Remote Work Changes City Economies

Office Occupancy Rates In Cities Are Just… Not Good

This short segment is worth a watch.

Pay special attention to how they talk about the back-to-office trend. Pay attention to how they expect the occupancy rates in New York to settle in at a steady state of 56%. And pay attention to the hybrid workforce numbers in Manhattan (35% of the workforce comes into the office only 3 days a week).

New York’s “new normal” is expected to settle at half the occupancy rate of pre-covid. Ouch.

This isn’t a shocker to anyone that’s been paying attention to remote work’s downstream effects. But it’s worth noting because they’ve started saying the quiet part out loud in the mainstream media.

For me, the other interesting factoid from this segment is that it’s a fear of layoffs that’s been driving workers back to the office over the last few months. And that kind of makes me wonder, as the economy comes out of its slump, will the trend of increasing occupancy start to reverse again?

I think you know what my answer is.

New York property tycoon to give worn-out offices ‘back to the bank’ | Financial Times (archive.is)

Speaking of the downstream consequences of increased numbers of remote workers, new 2nd & 3rd order effects continue to appear. I’ll reemphasize a prediction from my recent 2023 predictions newsletter: this year we can expect to see visible signs of transformative trends converging. 

In this particular instance, as cities struggle to get back to normal office occupancy, older and technologically obsolete office buildings no longer make economic sense given current market conditions. The combination of rapidly rising interest rates, a contracting technology sector workforce, geopolitical unrest, and a general shift to remote work is a mix of trends that creates transformative impacts on cities.

“the chief executive of property developer RXR, is preparing to surrender some of his offices to lenders.”

“The decision comes after an exhaustive review of RXR’s properties and is an acknowledgment that some that generated steady, if unspectacular, returns no longer make economic sense in a new era of remote work and rising interest rates.”

“The sharp rise in interest rates from historic lows is threatening all sorts of businesses that were predicated on cheap and readily-available capital, he noted. Even tech companies, one of the few remaining sources of office market expansion, are now jettisoning thousands of employees. Their cuts, in turn, appear to be rippling through Wall Street.”

“When companies are laying off people, they don’t usually take more space,” Rechler said, adding: “The amount of development projects that we’re hearing about around the country that are stopping is mind-blowing.”

So, what’s it all mean?

It’s just more evidence that city economies are struggling from the downstream impacts of society-wide trends colliding. It signals that you should watch for and adapt to how cities and national economies cope. Building on my 2023 predictions post, I expect major developments on this front sometime in 2023.

People Continue To Migrate

As if New York and other cities like it weren’t having enough troubles, in a remote work world, people continue to migrate away from cities and to places that better align with their shifting priorities.

In this instance, the data shows that people are relocating to low tax jurisdictions in signifcant numbers. It’s just another trend to pile on top of the points made above.

States With Low Taxes: Americans Leave New York, Moving to Florida, Texas - Bloomberg - A stunning revelation to no one that’s been paying attention to these trends for the past 3 years.

American’s now have the ability to work remotely and are choosing to relocate for a wide variety of reasons. Frequently that means relocating away from a defunct government and high taxes to better schooling, warmer weather, and so on.

The data over the last 3 years drives a consistent message here - people are migrating and it’s having a negative impact on city economies that rely on taxing the earnings, movement, and expenditures of a large number of people.

Apartment List National Rent Report

This trend is also clearly showing up in apartment rental data.

“Over the past six months as a whole, no large metro area in the country has experienced positive rent growth.”

The bottom line: if you can work remotely, where you choose to live and why are likely to change. And those changes have downstream consequences that continue to play out across the global economy.

Rapid Fire

• Money and State - Erik is quickly becoming one of my favorite people to follow online. His ideas and philosophies intersect at crypto, self-sovereignty, and the role of the state in our lives. I don't pretend to know all his beliefs, nor do I agree with many of the ideas I know that he believes in. But I find his approach to the world to be levelheaded and I always learn something interesting from hearing him speak. This website is where he sometimes writes about topics of interest.

• GCR’s 2023 Outlook - GCR (globalcoinresearch.com) - I would not take too much investment signal from this report. But it’s interesting to browse because GCR has a DAO-like investment community model they use to crowdsource ideas and capital which they then invest.

• "Yay, College!" Part 1: The Smiley-Face Super-Villainy of American Higher Education - Epsilon Theory - "All of our jobs, all of our incomes, all of our expenditures, all of our construction … a quarter of it is education and healthcare." And that’s why its political suicide to try and make a change to the system.

• Russians bought record number of gold bars in 2022, data shows | Reuters - “Russians bought over 50 tonnes of gold bars in 2022, ten times more than the year before. The most sought after were 1 kilogram bars which accounted for about 60% of those sold.”

• Russia-India Crude Oil to Europe, US News: February 5, 2023 - Bloomberg - “India is playing an increasingly important role in global oil markets, buying more and more cheap Russian oil and refining it into fuel for Europe and the US.” War in Ukraine is bad because of the loss of life. But it’s also bad because it acts as an additional tax on Western economies. And oh, by the way, the Russian economy is holding up a lot better than Western leaders want to admit.

• Russia Sidesteps Western Punishments, With Help From Friends - The New York Times (archive.is) - “Russian trade appears to have largely bounced back to where it was before the invasion of Ukraine last February. Analysts estimate that Russia’s imports may have already recovered to prewar levels, or will soon do so, depending on their models.” These last few stories in combination do a better job of telling why Western nations are willing to escalate their level of support for Ukraine with Tanks, Missiles, and potentially fighter jets. That reason? We’re in danger of settling into a forever war like we did in Afghanistan.

• The Lights Wink Out in Asia – The Scholar's Stage (scholars-stage.org) - Very interesting read on the shift to a multipolar world.

• GDP Growth Forecasts by Country in 2023 - “signs of economic weakness can be seen in the growing wave of tech layoffs, foreshadowed as a white-collar or ‘Patagonia-vest’ recession.” The “patagonia-vest” recession is a hilarious way of framing it.

• Mexico’s Industrial Hubs Grow as Part of Trade Shift Toward Nearshoring - WSJ (archive.is) - “Nearshoring” is one of those words you’ll want to keep an eye out for. It’s a sign of the evolving state of globalization and should be interpreted as a sign that multipolarism is entering the public dialogue.

Extras

Well that’s an interesting way of putting it.

What's something you know and believe, a contrarian take to what everyone else believes right now, that you know 10 years from now everyone will share & agree with you, and that it will actually just be conventional boring wisdom then?