Can global cities still thrive after the Covid-19 crisis?
Can global cities still thrive after the Covid-19 crisis?
The Covid-19 pandemic has led to many changes in the way people live and work. With many forced to work from home during lockdown, some people are now questioning whether they need to live in the city in which they work. This has prompted much speculation in the media about the future of global cities and whether the pandemic will spark an exodus of people to rural and coastal areas as they seek to work from home in a quieter and less stressful environment.
We spoke to Tom Walker, a fund manager specialising in global cities, to find out what the future holds for global cities and what impact Covid-19 has had around the world.
Are global cities at risk of decline if people move away to rural areas?
Tom Walker said: “If everyone leaves a city, it will lose the huge benefits that are derived when people cluster together to collaborate and exchange information. We have seen this before, perhaps Detroit is the best example of a city losing its appeal. When the car industry, the dominant employer, faltered people moved away, and the city went into decline.
“Today, we are not seeing the pandemic force people to move away from cities. The media is focussing on the people who are moving “away” from the city and not on those who are moving to the city, especially younger people. So far, the data is telling us that those that are moving away are not moving very far, only to the suburbs. People understand that they cannot be too far from the city, both from a professional and personal point of view.”
How has the pandemic affected global cities?
Tom Walker said: “Historically, any city-focussed crisis has always led to an acceleration of changes that were inevitable. For example, outbreaks of cholera in Victorian London led to the development of sewers and improved sanitation. The Great Fire of London led to the creation of fire-proof bricks. Covid-19 will be no exception.
“Fast forward to today’s crisis and it has accelerated the trends of working from home and the adoption of e-commerce, both of which were already afoot before the Covid-19 crisis. However, one of the key points to understand is that the pandemic has had, and will have, very different impacts on different cities.
“In parts of Asia, such as Shanghai, Beijing, Tokyo or Sydney, generally the pandemic was well managed. In these cities, life has returned to normal with little desire to work from home in any dramatic fashion. In contrast, cities in countries that did not handle the crisis so well, such as Paris, London and New York, will see a much stronger demand for working from home. There will be no uniform impact on cities, as ever each city, culture and region will react differently to the pandemic.”
So, what changes could occur?
Tom Walker said: “Trends that may have taken a number of years, if not decades, to occur have now been accelerated. The clearest trend is the reduction in demand for office space. As per my earlier comment, this will be more significant in Europe and the US in comparison to Asia.
“There will be more demand for logistics space, in and around cities, to serve the ever-growing e-commerce demand. There is also a chance that cities become younger; the older demographic may now decide they do not want to live in such close proximity to many people. A younger city could be hugely beneficial from a productivity perspective. Younger people are often more dynamic, open minded and entrepreneurial. This could significantly boost economic growth.”
How will the trend of working from home affect global cities?
Tom Walker said: “The trend for working from home is here to stay and this will result in a reduction in demand for office space. We expect this to be most significant in cities in Europe and the US such as, London, Paris, New York and San Francisco. This should allow redundant office space be repurposed as another use such as residential, schools, hospitals or even data centres.”
Will working from home vary by city?
Tom Walker said: “Absolutely, Asia will be far less impacted by the working from home trend. Generally, people in Asia have shorter commute times and live in smaller residential accommodation. Those cities with the longest commute times and poor transport infrastructure will be most impacted. In cities where people have long commutes, such as in London, Paris and New York, people will likely work from home more frequently.”
What about London?
Tom Walker said: “London will be one of the most impacted cities. In much the same way as the UK leads the way with regard to e-commerce penetration, the UK also leads the way with regard to employees’ desire to work from home. Many workers in London have a relatively long commute and this increases the appeal. At the same time average domestic broadband speeds are sufficient for high levels of connectivity for video calls.”
This article is issued by Cazenove Capital which is part of the Schroder Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.