BY Bruce Katz
Dec. 27, 2023
In War and Peace, Tolstoy famously observed that “Nobody was ready for the war which everyone expected.”
I was reminded of this quote when reviewing many of the newsletters published this year. As readers know, this column refers again and again to the wicked challenges that cities and metropolitan areas face during this disruptive post-pandemic period. (It’s difficult to say “post” when Covid seems to be raging again, but so be it).
The challenges we repeatedly focus on — the hollowing out of central business districts, the rapid reshoring of industry, the related, accelerated decarbonization of the economy — are far from hidden. They are, rather, daily fare in leading newspapers and magazines.
Despite that, it is hard to say that most cities and their networks are ready for — or responsive to — what is obviously happening and what is likely coming, for good or for bad.
Take downtowns, the driving force in the rebirth of U.S. cities over the past 25 years. That positive dynamic is now threatened as the rise of remote work drives detrimental, domino-like effects on commercial real estate, small businesses, transit ridership and municipal tax generation.
The latest news is sobering. A new National Bureau of Economic Research paper postulates that 14 percent of the $2.7 trillion commercial real estate loan market (and 44 percent of office loans) risk default. There will be no bounce back to the pre-Covid era; remote work is now a permanent feature rather than a cyclical aberration. As a result, cities need to move fast to diversify their downtowns economically, amplify their downtowns culturally, and remake their downtowns physically.
Several cities appear to be doing just that. Cleveland, for example, is using federal infrastructure funds to connect “the core to the shore” and make a formerly inaccessible industrial riverfront the centerpiece of a new urban fabric. Detroit is moving on multiple fronts to diversify uses and, similar to Cleveland, take full advantage of the downtown’s location along the Detroit River. A recent Economist article cited examples in Boston, Chicago, London and New York City of advanced research labs taking over spaces once occupied by office work. As the correspondent noted, “Evidently almost nobody is working from home — probably because they do not have access to bioreactors in their living room.”
These examples must become the norm, not the exception, if cities are to weather a commercial real estate comeuppance in 2024 and 2025. Reshoring and decarbonization offer other examples of new market realities. The scale and pace of these market dynamics are breathtaking, catalyzed by a firehose of federal grants, tax incentives, low-cost loans and, in the case of defense spending, direct procurement.
Ideally, cities and metropolitan areas would have received funding to plan the interplay between the assembly of land, the location of mega-factories, the support for small, local and diverse suppliers, the upskilling of workers, the engagement of research universities, the reconfiguration of logistics and energy infrastructure, the production of housing, the provision of childcare, and more. But no funding for industrial planning was forthcoming, unlike in 2009 when the Sustainable Communities Program helped communities connect land use, housing and transportation investments.
As with downtowns, some places are stepping up, both to seize the industrial opportunities and to ensure that the opportunities are part of a larger, coordinated strategy to drive inclusive and sustainable growth. Kudos to Columbus, OH, and Syracuse, NY for attracting Intel and Micron, respectively, and creating new platforms for multi-decade growth and prosperity. They show how the rapid reindustrialization of the U.S. economy is establishing a new industrial geography and a new set of metropolitan winners.
And kudos to St. Louis, MO for using the uptick in aerospace defense production to advance the regeneration of North St. Louis, one of the most racially segregated and disinvested neighborhoods in the country. The opening of a Boeing-backed Advanced Manufacturing Innovation Center in the heart of urban distress and disadvantage shows that re-industrialization is not just about 1,000-acre sites at the periphery of metropolitan areas. Central cities have a role and need to play it.
In many respects, the identification of first-mover cities and metropolitan areas makes the general point. The post-pandemic restructuring of the U.S. economy and core geographies like central business districts is happening fast. Cities and metropolitan areas, for the most part, still are playing out the last economy rather than adjusting to the one in formation. Unless this fundamentally changes, the result will be a slew of missed opportunities around business attraction and expansion and an abundance of externalities, the spatial mismatch between industrial work and workers being the most glaring one.
Let’s admit, first and foremost, that the pandemic and the constant onslaught of disturbing news has left many of us tired and distracted. The shaping of city and metropolitan economies is a heroic act and it is difficult to be a hero or heroine if you are emotionally spent.
Let’s also take into account that the degrading of the public sector over multiple decades has had a cumulative effect. The lack of adequate capacity and capabilities in cities, counties, suburban municipalities, rural towns and even states means that the fire hose of federal funding (which is torturously fragmented) often confounds rather than inspires. Applying for a grant and complying with (endless) federal requirements is a reach for most places. Integrating and coordinating planning across programs, jurisdictions and disciplines is often a bridge too far.
But the reasons for the unplanned metropolis are deeply rooted in our culture and structure.
The U.S. is large and decentralized, with power distributed across layers of government, multiple jurisdictions and sectors of society. Everyone is in charge; no one is in charge. This fragmentation can engender innovation and disruption. And it can be solved, but only if we get serious about, depending on the challenge, public/public partnerships, public/private partnerships or, in many cases, private/public partnerships.
This level of fragmentation is compounded by a philosophy that can only be described as anti-planning. “Invest First, Plan Later” seems to be the national motto. Or, as I once heard, “The U.S. view of planning is lunch.” Short-term thinking rather than long term action dominates.
There is no doubt that U.S. exceptionalism can be productive at times. But there is a messiness and sloppiness to how we are approaching the disruptions facing our downtowns and the opportunities emerging from the industrial/energy transition. We need to sharpen our act if we are to meet the national security concerns of the new global order and address the transnational threat of climate change.
For cities and metropolitan areas, this will mean strengthening those institutions and intermediaries (e.g., metropolitan business leadership groups, metropolitan planning organizations, councils of government, business improvement districts, innovation districts) that can move across sectors, jurisdictions and disciplines. These are the entities that can bring order out of chaos and cohesion out of fragmentation.
Like Tolstoy’s protagonists, our cities and metros know what’s coming. And frankly, they need to be more than ready. They need to be purposeful and intentional. That will be the central topic of next year.
Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University.
MORE FROM BRUCE KATZ
Ideas We Should Steal Festival
Real Estate Development for Good
Civic Health with Connor Barwin
Criminal Justice with Malcolm Jenkins