Since the lifting of lockdown in the United States, JPMorgan Chase's CEO Jamie Dimon, has been calling for employees to return to the office, and his views have also been supported by businesses in big cities such as The Economist. Even the White House, despite its green policies, is encouraging most Americans to resume commuting, even if it means long, frustrating, energy-hungry journeys.
However, American workers, especially the more experienced ones, are unwilling to give in. More and more companies are starting to offer remote work options to retain and attract these employees. According to Flex Index, the percentage of people working in the office throughout the day dropped to 42 in the second quarter of 2023 from 49 in the first quarter. Gallup's survey found that only one in five employees with work that can be done remotely work full-time in the office.
This is not just an American phenomenon. In London, office attendance is still 35% lower than it was before the pandemic. Canary Wharf in East London has been particularly hard hit as employers like HSBC and Barclays are scaling back their operations.
All this shows that the most elite business districts are in a sharp decline. North America's largest business district is in trouble. Overall, only 50 percent of office buildings are being used in the top 10 major metropolitan areas. And, employees typically spend their time in the office in the middle of the workday, with office visits dropping by about half on Mondays and Fridays.
It's a game-changer that reverses the paradigm of the industrial age. In the mid-20th century, as social democrats, trade unions, and reformers pushed for health reforms and prompted the relocation of people and companies to less crowded peripheries, the proportion of people living in core cities fell from nearly 24 in 1950 to less than 15 today. Since 2010, suburbs have accounted for about 90 percent of all metropolitan growth in the United States.
The decline of offices poses a threat to the economic functioning of the city. The term transactional city, coined by Jean Gottmann in 1983, is built around high-rise office buildings. From these high points, elite professionals will occupy the "commanding heights" of the economy.
Until recently, cities like London, New York, San Francisco, and Chicago seemed to be on the rise. Academic researchers generally say they herald a high-tech economic future, and some even imagine a world controlled by these cities and their mayors.
But even before the pandemic, reality was undermining the great "urban revival". Office occupancy has actually been declining since 2000. By 2019, the construction of new office space had dropped to a third of what it was in 1985 and half as much as it was in 2000. At the same time, wealth and educated people continue to shift to the periphery.
The pandemic has clearly accelerated this process, having a big impact on high-density, transit-dominated urban centers like New York, which have higher population-adjusted COVID mortality rates compared to car-dominated suburbs. It has prompted millions of people to move from high-density urban areas to suburbs, suburbs, and further afield.
Surveys show that the rise of remote work has prompted many people to leave the city. This lockdown-induced trend was further exacerbated by the wave of riots and crime that followed the fall of George Floyd, reducing the attractiveness of some metropolitan areas. In fact, in Chicago and some parts of Philadelphia, young men are now more likely to be killed than American soldiers who served in the wars in Afghanistan and Iraq.
The rise of remote work shows no signs of slowing down. A study by the University of Chicago suggests that web jobs may make up one-third of the workforce. Unsurprisingly, 70% of new startups offer remote work options. Today, nearly half (46%) of workers are able to work from home for part of the time, while 19% can do so all the time.
The experience of the office is clearly different between the elite and the lower level of staff. Gallup found that only 6% of employees who "can work remotely" want to come into the office five times a week, while 60% prefer a hybrid work model and another 34% prefer to work entirely from home. According to Conference Board's survey, the remote work model addresses issues that millennials are particularly concerned about, such as improving the "work-life balance." Most workers with children want to continue working from home or entirely from home and are increasingly moving away from urban centers. For those who choose to work in an office, there is now a growing market for remote suburban offices.
Employers are generally less positive about the rise of remote work, as recent surveys show. But most people agree that it has become a trend. One survey showed that three-quarters of employers would allow a hybrid model that requires two to three days a week to work in the office, or no work at all. In a McKinsey survey, more than a quarter of employees said they would consider changing jobs "if their organization decided to return to fully on-site work."
So, what is the reason behind the elite **? Like the factory owners of the industrial age, the lords of the transactional cities were concerned that remote work could begin to affect productivity. Elite workers in certain fields, such as high-end finance, construction, and **, may find regular brick-and-mortar collaborations necessary. But most companies have little desire to maintain or expand their space.
More pertinently, the consequence of a clear consequence of working from home will be the gradual decline of core cities, which are almost all run by progressive Democrats, and the continued rise of a more politically mixed periphery. Mayors of large cities face declining real estate values, threatening their primary income**. The overall financial damage can be significant, with estimates that real estate values in Houston, London, New York City, Paris, Munich, San Francisco, and Tokyo have fallen by $800 billion. This could be a huge blow to large and politically related investments**, including Blackstone, which is now the world's largest supporter of office space. Things could get worse, according to The Atlantic, by 2025, 1$5 trillion in commercial property loans due Many debtors may default.
The crisis is coming, and the situation will not look good. Despite optimism about a widespread return to the office**, "zombie office space" could plague the urban real estate market. Construction sales have been**, and some real estate giants such as RXR, Columbia Property Trust, Brookfield Asset Management, have defaulted on billions on commercial property loans.
Every year, as remote work becomes more deeply rooted and more people move away from the urban core, attempts to force people back into downtown offices seem likely to fail. The implications for political, social, and urban demography can be profound. We may be witnessing a shift in power and influence from owners of high-rise buildings to inland households.