The pandemic is bad news for superstar cities. Here’s why.

Is remote work here to stay?

The pithy response to that question is, “Meh, we’ve had the technology for years but still worked in the office pre-COVID.”

According to The Atlantic’s Derek Thomspon, that answer has merit.

But he believes that there’s no going back and that we’ll see a permanent transition from “spatial proximity” (work where you live) to “cloud-based connectivity” (work anywhere)… and this will be no bueno for superstar cities.

The key pandemic change isn’t technological; it’s social

Citing work from economist David Autor, Thompson says that the slow adoption of remote work can be explained by the “telephone problem.”

While the telephone was patented in the 1860s, fewer than half of Americans had one 7 decades later. The behavioral changes required to put a ringing box in your house moved a lot slower than the tech itself.

The same happened with remote work. Skype was founded in 2003, but telling your co-worker, “Hey, can we just hop on a vid call instead of meeting in person ‘cause I don’t want to put on pants?” was founded only in 2020.

There’s no going back from the Zoom-i-fication of society

As a result of this new normal, Thompson makes 4 predictions:

• Supercommuting: Per Apartment List, rental prices for downtown metro areas are falling (while prices in nearby cities and suburbs are ticking up). Thompson expects this trend to continue.
• Leaving the coast: Superstar cities like SF and NYC have seen major out-migration during the pandemic. Municipal services in these cities rely on property taxes, sales taxes, and transit fees. If services lag due to lower revenues, more people will leave, meaning even less revenue, and so on.
• Rise of the rest: Superstar cities have priced out regular families. Cities in the Midwest (Cincinnati, Cleveland) and the Sun Belt (Phoenix, Austin, Nashville) offer more affordable — and larger — homes.
• All in the cloud: One survey from investor Kim-Mai Cutler found that 42% of founders she spoke to now favor a remote-first firm over a physical HQ (vs. 6% pre-pandemic).

Our take: There’s more than a remote chance that some of these predictions are right.