The Five Types of Cities that will Win the Recovery

As we approach the end of 2020 - and nine months of home offices, Zoom calls, and virtual conferences - it’s worth taking stock of the impact the pandemic has made on cities and economic growth throughout the world. As the US and global economy approach a tentative recovery in 2021, winners and losers will emerge: the recovery will favor some cities and regions while leaving others behind.  

Make no mistake: I’m bullish on cities. The arc toward increasing urbanization has spanned millennia and survived far worse pandemics, wars, new technologies, and more. And as the COVID pandemic ravages the likes of Iowa and South Dakota, it’s increasingly clear that urban density was never the problem. Cities will return bigger and better than ever - but not necessarily in the same way, and not necessarily the same cities. Some will return stronger than others, driven by changes in the nature of work, shifting consumer preferences, and specific policy responses.  There’s not one single way for a city to win, but rather a combination of uniqueness, proactivity, and luck.

So who will win the reshuffling of urban economic power?  Here are a few categories of cities that are poised to come out of the recovery better than ever:

The Bedroom Community

Examples: Santa Cruz, Beacon

While some jobs will become permanently remote, many more will become hybrid: 1-3 days in the office per week, 2-4 working from home. And while some workers - particularly young, single people and empty nesters - will remain in urban centers, others will move to smaller communities in the “60 to 90 minute” commute range - too painful to do five days per week, but worth the tradeoff at 2-3 days per week to get more space at a lower price.

Beacon, New York is a great example of a city that is poised to benefit from this way of living. A 1.5 hour train ride from Grand Central Terminal, it’s a bit too far for daily commuting. But it has a remarkably strong local art scene anchored by DIA: Beacon and easy access to nature and the Taconic Mountains - a great choice for someone commuting into New York two or three days per week.

The HQ2

Examples: Tucson, Salt Lake City, Atlanta

In early 2019, I attended a roundtable discussion of CEOs running growth-stage technology companies.  Every single CEO was either heavily investing in a second headquarters in a less-expensive market or immediately planning to do so.  Most were choosing cities convenient to San Francisco or New York with business-friendly laws and low cost of living: places like Tucson, Salt Lake City, Boise, Atlanta, and Phoenix. This trend has only accelerated since COVID. In March, we at Common announced a second headquarters in Atlanta, where we’ve since hired over 40 employees.

As employees return to the office, these “HQ2” cities will undoubtedly benefit. The most successful cities will offer a combination of affordability - studio rents under $1,200 per month - and fun - nightlife and music, culture, and access to nature.

The Proactive Hub

Examples: Tulsa, Savannah

Some cities aren’t leaving their recovery to chance: they’re enacting specific policies to ensure they’re on the winning side. Perhaps the clearest way to attract remote workers is to simply pay them to come. At least two cities have embraced this strategy: both Tulsa, Oklahoma and Savannah, Georgia have rolled out specific incentives giving remote workers up to $10,000 to relocate.  Others - such as Austin, Texas - have embraced major investments in mass transit to give them a leg up in growth.

At Common, we rolled out the Remote Work Hub RFP this summer to give cities another proactive way to engage and attract remote workers.  We’ve been thrilled by the response thus far and will be announcing finalists in early 2021.

The Destination (with Depth)

Examples: New Orleans, Miami

As more workers have the opportunity to work from anywhere, the most obvious winners will be cities that are synonymous with fun: places like New Orleans, Nashville, and Miami.  But not every top bachelor party destination will be a winner; the real success stories will be able to back up their fun reputations with some depth: cultural institutions, universities, and a base of educated workers. While it might be fun to do a couple months of remote work in Myrtle Beach, it probably doesn’t have the economic vibrancy and diversity to retain remote workers for the long haul.

Cities “on the bubble” need to get proactive, playing to their natural strengths while giving a little extra incentive to get on remote workers’ radar.  Savannah is a great example of this, complementing their local amenities and strong educational presence with a remote worker incentive program.

The New York

Example: New York

New York is going to be just fine.  Across the board, the pandemic economy has been favorable to market leaders, and New York is a market leader of global cities.  Furthermore, New York’s largest industries - finance, advertising, fashion, media - have been relatively hesitant to embrace remote work and are likely to return to the office in some form once it is safe to do so.

It’s fair to contrast New York to another city that might emerge from this less-than-fine: San Francisco.  Unlike New York’s anchor industries, tech has eagerly embraced the fully-remote work model, reinforcing a pre-COVID trend of tech industry flight from San Francisco to more affordable and business-friendly locales (see The HQ2 above). And the city of San Francisco continues providing incentives for companies to leave, passing a host of new taxes on the latest ballot.  While San Francisco has natural advantages in great weather and beautiful architecture, it has a recent habit of shooting itself in the foot.

No city can rest on its laurels; the economic giants pre-pandemic aren’t guaranteed a recovery.  The winning cities will have strong appeal to workers newly able to work from wherever they choose.  They will play to their natural advantages, carving a niche in the post-pandemic economy.  But most importantly, they will be innovative and proactive in response to the challenges and opportunities that will inevitably emerge.