I think WE all are watching the implosion of We(Work) with curiosity. Beyond their chief co-working offering, I found the educational experiment of WeGrow fairly interesting, and my limited experience with Adam Neumann and his wife Rebekah, who were fellow parents at my school for a year, gave me some insight into what they were up to, at least as of a couple of years ago. One of my daughters, who was a classmate that year, enjoyed their hospitality, car/driver, and private chef. So that was fun.
And speaking of fun, there’s been a fair amount of fun made of the “woo woo” of the WeWork “conscious” philosophy, but I must say that I am very open to hearing that kind of message. Who doesn’t want the world to be a better place. I mean, c’mon.
Of course, the quick slide being tracked in the news has lots of juicy, nasty stuff to read. But don’t forget that lots of really good people- talented architects, marketing folks, designers and salespeople are going to lose their jobs. And landlords who have leased whole spaces to WeWork may end up with some vacancies. So it’s not all schadenfreude.
At the same time, I’ve never fully understood what made this particular coworking space so different from the others. Yes, great architecture. Yes, great feeling when you walk in. I was on the 50th floor of a WeWork in Tel Aviv last year, in a brand new building building by the Ernst & Young subsidiary there, and marveled at what they’d created. But was their concept remotely new?
It seems their style may have been new, but the change they offered was actually incremental. Really, maybe the biggest move was bringing beer back to the workplace. Instead of Mad Men-era martinis? I guess even that isn’t new.
There has been a lot written lately about the Future of Work, the Future of Employment, how it will impact where people live, how they interact etc.
This WSJ article and another about how many people leave New York State every day sparked my thinking. People are moving to “secondary cities,” and away from cities like New York for jobs and apparently (shockingly) cheaper housing. We will see it more fully in the 2020 Census. North Carolina will add Congressional seats, Florida may, California may not, New York and NJ will lose seats. I know that jobs are moving to secondary cities. Goldman moved lots of its back office and “cost centers” (vs revenue generating business) to NJ and UT, for instance. Jacksonville, other markets are booming as a result of changes like this. I’m seeing lots of real estate funds successfully growing in these cities.
But is it really going to hurt New York City real estate? Is some notion of the changing way we work the main driver behind people’s leaving New York? If not, what else is really underneath it all?
It seems quite clear to me that for many, the biggest driver of negative impact in New York City are:
Changes in State and Local Tax (SALT) Deductions on a national level
Rising taxes in NYC and NY State which make SALT more real for New Yorkers
New Jobs in other cities
Ease in Telecommuting through the power of Tech
These are fairly obvious trends to anyone who is looking. But the first two seem so far above the second two on this list. And they probably caused the third item, New Jobs in other cities. The tech piece has facilitated the rest, and biggest picture is the latest major shift in how the world works. But I’m simply unconvinced that co-working is driving the change. It’s a reaction to realities on the ground. They don’t seem to be changing the way that people work.
Did WeWork ride a rising economic wave? Yes. Did it ride a tech investing decade from so much uninvested capital? Definitely.
WeWork hasn’t changed the fact that working in cubicles isn’t great, and a lack of privacy in the workplace (aka no private offices) isn’t ideal for many people. At the same time, people like to congregate, to work together, and to live near each other. Those two items can be in direct conflict with each other.
At the same time, people seem to be less enthusiastic about the classic “suburb” made famous by John Hughes in the 80’s. I’m hardly predicting the death of the suburb, but there is a seeming push to be nearer the town center, with walking more of a priority, and the clustering of living that you can obviously find in cities like New York. We see the re-development of downtowns everywhere. Death of malls exacerbated by Amazon, but certainly those trendlines were already moving.
And so, back to New York. We are seeing some attrition from New York, with a push to create something similar to New York, across the US. Of course, some of these attempts will work, some will feel inauthentic. And separate from that, many people are clear that they want a house, want to live with a backyard, and choose to be outside of cities.
ah, the house with the backyard
On the flip side, I would argue that people move to New York City VERY intentionally. They are here to do something. They are focused on that, and not taxes etc.
Some of these people will be derailed by the realities of the cost of being in New York, or disgusted by this, or that, or our mayor’s managerial skills, a guy who has finally realized what we all knew, that he had no shot of being president. And these people will move out. And some others will remain in New York, attracted to the totality of what is on offer here. You know that quote about New York, San Francisco, New Orleans being the only real cities, and everything else being Cleveland? Well, this group is clear on what NYC holds for them.
Finally, when people DO look up, and perhaps they have accomplished that which they set out to do in New York, and may be ready for whatever is next for them, well, then they may choose to boogaloo on out of here. Right now we’re seeing a fair amount of very high end property that has hit the market.
Work life will change. Tastes in living seem to be reverting to the “village” mentality that has existed for centuries. And in the end, as long as NYC has more to offer than the downsides mentioned above, many people will stay here, and New York will remain a world-class place to live. There’s only one New York, warts and all.