Work From Home Is Killing Our Cities
By: Bjondi Dervishi, CSO of Abacus Sensor Inc.
The COVID-19 pandemic is killing more than people. Going into office buildings seems like a thing of the past now that working from home is so prevalent. At first it seemed awesome — commute times were eliminated, more time was spent with family and pets, wearing pajamas to work became a thing— but then some of the awesome began to wear off. Maybe you began to miss your old routine, got into fights with your family, or miss meeting with clients in person. Whether or not people prefer to work from home, the thing that no one is talking about is that this new normal is killing our small businesses and cities.
This has unfortunately affected me personally. My family has owned a restaurant in the business district of Chicago (the loop) for over 27 years. Restaurants are a notoriously difficult business to be in with low profit margins, lots of competition, and ever-changing customer demands. Peter Thiel often refers to restaurants as the worst business to start as an entrepreneur. Most fail within the first year and very few make it past 5 years of business.
Despite such unfavorable odds, our restaurant survived over a quarter century in one of the most cut-throat, competitive environments that exists. All of this came to a screeching halt at the onset of the COVID-19 pandemic. As small businesses were forced to close and large businesses shifted to working from home to flatten the curve, our family invested time, money, and sweat equity to re-model and re-purpose the entire restaurant in hopes of eventually recovering.
But being located in the central business district revealed an unnerving glimpse into the future; office buildings became empty in an instant, and the lack of office workers would result in the mass destruction of small businesses located near them.
In a flash, year-over-year income dropped over 90% for the restaurant and never recovered to a sustainable rate — even when indoor dining was briefly allowed. Contrary to public perception of the CARES act, PPP loans were not only incredibly difficult to procure, they proved meaningless when businesses no longer had revenue to survive. Slowly but surely, every single restaurant and bar located near our restaurant permanently closed. Ours too, has finally met its end and will be closing permanently at the end of the year.
Nearly two-thirds of Americans live in cities today. It should come as no surprise that most small businesses would also locate in them as well. The problem is that the coronavirus pandemic changed the way people live and work. In fact, nearly seven in ten workers are now working from home.
The reality is, there was nothing we could do to save the restaurant. When people no longer work in office buildings, the small businesses located around them become doomed to fail. This is actually the reason I became an entrepreneur, to solve a problem that could allow for office buildings to safely re-densify. The economic effects of near-empty office buildings became an obsession to me, and it’s worth going through what the effects of working from home mean to cities and small businesses.
The effects of working from home
Now that people are working remotely, the appeal to do so from confined city spaces has apparently vanished. The result is a moving phenomenon. People are leaving densely packed, urban cities to the suburbs or smaller communities across the country. In doing so, many have become disconnected from the reality of how this impacts cities and may not even be aware of the devastation left behind.
People are leaving densely packed, urban cities to the suburbs or smaller communities across the country.
Over 15.9 million people have moved during the coronavirus, according to USPS data. What does this mean for the small businesses that rely on the traffic generated by those former city occupants? Unfortunately, lockdown and work-from-home measures brought about by COVID-19 have disproportionately affected small businesses — particularly in the leisure and hospitality sectors.
The effects on small businesses
In the U.S. as a whole, data as of the end of November 2020 suggests that nearly 30% of all small businesses remain closed. The leisure and hospitality industries have suffered the worst fate, with almost 50% closed.
Most of these small businesses have likely closed for good. Large companies, on the other hand have had ample liquidity thanks to stimulus funding from the Fed, allowing them to not only make the expenses and changes necessary to survive the new conditions, but to thrive in them.
The effects on the economy
The changes made by large companies created a stay-at-home-economy that is likely here to stay. The huge investments in infrastructure to deliver goods and services directly to homes quickly and efficiently have had an economies of scale, making consuming those goods cheaper and easier. This in turn has created a behavioral change in people who work from home. Additionally, hundreds of thousands of Americans who lost traditional jobs in retail and service industries have begun working for the very companies capitalizing on this new economy working in online order fulfillment and delivery.
While this new economy will surely create some winners that capitalize on new consumer demand, it does not look good for many small businesses. The fewer small businesses left standing when the pandemic finally passes, the longer the unemployment rate will take to fully recover. As labor market gains are diminished, the pace of economic recovery will also take longer. This does not bode well for cities, where much of their attraction comes from their diversity of small-businesses and concentration of night-life activities.
Expanded work-from-home capabilities have already removed the early-adopter barrier for employees and companies that used to be on the fence, and a behavioral shift has occurred. Countless surveys, including ones from The Partnership for New York City, Business Insider, PR Newswire, SurveyMonkey, and Family Safety & Health all point to a future where work-from-home is either the preferred norm for employees or part of a hybrid model with reduced office workers, even after the pandemic ends.
What this means for the future of small businesses and cities
To understand what the future of cities could look like, one merely needs to observe them in their present. What they will find are empty downtowns, boarded up windows, an abundance of for lease signs, and high homelessness and crime rates.
The question that property managers and building owners are likely thinking about is what will the future occupancy rate look like for their buildings? The survey data seems to suggest much lower occupancy rates due to a hybrid office/work-from-home model. Tall buildings have high operating costs. Will they be able to continue to operate if office spaces are downsized and net recurring revenue decreases?
Let’s say building occupancy rates stay down in a hypothetical future. Fewer office workers means less people in downtown districts shopping, eating out at restaurants, and doing other activities provided by small businesses. The net income for small businesses in these districts would go down as a result and many would be forced to lay off workers or shut down, just like they currently are doing. The likely jobs available to those laid-off workers are in the e-commerce industry and reinforce the stay-at-home-economy.
Even if brick-and-mortar small businesses are replaced with businesses that are designed for the new stay-at-home economy, there is no appeal for them to locate in cities and pay the premium high rent prices charged. The appeal of those cities dwindles without the vibrancy offered by small-businesses. People already demonstrated a willingness to move out of cities when the need to go to the office and ability to go to small businesses expired overnight.
The desire for people to live in cities and for small businesses to locate in cities mirror each other— if the demand is not there for either of them, they will choose to leave cities or close. All of the things that make cities great begin to collapse. The result, it seems, is the future could look much like the present for cities and small businesses.
Can anything be done to stop the bleeding?
It seems this article has painted a doomsday picture for cities and small businesses. The longer that small businesses stay closed, the more permanent the damage to them and to cities and the harder it will likely be for both to recover. Economists and political pundits have already discussed the possibility of an economic depression. Nobody wants to imagine such a bleak future living through a possible depression, but it is definitely realistic.
The good news is, something can be done about it! In fact, Americans have been through adversity many times before and have come out stronger after. We did so after 9/11, after the Cold War, even after the Great Depression which was immediately followed by World War II — a double whammy!
Americans have been through adversity many times before and have come out stronger after.
The U.S. endured the Great Depression and double-digit unemployment for the entire decade of the ’30s. As if not enough of a battle, the 30’s led to the rise of Adolph Hitler and with him World War II, capping and enveloping the decade in a horrific cloud of dark smoke and tragedy.
The U.S. initially stayed out of the War — maintaining an isolationist policy — perhaps with the hope that things would sort themselves out and eventually return back to normal. The truth is that things do not just go back to normal. Problems do not solve themselves — they need to be solved by human ingenuity.
Problems do not solve themselves — they need to be solved by human ingenuity.
It wasn’t until December 7th, 1941, when Americans were attacked at Pearl Harbor and confronted head-on with the threat that they joined the fight. Faced with arguably the most important war of all time, with the future of humanity at stake, against the forces of evil, Americans joined together and began to solve the problem. Government bonds were sold to U.S. investors to raise funds quickly. As a matter of patriotic duty, U.S. citizens were encouraged to buy War Bonds, and Americans responded in kind, buying the equivalent of $4.1 trillion dollars worth of bonds in today’s money.
16 million American soldiers enlisted for the war — 11% of the population — leaving their families behind to fight the enemy head on. More than 6 million women took wartime jobs in factories, 3 million volunteered with the Red Cross, and over 200,000 served in the military during that time. This all ironically reduced the Great Depression-era unemployment rate and kickstarted a new economic frontier for the U.S., transforming it into the world superpower it is today. It seems that we have a parallel in today’s pandemic with millions of Americans working on the front lines battling the virus and millions more working in essential jobs keeping our entire economy going.
But, effectively combatting the enemy in World War II also required the inspired work of many brilliant young minds and inventors. A look at some of the innovations brought on during the hostile conditions of the War will verily prove this to be true. The two most important ones — the computer and nuclear power — show just how awesome human ingenuity can truly be in the face of adversity. It needs to once again shine to effectively stop the bleeding of this pandemic and prevent the nightmare future from ever happening.
Human Sacrifice and Ingenuity Solve the Problem
We have suffered through so much during this pandemic. We have all made sacrifices, but the problem is not solved yet. Even with vaccines being rapidly produced and made available to people, if recent surveys are any indication, they will not be adopted widely enough to be the final solution (no pun intended). We cannot make the mistake of thinking that others will do the work necessary to solve this problem — it requires the participation of all of us still. It requires further human ingenuity.
Even with vaccines being rapidly produced and made available to people, if recent surveys are any indication, they will not be adopted widely enough to be the final solution
Social distancing, wearing masks, quarantining — none of these were complete solutions. People still got sick and died with strict policies put in place. The reason why is simple, they each only address portions of a complicated problem, and some of them create new problems in doing so (like causing thousands of otherwise successful small businesses to fail).
Let’s take social distancing as an example — social distancing may slow (not stop) the spread of COVID-19, but it also requires small enclosed spaces to have limited occupancy. A restaurant that used to serve 150 patrons might only be able to serve a quarter of that when social-distancing is in place. A public train or bus might need to go from packed cars to less than 20 people per car. An elevator will need to limit occupancy to 1–4 passengers at a time, rather than 12–16 passengers as was the norm at peaks before the pandemic. This last one creates a bottleneck problem and very long lines for the elevator making re-entering tall buildings a new problem.
We believe that tall buildings need to have the ability to re-densify safely for cities and small businesses to have a chance. This is why Abacus Sensor has identified and become committed to solving the elevator bottleneck problem. Abacus’ technological innovation will play an important role in safely re-densifying cities. Let’s envision the effects of solving that problem.
Abacus Sensor is able to count passengers inside elevators in real time and then initiate express rides when maximum occupancy is reached. This action eliminates unnecessary stops, recapturing precious time during each elevator round trip while safely maintaining socially-distanced limited occupancy. While the efficiency gains are spectacular, this also creates the most important safety innovation of all by reducing the time each passenger spends inside of these small, enclosed elevators to the shortest possible amount. Thus, vital elevator throughput and efficiency are restored and the maximum population that buildings can safely move during peak times is increased. Without this innovation, re-densifying tall buildings is a physical nightmare and sacrifices either need to be made to safety or to efficiency.
Currently, office buildings in Manhattan are at less than 10% capacity on average. This is abysmal for the business capital of the U.S. But what if their true limit was actually higher and property managers could increase elevator efficiency and monitor elevator usage data to determine how many people they could safely bring back? Imagine if this number could be safely brought back to 40–50%? While not perfect, the ancillary effect this could have on small-businesses could be compounding and they might at least stand a chance at surviving. Abacus Sensor helps solve the elevator problem by innovating with new technology, but people will need to be convinced to also return to the office.
We all have a part to play
If buildings want to convince people to return to their offices, they will have to implement new solutions to address their tenant’s concerns and safety. New innovations are emerging all the time, and and adopting the right ones will have a broader societal impact. The right innovations to adopt are those that allow people to safely occupy a building and safely move through it; without adopting these innovations, cities and the many communities that rely on them are in jeopardy.
On top of that, buildings can adopt new amenities (not available at home) to further persuade occupants that coming to work is worth it. While working from home has its upsides, the post-pandemic world will likely see a paradigm shift away from employer choice of who is required to work in the office, and toward employee choice that each person will decide for themselves. In other words, the tenant experience in the office needs to be worth the commute and the possible health safety hazards to convince enough employees to use the office and, in turn, convince their employers to continue leasing the space.
If tenants don’t return to buildings in cities, then small businesses and communities around those buildings and cities will suffer. The value of those buildings would also plummet and their income may not be enough to support basic operating costs. All of the things that make cities great begin to collapse.
Keeping cities alive will require at least some people to return to the office. The question, then, is how this can be accomplished safely and efficiently. If there are health safety concerns, office occupancy will remain low. Likewise, if there are logistical bottlenecks in getting into and out of the building, it’s unlikely that occupants will want to return. We think that addressing the key areas of health safety and minimizing bottlenecks will play an important role in convincing people to return to work.
By solving key issues for tenants to get them to return to the office — tenants are not only made happier — their return to buildings keeps cities alive, acts as a meaningful contribution to the well-being of the community, and potentially creates a better future. While it is incumbent on each building to adopt solutions that fits their specific needs, one thing is clear: doing nothing and waiting it out will cause permanent damage to the community and downtown small businesses. However convenient working from home may be, we think the city is worth saving. We can only hope that buildings think it’s worth saving too.
History showed us clearly during the Great Depression that cutting consumer spending and hunkering down for it to pass without making new investments accelerated the unemployment rate and decreased the GDP of the country. History has a way of repeating itself in new ways. We’re all facing the future consequences of our actions together. We all have an active part to play in ensuring our cities and small businesses don’t end up on the verge of collapse. New solutions are still required and some may create new technologies like the computer or nuclear power and change our future forever. One thing is certain though, problems don’t sort themselves out, people have to solve them.
