45.085 --> 00:17:47.265
or when you have some unusual occupations

394
00:17:47.325 --> 00:17:48.545
or unusual situations

395
00:17:48.765 --> 00:17:51.445
or some really aging parents or whatever.

396
00:17:51.545 --> 00:17:54.085
So there's lots of reasons why people aren't

397
00:17:54.085 --> 00:17:55.245
pricing this flexibility.

398
00:17:55.345 --> 00:17:56.405
And I think to,

399
00:17:56.745 --> 00:17:58.925
to a very large extent, this is here to stay.

400
00:17:59.505 --> 00:18:03.565
Uh, there's a lot of, yeah, of rear regard, reactions to

401
00:18:03.565 --> 00:18:05.485
that, but they don't seem to be very successful.

402
00:18:06.165 --> 00:18:09.925
I cannot give you an exact number. We will be in five years.

403
00:18:10.745 --> 00:18:13.165
My feeling is that it's going to remain

404
00:18:13.665 --> 00:18:16.725
and it's going to remain more important in those places

405
00:18:16.895 --> 00:18:20.365
where commuting, takes longer, is more unpleasant.

406
00:18:20.865 --> 00:18:24.165
So the New York cities of the world in small town America

407
00:18:24.545 --> 00:18:27.645
or in small town everywhere going to work, you know,

408
00:18:27.785 --> 00:18:29.565
is is is not that painful.

409
00:18:29.995 --> 00:18:32.205
Also, people will go back to work with a lot more.

410
00:18:32.505 --> 00:18:35.085
But in large cities, yes, I can see with situations

411
00:18:35.095 --> 00:18:39.325
where people will want to be out of work in, in some sort

412
00:18:39.325 --> 00:18:42.245
of ebr with situation, two or three days a week.

413
00:18:42.245 --> 00:18:46.445
And then you also have, you know, jobs that we've learned

414
00:18:46.595 --> 00:18:49.085
what to design, that we've learned what to design so that,

415
00:18:49.625 --> 00:18:51.645
the person could be fully remote.

416
00:18:52.425 --> 00:18:55.045
Uh, what was amazing is that whatever, two years

417
00:18:55.045 --> 00:18:58.445
after Covid, like 22, 23, you had

418
00:18:58.985 --> 00:19:01.965
the payroll in New York City had gone up.

419
00:19:02.715 --> 00:19:04.525
When the Office of New York, the offices

420
00:19:04.745 --> 00:19:07.165
of New York was still very largely empty.

421
00:19:07.465 --> 00:19:09.085
So you had this bizarre situation

422
00:19:09.085 --> 00:19:10.845
where actually the labor market

423
00:19:10.905 --> 00:19:14.285
of New York City could expand well outside, you know,

424
00:19:14.285 --> 00:19:17.405
with people working for New York City firms supposedly

425
00:19:17.645 --> 00:19:20.045
employed in New York City, but working from whatever,

426
00:19:20.045 --> 00:19:23.165
from cle from the Midwest and so on and so forth.

427
00:19:23.625 --> 00:19:25.485
Uh, at some level these are able,

428
00:19:25.485 --> 00:19:28.165
they can participate into some agglomeration effects

429
00:19:28.455 --> 00:19:31.445
associated with New York City being incredibly productive

430
00:19:31.855 --> 00:19:34.565
while still being, pretty far away

431
00:19:34.665 --> 00:19:37.405
and not participating into the congestion in New York

432
00:19:37.405 --> 00:19:39.405
and the really high prices and stuff.

433
00:19:39.425 --> 00:19:41.725
Seeing for the firms who are learning

434
00:19:42.105 --> 00:19:43.725
and who are able to manage with that.

435
00:19:43.725 --> 00:19:45.565
Well, this is a huge opportunity.

436
00:19:46.105 --> 00:19:48.165
But yes, this is complicated. This is hard.

437
00:19:48.165 --> 00:19:50.525
You have all this complicated me with meetings

438
00:19:50.525 --> 00:19:52.685
where some people are here, some people are not here

439
00:19:53.145 --> 00:19:56.325
and you, but we are getting accustomed to that slowly.

440
00:19:56.865 --> 00:20:00.285
We are getting accustomed to working also remotely.

441
00:20:00.725 --> 00:20:03.085
I have three research assistants in Philadelphia.

442
00:20:03.825 --> 00:20:05.965
Uh, we get to talk once or twice a week,

443
00:20:05.985 --> 00:20:09.125
and I think we are no less productive than before.

444
00:20:09.185 --> 00:20:11.805
So there's a little bit of, of grumbling on the end

445
00:20:12.075 --> 00:20:14.365
because I was bringing some sort of life

446
00:20:14.505 --> 00:20:15.845
to the office when I was here.

447
00:20:16.425 --> 00:20:20.645
Uh, there's a meeting with one less person, especially the,

448
00:20:20.755 --> 00:20:23.285
well, if it's the person they have to report to,

449
00:20:23.345 --> 00:20:24.445
that's a bit of an issue.

450
00:20:24.465 --> 00:20:26.645
But we, we, we can still will make it work.

451
00:20:26.665 --> 00:20:28.525
And I think at the level of productivity,

452
00:20:28.975 --> 00:20:30.845
which is essentially the same as before,

453
00:20:30.845 --> 00:20:34.205
but for that, that also require me making some investments

454
00:20:34.205 --> 00:20:36.525
with them beforehand to make sure we,

455
00:20:36.525 --> 00:20:39.805
when the day I would be welcoming to moderate for a year,

456
00:20:40.365 --> 00:20:42.125
I would be able to still work with them

457
00:20:42.505 --> 00:20:43.805
and work with them more efficiently.

Urban Shifts and Housing Dynamics Post-Pandemic

00:00:00 - It's going back to the dark days of the pandemic. We were spending a lot of days at home and with my colleagues, we had decided we'd be meeting at least once a week, all of us, and also somewhat regularly, somewhat regularly in pairs. So I had this great colleague called Jesse Berry, who was on her way to get tenure before tenure, collaborating with a young colleague. He is a double-edged worker for that person, but after tenure, she was free to, to widen a set of courses,

00:00:34 - So one of the discussions we had was, you know, it's a major, major shock happening, so far in the last whatever, a hundred years, all the big technological shocks have been favorable, mostly to cities on urban living, with some exceptions about stuff that happened in the us CCA 1960 were doing well by expanding, people wanted to flop to them and so on and so forth. So all of that, was great,

00:01:08 - of living in successful cities becoming incredibly high. And suddenly here's the pandemic. And we see lots of bizarre things happening, potentially a major threat to cities. But some of them actually, every time there was a house on sale in my neighborhood in Philadelphia, people were going crazy. Like things I'd never done, I'd never seen before. Like people waiting for an open day, people bidding on top of each other for, old houses.

Impacts of Work-from-Home Trends on Urban Real Estate Markets

00:01:40 - we could at the same time see, the center of Philadelphia and certainly the, mid will midtown and downtown with Manhattan, like not doing very, very well. My day job is for real estate department. So we teach real estate to students. we are in close contact with the industry, and people from the industry were like in despair with what was happening on the office markets, with potentially staff that would unravel

00:02:10 - retail kind of doing not well, but well, depending on where, all sorts of interesting patterns, where clearly suburbs were doing better and all of that. And we, you know, some academic pieces were coming out documenting like one damn fact after another, which, you know, it was perfectly interesting. But we thought with micro Jesse bury, it was perhaps time to tell a story around that and come up with, a more unified,

00:02:39 - Not a story of everything about, you know, all trying to explain all why work from home. You know, we, we took work from home at that point, has given and try to understand the implications of work from home for cities. We could see, we could see people being, you know, they were stock homes, so they were very unhappy With that. But as soon as we were no longer stuck home, people discovered that they were quite happy to work from home, at least some of the time, including in my, in my own household.

Embracing the Commuting Dividend: The New Normal of Remote Work

00:03:12 - of new normal, my wife said, okay, she negotiated two days a week for employer, and she asked me to stay, to stay home at least one day a week, you know, to do a number of things and stuff. So meaning that you are saving time, not having to go to work. So that's a commuting dividend. But we know from a lot of past research that, you know, commuting, we spent a lot of time traveling. your typical American household, your typical member

00:03:45 - doing four errands. you know, only one of them on average will be, will be, will be commuting. Actually, we will commute. Commutes are one mile in four and one trip in six in the us and that's, you know, we don't like, we like being places, but traveling is a cost, particularly so for commutes, because these are the most congested times of the day. This is not something we enjoy doing beyond 10, 50 minutes.

00:04:16 - 20 minutes or more, or 30 minutes or more. So there's a big gain of actually not having to commute. So we call that a commuting dividend. And you know, if you're not working, the wage cost of not being, having to work or being able to stay at home two days a week for lots of workers seem to be in the order of five to 10% of an equivalent wage. So if you're able to stay and work from home, it's as if, you are making five,

Understanding the Commuting Dividend and Home Space Needs Post-Pandemic

00:04:47 - to spend that time in your car that you really dislike actually. And the, and even the cost of that mileage, like in my own, in my household, we could go down one car and so on and so forth. So you can, you, you're going to save from that. And we are calling that the commuting dividend. So all the paper we wrote was fairly technical because we wanted to be able to quantify that, and put that in a startup framework of demand for housing in different locations around the city and so on and so forth.

00:05:18 - that it had and the, and the spatial well component of it for people were living closer, gaining less versus who were living further away while gaining more, which meant that people then wanted to live further away because suddenly more remote locations were becoming relatively more attractive because their lack of access to jobs was becoming less important. We started formalizing with those ideas. So that's the commuting dividend. But at the same time, at the peak of the pandemic,

00:05:52 - to work from home, but we had to work in all sorts of locations at home. For me, that was the bedroom, that was the last, our, our bedroom. That was the last place that was available. And after a while, you know, there was a word for that. When you spend 20 hours a day in the same room, it's a jail cell, right? So, you want to have actually more space in your house so that you can have an independent office, which we eventually got when one of the kids left home.

Impact of Remote Work on Housing Demand and Prices

00:06:23 - for my wife had had already one, now we have two. And you know, it means that you want to consume more housing. So we were lucky because we had one kid, were living the house. But for many households, you know, if suddenly you go from zero space to work at home, to two home, two home officers for two different members of the household, that's actually a pretty big increase in your demand for housing. So we had, we had this first force where you no longer need to commute at the, or you need to commute less, which leads you to want

00:06:56 - So prices will go up in those locations. And because you also want to consume housing, more housing and people everywhere wanting to consume more housing, that's also going to lower well the price of housing. So you see like relatively, the centers are losing because their better access becomes less variable. So, the decline, the suburbs increase, but at the same time, everybody wants to consume more housing, which is also pushing

00:07:24 - So the resulting effect between this plus and this minus for centers in some cases, like Philadelphia, I think it's a plus. the price of housing in Philadelphia in the center has gone up some in part because you had people moving out of New York and all of those complications, whereas in the suburbs, universally they became more attractive and places went up. One thing here that is, is really important to understand is that this is what happened in the space of three or four years, but those adjustments are going

Challenges of Housing Development in Post-Pandemic Cities

00:07:58 - in part because we build housing only very slowly. lots more people probably want to live in more remote locations, but if there's no housing, they need to outbeat somebody else. So, so, so at this point we have high prices and, and people, you know, not much left, well, that's available for people who want to move from the center, but a long run, you know, there's going to be some more building happening. There'll be some differences across cities

00:08:31 - you know, 50 mile reduced from Boston. Nobody can build anything anywhere near anyone. banana, no, it's build absolutely nothing anywhere near anyone. where on the other hand, you have places like Charlotte, in North Carolina where, you know, things can expand and eventually there'll be a lot more building taking place. And that city, like all the cities that actually let,

00:08:59 - and, and gain population. So you have both a special, with a special but dimension within the city. But then depending on how cities react or how liberal the cities are with respect to housing, you are going to have growth or non-growth. That's also something that, it's actually why we were, we were able approach by the New York Fed to actually buy this piece for the reopening, for the reopening world conference at the end of Covid. And so cities exist

Impact of Suburban Amenities on Economic Sustainability

00:09:32 - and historically this is what matters and benefits in terms of, in terms of amenities and consumption. We, we decided we wanted to make our mind on that. So amenities, we, we quickly came looking at the facts around us and what was happening, including actually new stuff opening in our suburbs. I think, you know, we've been validated on that one that, I mean, it is come and go reasonably easily.

00:10:03 - if it's an an attractive place. So there's chicken and egg sort of problem here. And the way we're thinking about that is that downtowns, they were being sustained by, you know, you have what we call the dinner economy or the shopping economy where people come and, you know, they have dinner at the, in the evening, they go to the cinemas, they do stuff, they go to the theater, they go and buy stuff on Saturday afternoon. Before that, all sorts of, with all sorts

00:10:33 - at the same time we realized that this dinner economy and shopping economy, we are being sustained by the lunch economy. Because as a restaurant, if you are only open for dinner, you are not going to make money. And that's going to be very, very difficult. And also, lots of the people that participated in the economy, they were already here for work and part of the launch economy. But if the launch economy disappears, the economy is finding lots of pro is,

Shifting Urban Dynamics: The Decline of Downtowns and the Rise of Suburban Living

00:11:03 - And indeed what we've seen is many downtowns have not recovered. You know, they've recovered some for some, but many have actually lost retail lost jobs, and that's not coming back. Whereas we've seen a lot more opening of retails and all sorts of service places in the suburbs where people tend to hang out a lot more. you know, you may be working from home, but you, you have lunch with, with a friend and stuff.

00:11:33 - But I can see my wife, I can see my wife where will do that. Like, she's working from home two days a week and she's meeting with somebody for lunch at least one day. We can very often, that's actually somebody from work in a broad science who, you know, it's Philadelphia. It's not a huge place and it's big, but not that big. So they can meet actually within, Well within a, within a few kilometers will of each other. And they will be, and they will be having lunch as if they had lunch close to work. That's a big unknown. We are seeing housing becoming expensive in many,

00:12:07 - so long term that's creating a problem because people is only so far down in terms of consumption of housing that you can go. So, this is not our object today, but that leads to homelessness and all sorts of other complications. there's a fear that downtowns are going to depopulate or attract only very poor people. And going back to a 1960s sort of vicious circle of

Challenges in Commercial Real Estate Amid Rising Crime and Economic Shifts

00:12:41 - especially in the US 'cause when this crime in the US it's really, really bad with people having guns and all of that. So, and then this, this negative, well, this negative circle at the same time, you know, we, people tend to forget that there are prices, especially for commercial real estate. Those prices are slow to adjust in part because what you have is, what you have is,

00:13:09 - it's not a contract for an apartment. It's actually a long-term contract, which will have an initial price and then a close that stipulates how much by how much, where the price will go up every year. who's going to take care of this? Who's going to take care of, of minor maintenance, major maintenance, and this and that stuff. These are contr, you know, new space needs to be organized for your needs and all of that. So there's a huge discuss. You want to have a security for 15, 20 years.

00:13:40 - and those lease, typically it's hard to go before they expire. But as they expire, we are seeing actually the slow movements of firms moving out, downsizing with greatly and so on and so forth. Moving to cheaper, went to cheaper places, and that's not very good. So that's, that's actually this very slow, but at the same time, eventually prices will go down, perhaps by a lot.

Shifting Dynamics in Office Real Estate and Work Preferences

00:14:10 - where people are buying some office towers for tenths of the price in San Francisco, relative to what, was the price like 10 years ago. So that's, at some level, this is a good development in the sense that yes, it's going to let, lots of investors with lots of problems and so on and so forth. Hopefully that will not become systemic. But as prices go down, some firms will find that attractive. And, you know, you were a firm that before was bringing everybody to the office,

00:14:43 - or maybe may just need to come once a month in person. Lots of people were to the office just because they Were told to. Here you will have firms that actually say, okay, those guys, they want to be in the office, they want to be here. They're the creative and communicative types. They need to be with each other. They need to be close to, to other firms and so on forth. So maybe when that world actually, without having a lot of back office that was serving no real purpose for those agglomeration effect to have stronger

00:15:17 - not everyone maybe will, will, will long run because there's only so many. So maybe Manhattan will come back, but maybe downtown X will not. And even in New York, sub centers that were quite vibrant, whatever, pretty far, let's say pretty far, when in Brooklyn, I'm not saying Queens, but pretty far, when in Brooklyn, maybe those places will not wake up, anytime soon because, well,

Desire for Workplace Interaction Amidst Remote Work Trends

00:15:46 - that I want to be at work. you know, I'm happy to go to work at least four days a week because I get to talk to colleagues. We exchange ideas. That's what actually feel like if I stay home more than three days, I'm becoming somewhat dry and empty. I think there's lots of people will like me. It really depends what you're doing. We work from home and there's lots of enemies. I was involved in some discussions with the city of New York and there was this thing, this, you know,

00:16:17 - Every six months or so, Jamie Demand would go, like people, you go back to work five days a week, and, the mayor of world of New York, Eric say, yeah, we can revive New York. No worry about anything and stuff. We just need, we just need where people to go back to work. And well, they've tried many, many times and, and they're not, and they've raised all sorts of threats and we're going to fire you and stuff, but people, and you get people now who actually, when they negotiate their contracts, young people, I mean,

00:16:50 - So you have people in their late twenties finishing their MBA who want to go like, I want to work in an office no more than three days a week or no more than two days a week, or whatever. And, firms grubbing and stuff and not liking it, but they, they need to hire people and you know, they will need to adapt. I think this is here to stay. So whether this is here to stay at 30, 40% or 20, I don't know, but it used to be less than five what before covid.

Valuing Flexibility in a Post-Pandemic Work Environment

00:17:22 - you know, is the arc of whatever human evolution or, or economic growth where, you know, as we live in this world with lots more convenience and so on, we also want to have a flexibility that we, we we are starting to prize. And we've realized through covid that this flexibility is really important, especially when you have a young family or when you have some unusual occupations or unusual situations or some really aging parents or whatever.

00:17:54 - pricing this flexibility. And I think to, to a very large extent, this is here to stay. there's a lot of, yeah, of rear regard, reactions to that, but they don't seem to be very successful. I cannot give you an exact number. We will be in five years. My feeling is that it's going to remain and it's going to remain more important in those places where commuting, takes longer, is more unpleasant. So the New York cities of the world in small town America

00:18:27 - is is is not that painful. Also, people will go back to work with a lot more. But in large cities, yes, I can see with situations where people will want to be out of work in, in some sort of ebr with situation, two or three days a week. And then you also have, you know, jobs that we've learned what to design, that we've learned what to design so that, the person could be fully remote. what was amazing is that whatever, two years

Remote Work Dynamics and Productivity in New York City

00:18:58 - the payroll in New York City had gone up. When the Office of New York, the offices of New York was still very largely empty. So you had this bizarre situation where actually the labor market of New York City could expand well outside, you know, with people working for New York City firms supposedly employed in New York City, but working from whatever, from cle from the Midwest and so on and so forth. at some level these are able,

00:19:28 - associated with New York City being incredibly productive while still being, pretty far away and not participating into the congestion in New York and the really high prices and stuff. Seeing for the firms who are learning and who are able to manage with that. Well, this is a huge opportunity. But yes, this is complicated. This is hard. You have all this complicated me with meetings where some people are here, some people are not here and you, but we are getting accustomed to that slowly.

00:20:00 - I have three research assistants in Philadelphia. we get to talk once or twice a week, and I think we are no less productive than before. So there's a little bit of, of grumbling on the end because I was bringing some sort of life to the office when I was here. there's a meeting with one less person, especially the, well, if it's the person they have to report to, that's a bit of an issue. But we, we, we can still will make it work. And I think at the level of productivity,

Investing for Effective Collaboration

00:20:42 - but for that, that also require me making some investments with them beforehand to make sure we, when the day I would be welcoming to moderate for a year, I would be able to still work with them and work with them more efficiently.

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