The Great Regression: The Pandemic And Urbanism

Founder and CEO of The Raisner Group (formerly Proteus Capital Management), a private real estate investment firm in New York City.

On January 1, we were happily entering and looking forward to a new decade, on the heels of a red hot economy. By March, we were in a global pandemic. By July, the novel coronavirus was stronger than ever nationally, while other countries (paywall) seem to have tamed it. To some extent, this is just a notch up from house arrest. For most, 2020 has translated into changed social norms, months of working from home, urban exodus, no gyms or social gatherings, and virtual — almost — everything. By any means, this will have lasting impact on every aspect of our lives.

To some degree, we are going back in time and headed toward a more “simple” society. Nature has made us partially go back to the lifestyle of the last century.

Take traveling, for example. International travel is not widely available currently, between travel restrictions, risks of being locked into a foreign country and the risk of flights being canceled or postponed. Worldwide, the virus will not extinguish itself or stop threatening to come back in new waves for the foreseeable future. Before the last decade or so of discount airlines and mass foreign tourism, international travel was just not as available. What will this mean for urbanism? Well, domestic tourism will rise and likely be pushed by the federal and local governments while American resorts should experience growth.

The same goes for the international makeup of “superstar” cities like New York in the U.S., London in the U.K. or Singapore in Asia. With fears over Covid-19, gone for now is the era of increasing international student populations on American university campuses, and with travel bans, gone are the days of international business executives living in several cities at once. With American immigration essentially shut down for new H1-B work visas, large corporations will have a more domestic workforce, at least for a few years. For American cities, that implies the need for fewer hotels, especially at airport locations, and perhaps less corporate housing, as overall movement is restricted.

From a societal perspective, one could also expect the current pandemic to create a baby boom, at least once the economy settles. On one hand, there’s strong encouragement to limit social interactions, including dating, which can foster the formation of long-lasting relationships. On the other hand, current economic conditions are leading Americans to delay having children until the country is “back to normal.”

Furthermore, the national online schooling experience has demanded more of parents. Instead of having children in classrooms, parents have supplemented the teacher as they are solely available virtually. This could lead to a long-term trend of more stay-at-home parents. Those parents may also want to have more children than past generations as they become ultimate experts at raising kids full-time.

To some degree, it could be that the last decade was an anomaly in American history. It may not be sustainable for our country to have a “broke but fabulous” generation. We may go back to the fundamentals of the American Dream. While millennials traveled more internationally thanks to cheaper airlines and the creation of Airbnb, they also spent an enormous portion of income on rent, and weren’t able to purchase homes due to exploding real estate prices country-wide.

Our country needs to resume its historically high growth rate, fostered by innovation — and it will. Up until 2000, U.S. GDP grew over 3% yearly in each decade. After 2000, we hovered at around 2% and to some extent, leveraged the economy through the actions of the Federal Reserve.

The coronavirus provides an opportunity to restructure society. Again, we are falling low enough that we will bring on leaders who will be able to put in place the right policies — urban and others — for the U.S. to regain its strength. To begin, an effort including massive production of housing would render both renting to be more affordable, and home ownership to be more attainable. This is just supply and demand math.

As crime surges (paywall) in cities like Chicago, Atlanta and Philadelphia, “tough on crime” mayors may eventually be voted into offices, setting the stage for American cities’ new growth.

As American urban centers were temporarily emptied out due to Covid-19, and perhaps nowhere more than in New York City, they will refill as they become cheaper, which was badly needed. As corporations gradually reopen their offices and do the inevitable, which is ask the majority of their workforce to stop working from home, then new domestic and international talent will flock downtowns again. Because their jobs are there, friends and infrastructure will be present as well. That is why humans have congregated in hubs since ancient times, be it in Rome, Athens or Samarkand, the former capital of the Silk Road.

Chances are, we will go back to some sort of post-World War II America, with high growth; active recruiting of brains and talent from abroad in order to foster innovation and entrepreneurship in the economy; high homeownership rates and a rapidly growing population. If anything, America is the country of grit, and we will rebound strongly. Hopefully, the inequalities building up for too long that reached a boiling point in the June demonstrations and sparked the current national debate about racism will lead to a society with less friction. This all bodes well for urbanism, if well-handled, and real estate prices. For real estate investors, this could be a once-in-a-generation, if not several generations, opportunity to strategically purchase and benefit from the prosperous future of the United States.


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