DISCLAIMER: This article represents my personal views and not those of my employer or any affiliated organizations.
What will happen to cities?
In the wake of corona, New Yorkers and other city dwellers made the realization that “Hey, maybe I don’t need to be at the center of the knowable universe!”. They decided to venture out into what they once deemed “flyover states”. Many remember when Brooklyn was perceived as “unlivable”, only to be brought to the top of hype in the 2000’s. New York City has suffered many “deaths” over time – The 1977 blackout, the 1987 recession, 9/11, the Great Recession, Hurricane Sandy… take your pick. Depending who you ask, New York City has come back from the dead so many times it’s not worth counting. I’m not here to talk about that.
Major metropolitan areas will still exist in a post-virus world. They will, however, be changed significantly. Cities will be less centralized, a trend that has been going on for decades. They will not just have to welcome a global workforce that wants to move there, but will be subject to that workforce’s demands. Physical place will take little importance to how business is done. I wrote an article on this migration earlier this year. Many will leave metro areas entirely, in a trend we could call The Great Dispersal.
The “3 R’s” (restaurant, brick-and-mortar retail, and commercial real estate) industries have taken a tremendous hit during the virus:
As of September 2020, 100,000 restaurants closed since the start of the virus.
Chain retail stores shuttered 520 store units in Manhattan alone.
It’s highly unlikely big cities will continue with their current state: Sidewalk tent restaurants outside of actual restaurants, retail stores acting as proxies for e-commerce, and giant skyscrapers sitting empty.
Where Do We Go From Here?
Restaurants
For the immediate future, we will have to find a way to sustainably accommodate dining. It should be more comfortable, not outside, and enforce compliance. This could involve the use of “lampshade” pods which block transmission of droplets, do not require the user to wear anything, and don’t interrupt the dining experience.
Ghost kitchens which offer no in-person counter and only receive takeout orders have become popular. They also cut down on front-of-house overhead for restaurants’ famously razor-thin margins. This may mean that workers get their food from a restaurant, and eat it somewhere else – Such as a park, or other socially distanced environment.
Retail
Brick-and-mortar stores may begin to embrace their function as carry-out centers. Retail stores, especially big box retailers, are already functioning as reserve stock rooms for their e-commerce properties. While most entrances are automatic (foot pedals could help), many consumers are uncomfortable with having to grab products that other customers touch.
We could see checkouts functioning much like layaway counters to eliminate this. Employees bring items to you, and there is little need for the aesthetic gleam of restocking, store displays and shelf-facing.
Real Estate
As office buildings in major metros sit empty, many are proposing a conversion to mixed-use functions, living spaces and other purposes. I witness this in my neighborhood of the Financial District, Manhattan – Where old bank towers were successfully converted to high-rise apartments. NY Governor Cuomo recently reviewed a proposal to do exactly that in Midtown Manhattan.
Suburban low-rise offices could turn into hospitals or living spaces as well. These residential conversions could finally start to fill the need for affordable housing. If you’re from New York, this may be shocking. Nobody expected this much housing inventory to open up, when we constantly hear about housing lotteries and lack of space.
Conclusion
The virus may last a long time. We’ve seen in 2020 that economies will not stay locked down forever, and will adapt. We could see a post-virus transition sooner than we think. There is opportunity in crisis. The world will go on. As with all crises, this too will end.
DISCLAIMER: This article represents my personal views and not those of my employer or any affiliated organizations.
A 2012 report from the United States Census put the population of the Midwest at 65,377,684 people. As of 2019, the U.S. population is projected at 328.2 Million. If we go by that figure, the Midwest represents at least 20% of the U.S. population. So why are we so uneducated about it and its populace?
This summer, I will have been on a road trip through many states in the Midwest: Nebraska, Missouri, Iowa, Illinois, Wisconsin, Indiana, Ohio. Many events have unfolded around Minneapolis, Minnesota the past few months. As of August 17th, 2020, Milwaukee, Wisconsin played host to the 2020 Democratic National Committee – The city where I was born. But due to the virus crisis and other circumstances, Milwaukee has largely been left in the dust.
When you think of the Midwest, it probably conjures up familiar images. Wide open fields. Little population. Few jobs. Low diversity.
That may be true of some parts, but that’s largely not representative of the cities. We’ve had intense waves of migration both from other U.S. regions and internationally. We host refugee programs and international students from around the world, who permanently resettle in the Midwest. For instance, Minnesota and Wisconsin play host to large Muslim and Hmong communities, among many others. Midwest cities have the same varied demographics of any major city. This map hints at just how diverse our country is.
“Many Rust Belt cities have minority populations that statistically outpace those in other parts of the country. The largest per capita Muslim population in the United States is here, in Dearborn, Michigan. With so much emphasis placed on the manufacturing sector, many overlook the largest employers in the region: hospitals, retailers, and institutions of higher education. Of the handful of cities in the United States that support an Orthodox Jewish population, many are in the Rust Belt. A century ago, the region’s cities were often populated primarily by non-native English speakers. For example, in 1900, over 75% of the residents of Cleveland, Ohio, were foreign-born or first-generation immigrants.”
When hearing about the Midwest, you’ve probably seen an image like the one above in Detroit. Most of us have heard the story. The Midwest was the jumping off point for the drive westward, during the “Gold Rush” and the “Oregon Trail”. Industry prospered during the Industrial Revolution, and gave way to a manufacturing boom up to the 1960’s, when everything went bust. Michael Moore’s “Roger and Me“, coverage of Flint, Michigan‘s water crisis, and reports of Chicago’s crime rate have chronicled this ad nauseam. Now write that image out of your head.
There’s more to the region than that in 2020, even if there’s plenty of truth to the “Rust Belt” story. While the factory boom of the 1950’s gave way to population loss in the 1960’s – Those factories are being repurposed and reused.
The documentary “American Factory” on Netflix is a great case study in this. It chronicles the purchase by a Chinese company of an old GM plant, which they then staff with both American workers from Ohio, and Chinese workers from their headquarters. It’s not all roses though, as the two cultures have heated dialogues and even a union strike. Yet, both of each groups’ humanity shines through. In Wisconsin, we almost saw a similar scenario with Foxconn opening a plant there, attracted by tax incentives. However, closing the deal proved difficult, and it eventually didn’t happen.
Maybe the most telling tale of the Midwest economy, though certainly not the only one, is J.D. Vance’s “ Hillbilly Elegy “. In this autobiography, Vance describes his journey from abject poverty in Kentucky and Middletown, Ohio to graduating from Yale. He talks about the difficulty of adapting from a humble, yet heart-wrenching childhood upbringing to the highbrow cultural motifs of the Ivy Leagues. A childhood plagued by poverty, drug abuse and despair amongst his community, and a sense of being “stuck” where he was.
Though a first generation collegiate, going to college was looked down upon. He had to change the way he talked, how he thought about money, even his table manners. Vance knows so many people on the bottom rungs of social advancement undergo this struggle to assimilate to “professionalism” while maintaining the humbleness or scars of their upbringing. Yet, he’s very level-headed in his viewpoints on helping more people follow the path he did.
Now, audiences of Midwesterners and East Coasters alike listen to his bottom-to-top story. Vance recently founded a Venture Capital fund to literally invest in Midwest businesses. He also became an advisor to Rise of the Rest Seed Funds, which “invests in passionate entrepreneurs that are based outside of Silicon Valley, Boston, and New York City.”
Relocation of Infrastructure
There are also many Midwest investor groups specifically focusing on Black, Latinx, Indigenous businesses. The Midwest Investors Diversity Initiative, “ a coalition of investors, is dedicated to increasing racial, ethnic, and gender diversity on corporate boards of companies headquartered in Midwestern states”. Black Midwest Initiative is a “committed to advocating for the lives of people of African descent as they are situated throughout the Midwest and Rust Belt regions of the United States”. The Illinois Hispanic Chamber of Commerce, “connecting the vibrant Hispanic Business Community of Illinois”. It hosts LatinX Incubator, which seeks to grow the pipeline of LatinX entrepreneurs contributing to the Chicago innovation economy.
Are We Talking about the Positives?
Cost of Living
This video snippet, “Why government agencies should move from D.C. to the Midwest” makes a very clear case. The once robust infrastructure in Rust Belt cities saw massive mid-century population losses once big companies shut down or moved away. These cities are built to be twice as big as they are. They have international airports, public transit, a well-built highway system, even sports teams and performing arts centers. If these government organizations were to move there, they would lower their overhead, gain access to large talent pools, and bring down cost of living in their home cities on the East Coast.
Smart People
With COVID-19 changing the way people work and live forever, expensive coastal cities have lost their sheen. Midwestern cities represent the perfect foundation for remote work. with less expensive homes, conveniently located resources, and not nearly as much urban congestion. Unlike the Great Recession, where people including myself moved to big cities like New York — We may see the opposite happening post-COVID. Let’s call it the Great Dispersal.
There has been all kinds of innovative new businesses opening around the Midwest. One example: Sherman Phoenix blossomed in Milwaukee’s Sherman Park neighborhood after 2016 civil unrest over a fatal police shooting that rocked the community. The space reclaims a former BMO Harris bank damaged in the unrest. It now hosts 27 Black-owned businesses, community events, and supports transforming shuttered buildings to functional spaces.
Remote Work
The Midwest has some of the top universities in the country. We are historically renowned for our educational institutions. Northwestern, Notre Dame, and the Big 10 (University of Chicago, Purdue University, Michigan State University, University of Wisconsin — Madison and others). While physical location may not be as important in the new paradigm, having many well-educated people clustered in one area is. And while the Midwest has lacked the high-flying jobs of the coasts, many aspects of collegiate jobs are now global.
There’s a cluster of very smart people looking for more opportunities. Some of them have relocated to the coasts, like myself, going up against the cadre of elite schools and finding themselves up against stiff competition and generational pedigrees. However, many have stayed in the area, and helped it blossom. Both of these groups are just looking for meaningful investment in their ideas.
How Can You Help?
One interesting highlight of this was the documentary Generation Startup. The film profiles 6 recent graduates as they undergo the challenge of creating startups in Detroit, Michigan. I attended the screening 2 years ago, and met all these bright young people. While occurring pre-COVID, it shows how much easier it is to be an entrepreneur when you’re not paying most of your income for an apartment in NYC or San Francisco. It also enables entrepreneurship from economically challenged people, not requiring the nest egg that big cities would. According to Crunchbase, Midwest startup exits generate 5.17x the median multiple vs. other regions.
In the time of COVID, remote work has become the norm, for the foreseeable future. Many companies have realized substantial cost savings with their staff working remotely — No need to stock office kitchens, lowered electricity usage, and in some cases, they’ve let their office leases expire, becoming a completely virtual workforce. There’s no longer a need for “location bias” when it comes to work that can be done on a computer. And with distributed workforces comes service economy jobs and more.
So, Milwaukee was good enough for the DNC. The Midwest was good enough to hold America’s 3rd most populous city. Midtown Manhattan is a ghost town.
Remote work is here to stay.
The “Great Dispersal“ is spreading professionals around the country.
Are you ready to hire a Midwesterner?
Are you ready to relocate your office or home to the Midwest?
