Bill Virgin: Era of the big city is done; medium cities that are more affordable will reign

Predicting the distant future is a lot easier than predicting what’s going to happen tomorrow, next week or even next year. Make the timeline long enough, make the predictions vague enough, and you’re safe. Either what you predicted doesn’t come to pass, and by then everyone has forgotten what prognosticated, or it turns out you made the right call and everyone hails you as a genius.

But make a specific prediction with a short time horizon, and everyone will remember it in case you botched it. Just ask weather forecasters how that works.

With those cautions and caveats in mind, let’s consider the latest news items on a running debate this country is having as to the future of big cities, and whether work-from-home is a permanent condition.

Work from home started out as a temporary and precautionary measure to protect workers during the pandemic, but as both employers and employees have become used to it, so the conventional wisdom goes, it’s looking more and more like the way office work in the future will be done even after the coronavirus is finally beaten down.

No more long commutes to a cluster of high-rise office towers in some congested central city. With the tools we already have, including email, mobile devices and Zoom conferencing, employers will no longer need so much space, and employees can work and live where they like and can afford. That has big implications for large cities like Seattle that are increasingly out of reach, in financial terms, for many families looking to own a home. The era of the big city is done; medium-sized cities that are more livable and more affordable will reign.

Exhibit A in support of this thesis comes from Kent-based outdoor recreation retailer REI, which four years ago announced plans for a fancy new headquarters complex in Bellevue. Earlier this month however, REI said it would put up the headquarters (which it has never occupied) for sale, and will instead split administrative functions between smaller satellite offices in Bellevue, the South Puget Sound area and the Georgetown neighborhood of Seattle.

“The dramatic events of 2020 have challenged us to reexamine and rethink every aspect of our business and many of the assumptions of the past,” said President and CEO Eric Artz. “That includes where and how we work. … We learned that the more distributed way of working we previously thought untenable will instead unlock incredible potential.”

The majority of REI’s headquarters employees “will work from home through the end of this year and into 2021,” Artz said.

REI is hardly alone in rethinking how and where its office employees work, and that has not escaped the notice of economic development planners in midsize and smaller cities looking to grab some of those jobs. Michael Cade, executive director of the Thurston Economic Development Council, recently wrote that the continuing escalation of housing prices in the central Puget Sound market is pushing would-be home buyers to consider towns that in pre-coronavirus days would have meant a long trek to the big city.

“Residential rental markets located outside of that core are becoming much more attractive to commuters as remote work environments are becoming more the norm and are proven, trial by fire, to be effective and productive,” Cade said. “Thurston County is continuing to attract those telecommuters.”

The contrarian argument comes from, who else, Amazon, which recently announced plans to add 3,500 job at tech hubs in Dallas, Detroit, Denver, New York (Manhattan), Phoenix and San Diego.

Like many other big tech employers, Amazon sent its corporate workforce home during the pandemic, and those who can and wish to do so don’t have to come back to the office until January.

This would seem to be an ideal opportunity for the company to rethink the tech-world model of having a lot of employees occupying large quantities of expensive office space in an expensive city for employees to live in. Amazon could, if it wanted, diversify its real estate requirements by choosing medium-sized cities in which to set up tech hubs, or to allow many of its administrative and executive employees to work from home, wherever that is.

But that’s not how Amazon or Jeff Bezos think. The company wants large office-based employment centers in big cities. Those are the places that employees with tech talent already are or want to live, never mind the hassles or expense of locating there. Why else would Bezos seek to increase Amazon’s presence in New York, where it endured messy and very public rebuff over incentives offered to locate there, when many smaller places would offer much better deals, or at least a lot less trouble, than the Big Apple?

What’s most likely to result is a mishmash of operating styles and philosophies. A few companies will commit fully to having as many employees work from home as is possible; others will regard that is just too radical for their tastes, and will try to return to the pre-pandemic mode of operating. There will be opportunities for midsize cities like Tacoma to snag some of the jobs now being done in big cities like Seattle, but expecting a major employer like Amazon to set up shop here is probably unrealistic.

Unless, of course, a city like Tacoma or Olympia can cut Bezos a swell deal to underwrite the cost of rolling those glass spheres down to Lake Union, loading them on a barge and floating them off to Commencement Bay or Budd Inlet.

— Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.