In the wake of the pandemic’s lockdowns and social distancing requirements, the world seems to be in a bit of flux. Many in-person venues have returned in full force, and consumers are less enthusiastic about online alternatives. This has caused some Internet-based businesses to rethink their situation in terms of anticipated growth. But when it comes to hybrid work shifts, things are less clear. As the dust settles, a significant number of workers continue with these types of job arrangements. And the urban effect of hybrid work doesn’t seem to be a favorable one. That’s why some analysts warn of an impending “urban doom loop” in the years to come.
To understand the urban doom loop, one only needs to appreciate how a vicious cycle continues to spiral downhill. In the regard, the urban effect of hybrid work Is one that is seeing fewer and fewer people in city centers. Fewer people in downtown areas means fewer dollars spent in urban hubs. Fewer dollars spent reduces urban tax revenues, occupancy, and use of services. Ultimately, this causes cities to reduce budget spending on urban needs, which deters urban revitalization. This is the urban doom loop some are saying is inevitable in a post-pandemic world. But whether they’re correct is certainly a subject for debate.
“The worry is that the enormous decline in people coming to the office may soon create a big shortfall in property tax revenue.” – Jonathan Bowles, Executive Director of Center for an Urban Future
The Current State of Hybrid Work
Notably, the number of employees working remotely during the pandemic was quite high. But as things have eased, there has been a gradual albeit incomplete return to the physical office space. Based on statistical averages, most city centers suggest in-office occupancy is about 50% of what it was prior to the pandemic. Clearly, the urban effect of hybrid work has been substantial. With so many workers staying at home, the use of actual city vendors and services is markedly less. And based on current worker sentiments, the preference to persist with remote or hybrid models continues.
To demonstrate the urban effect of hybrid work in other terms, a look at occupancy and transit rates paints a similar picture. In cities like New York, transit use in downtown areas remains at about 60%. Likewise, about 20-25% of urban office buildings remain empty and unused. For city governments, this poses a serious problem long-term. If hybrid work continues, then they’ll need to allocate less money toward city services. And at the same time, lower occupancy means less tax revenues and income. This is the double-edged sword that defines the urban doom loop.
“Unsheltered homelessness, even in places where it’s decreased statistically, has in some cases just become more physically visible because there are now vacant storefronts. There are vacant seats on transit.” – Tracy Loh, Researcher at the Brookings Institution
Shifting Aesthetics and Amenities
With declining foot traffic along urban streets, many cafes, shops and street vendors have been forced to go elsewhere. Dollars that used to be spent for coffee or on lunch breaks are now being saved or spent elsewhere. This trickle-down effect reflects a significant component of the urban doom loop, adding insult to injury. And with fewer services in these areas, city centers are appearing less and less appealing. Not only did many urban areas have limited affordable housing prior to the pandemic. But now, demand is declining as downtowns appear less and less desirable.
The urban effect of hybrid work extends beyond occupancy supply and demand. Certainly, fewer services and activities are not attracting as much traffic as before the pandemic. But their absence is also emphasizing other unattractive features. For one, homelessness is more apparent in many areas as part of the urban doom loop. The actual numbers in terms of homeless populations haven’t changed, but the visibility of homeless individuals has. In addition, cities are cutting funding to police and crime prevention measures as revenues decline. And this also impacts inner city desirability as well. Given these shifts, many are simply choosing to work from home elsewhere, much to the demise of urban environments.
“Those buildings have a lot of value and the land they sit on has a lot of value and they could be repurposed for housing. That’s not easy to do, but it can be done.” – Richard McGahey, Economist and Author of Unequal Cities
Urban Doom Loop or Urban Resilience?
Should the urban effect of hybrid work continue, then cities will have to make some tough decisions. With declining revenues and reduced demand for services, budgets will have to change. Naturally, this could lead to a vicious cycle and downward spiral. But is that really likely to happen? Throughout the decades, urban centers have underwent cycles of suburban escapes and re0gentirfication. Each time an urban doom loop is predicted, they have rebounded and flourished. Indeed, the urban effect of hybrid work has been significant. But that doesn’t mean empty offices might not eventually be revamped and once again attract urbanites.
The bigger question has to do with hybrid work itself. Those predicting an urban doom loop assume that hybrid work is here to stay, at least in some significant capacity. But is this a valid assumption? Already, brick-and-mortar book stores are making a comeback, which suggests shifting societal trends. And with inflationary and recessionary pressures, unemployment rates could rise. Should that happen, businesses may once again insist on an in-person presence from new hires as the talent pool expands. For these reasons, all bets are off when it comes to guaranteeing hybrid or remote work into the future.