Before Covid-19, urbanisation felt unstoppable. Be it culture, the economy or simple population growth, every metric made it feel like we would all be subsumed by the giant metropolises of the future. And, of course, the pricing of urban real estate not only reflected the largest cities’ hegemony, but an expectation that this would continue unbroken far beyond the timeline of your average discounted cashflow model.
But over the past year, a risk not much discussed in investment circles – but certainly flagged in virology ones – has led to a global pandemic, lockdowns and much debate over the future of urbanisation, mostly framed around the idea that working from home will negate the need to travel to large urban areas.
I’m not going to wade into the extensive debate about the future of the office, and a quick Google of past predictions suggests that’s a wise choice.
What is worth discussing, however, is why cities, which have survived every horror thrown at them – famine, fire, pestilence, tuk-tuks and Visigoths, to name a few – are unlikely to succumb to video conferencing, and whatever effect this may or may not have on offices.
Lifestyle drives demands
Cities will continue to be hubs of creativity and innovation. Back in 2002, the now famous urban theorist Richard Florida published The Rise of the Creative Class, postulating that the clustering of creative types in cities was driving economic prosperity and increased productivity – and those cities that attracted them would be the most successful.
His theory was so successful that many critics consequently blamed him (unfairly) for the wave of middle-class gentrification that made many cities so unequal and drove up housing costs substantially. He now forecasts that falls in office and retail rents in many city centres could create better opportunities for young creatives, allowing cities to reset and re-energise.
Florida also suggests that if life does become less orientated around the office, this will make people’s neighbourhood amenities more critical to them, something that will continue to favour denser, urban areas where economies of scale enable better amenity provision.
Which brings me to my next point. Cities are characterised by dense concentrations of restaurants, leisure facilities and other public amenities that enhance quality of life. These are made possible by the economies of scale provided by their populations and visitors, and enable a level of quality and variety unsurpassable in suburban and rural areas.
Research by Centre for Cities shows that city centre residents’ biggest driver of locational choice is the desire to be close to restaurants, leisure and cultural facilities, followed by the availability of public transport. Lifestyle is the city’s demand driver.
So regardless of the future of the office, it is not hard to imagine people, especially the young, continuing to flock to cities for the lifestyle benefits they offer, interacting with one another by accident or design, and sparking the creative and business conversations that have proven so critical to driving innovation in the past. Video conferencing has its uses, but it is quite hard to imagine it sparking much creativity or innovation – and it certainly does not mimic the face-to-face socialising that the pandemic has reminded us is a fundamental human need.
The race to recruit
Which brings me to the final, and most critical point – and, forgive me, a reference to the office.
For those with a labarador, broadband-equipped sheds, decades of learning, and a network of business and personal relationships to leverage, working from home is a viable way to see out one’s career.
For young people starting their careers, human interaction and learning is critical. For those starting the journey, working in an office surrounded by young peers to socialise and network with – forming vital professional and personal relationships – and having experienced members of staff to learn from, is critical to their development, both mentally and technically.
Are we really going to take this away from them? Have we thought of the consequences if we do? And given they will move to cities anyway, what employer wants to risk getting left behind in the race to recruit the best and brightest?
So, yes, I lied. This article does contain a prediction on the future of offices. They may see steady change in usage patterns and layout – some small decline in overall occupancy, even – but their fundamental role will not change. And as for our cities, they will most certainly endure.
Thomas Grounds is head of research at Grainger
