The Unintended Consequences of the COVID Lockdown
There has been some analysis and much discussion of the explosion in unemployment caused by the COVID lockdown, as 37 million Americans lost their jobs. The old joke that “it’s a recession when your neighbor loses her job; it’s a depression when you lose yours” managed to merge the literal with the figurative, creating real hardship and tragedy for those affected.
We can hope and reasonably expect the economy to recover and that the jobs lost will return or be replaced.
What will likely permanently affect the economy is the discovery that many—perhaps most—knowledge workers don’t need offices. Over the past three months they have found that both their productivity and quality of life can actually improve while working remotely. The magnitude of their realizations will grow as they adjust to their new possibilities. They will be able to choose new remote locations (homes) on different criteria than the need to be convenient to the office. They’ll have freedom to live anywhere! They’ll wonder why live within daily commuting distance when the daily commute is replaced with a visit every few weeks, once a month, or quarterly.
We’re seeing our customers authorizing remote work arrangements extending beyond the end of lockdowns. Already a significant portion are considering near-term 50% reductions in office floor space, or more. Analysts, commentators, and talking heads are starting to consider what this might mean for commercial real estate development, rents, and mortgage investors in the major cities. However, as big as the adjustment in commercial values will become, it will pale in comparison to the coming sea changes in residential markets.
If New York has dramatically fewer restaurants, far less vibrant theater and clubs, more restricted social activity in general, cycles of dramatically higher taxes caused by shrinking economic activity, and increased social unrest, will people continue to afford the financial, physical, and emotional costs of living there, or even nearby?
For the first time ever knowledge workers, our customers, will be able to truly choose where they live their lives, as the saying goes to have lives away from work. A significant percentage will to choose to change.
The resulting ripples will be huge.