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The Only Road to the New Normal Runs Through the Old

  • United Kingdom
  • Corporate Real estate
  • Real estate
  • Real estate development and regeneration
  • Real estate planning
  • Real estate sector

06-04-2021

Cities are machines for making high-speed history; vast crucibles where people work, play and invent the future together. Ten million minds are better than one. Mass housing, metros, tower blocks, theatre, plumbing, the department store, offices, street lighting and electric scooters - all owe their invention and development to cities.

The UK’s own cities blaze with this innovative and wealth generating force. More than 70% of the UK’s most highly paid and skilled people work in our cities, and every UK city economy is designed almost entirely to serve their needs. For example, over 60% of all jobs in the restaurant sector are based in cities, as are 75% of those in the entertainment and creative arts sector. Most crucially, the UK’s cities deliver over 55% of all national spending.

This is a vital fact, because the government’s recovery plan is based on unleashing two pent up powers. First, consumers hungry for spending fun after their lockdown house arrest; and, second, cash rich businesses investing and recruiting. However, these economic numbers make one point very clear: that the consumer spending missile won’t leave its silo unless people start to commute to their offices and to spend heavily in city centres. Johnson and Sunak know a consumer spending boom without city centres is like a party without a punch bowl - subdued, slow and destined for an early bedtime. That’s why they are both trying to nudge people back to the office: Johnson bluntly, “people have had quite a few days off, and [should now] make a passing stab at getting back into the office” and Sunak gently, but with a sting, “it’s good [when] people are in offices together...riffing off each other” and people “may quit” if not offered that opportunity.

This brings us to the Catch-22 of the 21st century UK economy. We know we need a more sustainable society: less commuting and international travel, greener buildings and cars, less meat eating and more local food. But, in the short-run, to generate the growth and money needed to build that economy, we need a conventional recovery. So Johnson and Sunak have a point. The only route to a quick recovery is by all of us getting back as close as possible to our old commuting, office dwelling and spending selves - when it’s safe to do so. We can then use the economic momentum generated by that initial recovery sprint to start the long transitional jog to a better normal of blended office and home working, local spending and greener behaviour. The alternative - of an immediate transition to a permanent non-commuting, home-working society - is possible (and people may vote for it by not moving their feet), but we need to accept that the price of that would be an anaemic recovery and more economic dislocation.

We are the first generation, when faced with a pandemic or other disaster, to consider migrating away from our offices and city centres permanently. Our technology allows us to contemplate this, and our attitudes to risk, economic costs and mortality are pushing us to do it. Andrew Bailey has said that the end of the five day office commute is inevitable, and a slew of corporate surveys show that most people want a blend of home and office working, and many want to work solely from home.

However, if we are to move away from our cities and offices, we need to think very carefully about this once in five millennia change. If it is the right thing to do, we must manage the transition so that we retain the best characteristics of our offices and city centres. Otherwise we risk throwing out our cities’ creativity and excitement with their crowded commute and high property costs. We must avoid the office, retail and leisure space of our city centres becoming our new left behind regions.

Nudging won’t be enough, the government will need to intervene (as it did in vaccine development) to make sure that both the initial recovery and the transition to a new normal can be achieved without excessive economic scarring by, for example:

  • providing generous grants and incentives for companies to install their own daily lateral flow test and trace systems
  • considering rates rebates for the parts of offices restored to use
  • making it much easier to turn offices into good quality residential and leisure space, by both grant and tax incentives, and profoundly changing city planning policies. The days when city centre planning meant no more than turning the office development spigot on and off are over. Before the railway revolution of the 1860s, all of our city centres were intimate, mixed-use spaces with people living where they worked and played. We need to recreate that blended city life
  • incentivize real estate investors and developers (perhaps with compensation for their Covid related rent losses) to develop new forms of more flexible and adaptable property, built for regular changes of use, across our city centres, suburbs and towns; and
  • most importantly, incentivize businesses to relocate or start up in new areas (both geographical and economic) to reflect the new blended lifestyles that are likely to develop: more home working, city centres as places to live, play and have fun - and with less (but better and more attractive) office space.

If the government leaves this profound social and economic change purely to the free hand of the market, that hand may deliver too heavy a blow leaving deep dislocation and economic scarring. Rather than nudge consumers, real estate and other businesses, the government should put a supportive arm around them (as it did with the Covid relief schemes) and invest, incentivize and guide them through to the new long-term economy. State led and supported development worked with the vaccines, it can also help the post-Covid economy recover and transform.

First published online on React News: original article here.

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