What will happen to those large, all-encompassing tech headquarters if employees can now work from home?

Employees in the tech industry may have more ability to work from home in the future:

Now that a large company like Twitter has announced the option to not return to the office, it will likely “drive momentum across the industry,” says Aaron Levie, the CEO and cofounder of Box. “Other companies look to those events as a signal for what they should do in their organization.”…

Not all companies are so eager to extend the work-from-home life. Employees at Apple’s headquarters in Cupertino have been told they will start returning to Apple Park in phases, starting in late May. Apple’s security policies, meant to protect the company’s internal work, have reportedly made it difficult for employees to do their jobs while at home, especially if their jobs are related to building hardware….

Of course, Twitter is not abandoning the office altogether. In the wake of the pandemic, Box CEO Levie thinks bigger tech companies are more likely to take what he calls a “hybrid approach,” blending remote teams with in-office ones. “We’re still far from saying, ‘We’ll shut down entire offices,’” Levie says, adding that the realities of childcare would make it difficult for all employees to enjoy working from home permanently. “There’s a lot of power in people coming together, certain types of functions being able to collaborate in person, but there’s equally power in the flexibility and convenience of no commute and being able to work in a more efficient way.”

But other companies may reconsider the expense of office space, or at least downsize it, if enough employees choose to work remotely going forward. In 2017, Automattic—the company that owns WordPress—decided to give up its sprawling 15,000-square-foot office in San Francisco, because its employees never came in. For some smaller startups, this massive work-from-home experiment has made it obvious that they don’t need offices at all.

What does all of this mean for offices and headquarters and big campuses? The big office or work campus, such as those for Facebook, Apple, and Google, offers multiple advantages: the ability for people to meet, gather, and interact formally or informally face-to-face or in the same room; the company can know where everyone is; the ability for the company to control the work environment; and they are status symbols both for the companies and their communities.

But, working from home or away from the office also offers advantages: the employee is more in control of their immediate surroundings; there is limited commuting time; workers can connect via technology when needed and shut that off or limit contact when needing to focus; and expenses related to a big building are reduced.

And, as the article notes, the implications are huge for how organizations operate, what it means to be an employee, and for communities where businesses use land and pump money into the local economy. A more decentralized landscape for companies might reduce the need for cities to compete for headquarters (Amazon example) or even make the competition more cutthroat fighting over scraps. What happens to all that office space and how can communities fill vacant space in an era of budget issues?

For the record, I do not think the big offices will go away. At the least, they provide a physical reminder of the company and social interaction is different in-person than through technology. But, if a significant number of companies allow more employees to work from home, this could transform many physical locations.

Data from Washington, D.C. does not suggest people are fleeing for the suburbs

A new analysis from Brookings Institution suggests real estate sales are down in both Washington, D.C. and its suburbs during COVID-19:

In the Washington, D.C. metro area, there’s no sign so far that residents in the urban core are more anxious to sell their condos and rowhouses than suburbanites are to ditch their McMansions. Home sales for the entire metro area dropped in March 2020, very similar to the pattern in the District. (Washington, D.C. accounts for less than 15% of the metro area’s population and home sales.)

Breaking out the year-over-year change in home sales for each local jurisdiction in the metro area shows similar patterns in the urban core (darkest gray), inner suburbs (medium gray), and exurban jurisdictions (light gray).

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Other items of note:

  1. Prices have not dropped (similar to elsewhere).
  2. As I noted a few posts ago:

In the U.S., large cities have been hit earliest—and hardest—by the coronavirus pandemic, spawning a cottage industry of speculation over whether city-dwellers will flee to low-density suburbs.

Without seeing the data from a lot of major metropolitan areas in the United States, it is hard at this point to conclude much of anything. Perhaps New York City is an outlier where people want to go to the suburbs to escape all of its density. Are transportation patterns in Washington D.C. where a majority of residents drive daily more like Los Angeles than New York City?

Analysis from Moody Analytics suggested Washington D.C. is one of the metro areas more likely to rebound from COVID-19. Would such a recovery help the city and region move toward being the true second city in the United States?

Maybe Washington D.C. is another outlier in all of the possible data. That leads to another question that often comes up when talking about urban theory: what is the modal American city, particularly in the time of COVID-19?

Wealthier Americans looking for homes away from urban COVID-19 cases

With the spread of COVID-19 within major metropolitan areas, particularly New York City, some residents might be looking for new homes outside the big city:

At the same time, well-off suburbs in areas like Greenwich, Connecticut, and Westchester County in New York, which had been relatively sluggish in recent years, quietly recorded strong performances in the first quarter, with few signs of slowing down…

For prospective buyers reacting specifically to the threat of coronavirus in New York City, suburban infrastructure may also hold a stronger appeal than what’s available in a typical vacation town.

“The general consensus is once this is over, you’re going to see a big surge in sales,” Mr. Pruner said. “But a lot of the traditional vacation spots may not necessarily see that. One of the issues is that they don’t necessarily have good medical facilities—even if you own a big house there, they don’t have the hospital or the resources”to go with it.

Though tastes have been trending toward smaller homes in recent years, buyers coming off the experience of their home suddenly becoming their entire family’s office, gym, school and recreation area are unsurprisingly now coming to their searches with a heightened appreciation for space, a fact that could bode well for suburban markets.

A few thoughts in response:

  1. This likely applies to a small segment of the real estate market: people with the resources and jobs to move during the COVID-19 crisis. Plus, the analysis here seems mostly geared toward higher-end homes. Could be worth keeping an eye on for the near future: how many well-off Americans make real estate decisions within the next few months?
  2. Conventional wisdom suggests potential homebuyers care about high quality school districts (for their kids’ education and the effect on property values). How many buyers going forward will also consider medical facilities? And what is the correlation between high-performing suburban school districts and nearby high-quality medical facilities?
  3. Given the moves in vacation spots – like the Hamptons or in the state of Michigan – to try to limit travel to second homes, might there be any long-lasting consequences? The influx of vacationers can already cause tensions but they can also be a very important source of business and income.
  4. The flip side of this analysis is the development of urban residences that emphasize health in different ways. It is not about providing a gym or a pool (which are not helpful during social distancing guidelines); it is about having buildings and residences with lower likelihoods of contracting illnesses. Imagine all antimicrobial resistant surfaces, units on their own air systems, separate entrances and hallways that limit contact with others, particular cleaning protocols, and other possibilities.

Addressing “green gentrification”

As American cities develop land in ways to combat climate change, researchers have examined who benefits from the new development:

Fighting climate disasters is a good idea for the planet, but can have unintended consequences for neighborhoods. “In order to construct a green, resilient park or shoreline, we get rid of lower-income housing … and behind it or next to it, you’ll have higher-income housing being built,” says Isabelle Anguelovski, an urban geographer at the Autonomous University of Barcelona who co-wrote an article about green gentrification in December’s PNAS. It can get even worse, she says. Hardening one neighborhood so that water can’t flow inland there means the water goes somewhere else. “The flooding and storm events go into the basements of the public housing next door,” she says.

That’s double jeopardy. And it turns into triple jeopardy, thanks to economics. New amenities plus new luxury housing drive up local housing prices, which drive out working-class and poorer residents. “The question is not only what Boston is facing, which is middle-class gentrifiers with a slightly higher income and education. It’s über-rich people who end up taking over cities until they are unable to fulfill their direct functions,” Anguelovski says. The gentrification wave is its own kind of economic apocalypse. If it hits, none of the people who make a city work—teachers, police officers, health care workers, bus drivers—can afford to live there. “Or it becomes so important from an economic standpoint, so desirable and hardened with infrastructure that entire buildings are empty—purchased by real estate funds or individuals from the Middle East or Russia,” Anguelovski says.

The problem that cities face is the difference between physics and real estate. Climate change happens on the scale of decades or centuries; real estate development and politics happen on fiscal and electoral timescales. “I get it. Green space is great, and while it may not be much of an improvement in terms of climate adaptation, it’s good for people’s well-being and quality of life,” says Ken Gould, an environmental sociologist at Brooklyn College and coauthor of Green Gentrification: Urban Sustainability and the Struggle for Environmental Justice. “Does it sequester much carbon? Not really. It’s fine. But you have to manage the real estate markets, because markets left to themselves, when you put in an amenity, are going to generate development.”…

Obviously, cities are facing more and more climate-related hazards. It’d be policy malpractice to not get ready for them. “It’s not too difficult for a city to make green infrastructure investments in neighborhoods that have been historically underinvested in, but the housing side needs to kick in,” says Constantine Samaras, an energy and climate researcher at Carnegie Mellon University. “The people who live in these underinvested neighborhoods deserve a neighborhood with bike lanes and green space. It’s up to city policy to make sure they can stay.” The trick is to build new housing while not uprooting people who live in the old stock—so that everyone benefits from the protection against disaster, not just a wealthy, lucky few.

This sounds like a twenty-first century version of urban renewal programs in American cities. In the name of the good of the whole community – now to protect neighborhoods and cities against environmental risks – lower-income housing is removed and the land eventually ends up in the hands of wealthier residents and property owners.

The sociological literature on urban development would suggest this is not surprising. Through a variety of means, leaders and wealthier people find ways to procure desirable land and profit from them. Redevelopment, whether undertaken to improve properties or make places greener, tends to benefit those who move into the neighborhood, not the ones who have been there a long time.

As is noted in the portion above, what is good for real estate and property values may not be good for the community even though the changes themselves – such as putting up barriers to water or creating more green space – would be welcome. At least now, the American system tends to privilege the real estate side, not the community improvement and well-being side. What could be done to limit the real estate market for the good of the city? Which city leaders will lead the way in arguing that green improvements should not be tied to market forces?

Suburban dream: have a McMansion 12 miles from Times Square

A profile of Hasbrouch Heights, New Jersey in the New York Times highlights the variety of housing styles available in close proximity to Manhattan:

A mile-and-a-half square atop a hill, Hasbrouck Heights is hardly the boondocks. Times Square is 12 miles east, and the Manhattan skyline is visible from some streets. On the northern end, Interstate 80 swipes past and Route 46 cuts through. Route 17, with office buildings, hotels and chain restaurants, runs down the town’s eastern edge, and Teterboro Airport is just on the other side.

Driving through Hasbrouck Heights on Route 17 offers little inkling of the residential community up the hill or beyond the cliff to the west. Bordered primarily by Hackensack and the boroughs of Lodi, Wood-Ridge and Teterboro, Hasbrouck Heights has an eclectic housing stock of Capes, Victorians, ranches, split-levels, boxy contemporaries, Tudors, McMansions and colonials of all stripes, many on 50-foot-wide lots. The architectural variety, spanning the late 1800s to the current decade, is evident on nearly every block.

“With the new construction, builders have done a good job adding style and character,” said Susan LeConte, the president and chief executive of LeConte Realty, in Hasbrouck Heights. “The homes are not cookie-cutter.”

Four quick thoughts:

  1. This kind of real estate profile, a staple in many newspapers, tend to be very positive about each community or neighborhood highlighted. This profile is no exception: it has the feeling of a small town (bikes can stay unlocked!), there is a little noise from a nearby airport but not too much, and residents can commute to New York City. If this is not an advertisement for the American Dream – single-family home in a quiet suburb not too far from the big city – then I do not know what is. (Thinking more about these profiles: it would be funny to follow them with the opposite perspective of each community.)
  2. The paragraph on different housing architecture is interesting in two ways. How would a suburban community end up with an “eclectic housing stock”? Perhaps development took place in fits and starts. Perhaps the community has a mix of housing needs (with McMansions sitting on the more expensive end). Perhaps the community is more open to different kinds of development.
  3. The second interesting part of the housing paragraph is that the mix of architectural styles only hints at two more modern styles: “boxy contemporaries” and McMansions. Neither descriptions are endearing. Boxy and sleek homes are not preferred by many. McMansions are often viewed as taking up too much space and having poor design. Does this hint that home styles have hit a dead end in recent decades? Would more buyers prefer an older, more established style that they can then update to fit their own needs?
  4. For all the density and glamour of Manhattan, there are plenty of McMansions in the New York City region (including famously in New Jersey and elsewhere).

“Trophy ranches” may disappear with Baby Boomers

One segment of the luxury property market does not appeal to younger buyers or those who do not understand the appeal of a “trophy ranch”:

Decades ago, a generation of America’s wealthiest, raised on television shows like “Howdy Doody” and “The Lone Ranger,” headed west with dreams of owning some of the country’s most prestigious ranches. Now, as those John Wayne- loving baby boomers age out of the lifestyle or die, they or their children are looking to sell those trophy properties…

Jeff Buerger, a local ranch broker with Hall & Hall in Colorado, said there are more large trophy ranches on the market right now than he can recall in his nearly three decades in the business. There are about 20 ranches priced at over $20 million on the market in the state, according to a Wall Street Journal analysis of listings…

Unlike other sectors of the U.S. high-end real-estate market, ranches can’t fall back on international purchasers. Broker Tim Murphy said there is virtually no demand for ranches from international buyers, many of whom “don’t get it.”…

“The last wave of buyers was the baby boomers who fell in love with John Wayne and wanted that experience for themselves,” Mr. Buerger said. “Today, it’s more about conservation. You’re starting to hear more landowners talking about wildlife habitat enhancement and ecological work.” Other targeted groups include wealthy families from the East Coast or Silicon Valley.

I would guess this is not just about baby boomers: it is about broader conceptions of what is the ideal property if someone came into significant money. The implication in the story above is that media, particularly John Wayne films, created a desire for these locations. Presumably, other media depictions would fuel desires for other properties. Depending on the tastes and background of buyers, this could range from:

1. Pricey downtown condos or penthouses in the middle of urban action (whether in well-established wealthy neighborhoods or in up-and-coming places).

2. Suburban McMansions that offer a lot of space and unique architecture.

3. Traditional mansions with sprawling homes whose size and design imply old money (in contrast to the flashy yet flawed McMansions).

4. Impressive vacation homes right on desirable beaches.

Perhaps the trick of any of these is to try to ensure that there are future buyers for your property. If demand drops, your hot high-status property may not hold up as a desirable location for the long-term.

I have always lived within roughly 15 minutes of a major highway: easy access, no noise

In the homes in which I have lived, I have always had relatively easy access to highways. A short ten to fifteen minute drive is all it would take to get to a major highway and, barring traffic, an additional thirty minutes could take us to a major airport, downtown, or out of the metropolitan area.

On one hand, this is a major convenience. Metropolitan regions have areas that are closer or further away to transportation options. In the Chicago region which features a hub and spoke model of transportation (particularly the railroads but also the highways past I-355), living further out from the city means residents could be located further away from major roads. Trips get longer when it takes more time to get on the faster roads.

Additionally, we get the benefit of living near the highway without the negative externalities of being too close. We do not hear the highway. We do not live near the businesses that tend to collect at a highway exist (gas stations, fast food restaurants, etc.). The lights along the highways and exits are beyond our sight.

One way to see these advantages at play is in real estate listings. In the Chicago region, locations near major highways (and rail lines), tend to have this listed in the property description. Of course, some properties may be too close and this can detract from the home and property. These properties can still sell – they may still be in desirable locations and be nice residences – but that road noise can detract from the private experience many suburbanites desire. In our last housing search, we saw a number of homes within hearing distance of highways and this is not something we wanted.