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The Old Economy and the New Economy

The Old Economy and the New Economy

August 21, 2019

My son and fiancé recently moved to Nashville, Tennessee into a large apartment building that was completed less than a year ago.  It’s next to a deserted, dilapidated slaughterhouse that is scheduled to be replaced with another apartment building.  Just down the street there are three other apartment complexes under construction.  Their building has a view of downtown Nashville, which is rife with more construction.  Many, if not most, will be apartments.

They moved from downtown Dallas, Texas where they lived in a recently constructed apartment building.  It was in an area that was full of either new apartment buildings, or old ones that were soon to be demolished and replaced with new ones.

My daughter and son-in-law lived in downtown Washington DC, in a relatively new building surrounded by apartment buildings.  When I went to visit, I noticed many new apartments under construction, especially near the Potomac River.  She had moved to DC from Charlotte, North Carolina, which was constantly replacing old warehouses with new buildings to be used as apartments.

We hear about the high cost of living in lots of these cities and others (San Francisco, Chicago, etc.), yet builders are constructing expensive new apartments at a furious pace.  Heck, even here in sleepy old St. Louis, the most significant construction projects like Ballpark Village are anchored by new apartment complexes.

I’m sensing a trend.

My question is... who are all these apartment-dwellers, and where are they working?

I was thinking about this in conjunction with our recent move into a new office space.  As a firm, we are experiencing tremendous growth.  We are as busy as ever, yet our new offices are 30% smaller in square footage than our old.  We are downsizing because we just don’t need as much office space with so much work done via mobile, laptop, and cloud storage.  We can meet with people anywhere and at any time; large offices are just a waste of resources.  It’s an amazing trend.

(Side note: I still need to hire another advisor to keep up with growth.  If you know somebody who might be a good candidate, tell them to contact me!)

Meanwhile, despite the economic prosperity we are having in the US, shopping malls are closing, factory buildings are repurposed, and older office space goes empty.  In their places are Top Golfs, coffee shops, paintball arenas, and 24-hour fitness centers.  Manufacturing output in our country seems to be doing ok, but I’m not seeing any factory buildings built anywhere near cities, and I doubt there are a lot of factory workers who are able to afford the rents in those urban apartments, anyway.  

The trends are less office and manufacturing space, and yet people are moving to urban areas in record amounts and paying big money for new, fancy apartments.  How?

I have a theory:  after lots of years of predictions, we are finally entering into an economy that is largely knowledge and technology-based.  Ten years ago, it was the random person you knew who “worked from home”. Maybe it was some retired “consultant” or “traveling salesperson”.  Now I think I could name 30 clients of mine who work from home full-time for companies both large and small, in traditional or new industries.  I’m guessing another 100 clients could do large portions of their jobs remotely as well.  Technological changes have erased the barrier between home and work in ways that mean many people can do what they need from wherever they need.

The people moving into these apartments are knowledge workers who work for companies that are everywhere and nowhere at the same time.  No longer bound by the need to be physically present to do their jobs, employees are free to live where they want without the hassles of commuting.  Of course, living in urban areas also has a benefit for those who don’t work from home as well because even if they do work in a regular office, the office is likely to be nearby and accessible to many forms of transportation.  This may be leading to revivals (or, pejoratively, “gentrification”) of urban cores.

This new knowledge-based workforce is not without a downside:  working from home can be lonely without actual human contact.  People who love the freedom and convenience of working from home miss being around other people.  This is why, in my opinion, these workers are driving demand for apartments in the cities with lots of amenities (coffee shops, workout facilities, pools, shopping) on site or within walking distance.  They might want to be around other people when the eat, play, and exercise to make up for the loneliness caused by working remotely.  It’s probably not true for everybody, but it seems to be a huge trend and is changing how we live, play, and vote.  Yes, it’s been happening for a while, but it seems to be accelerating with the good economy and technological changes.

What does this mean for us and for our kids?  Well, it’s probably true that education trumps all because the most educated and technologically adventurous of us will have the most choice when it comes to not just careers, but living circumstances as well.  If you have the ability to learn and don’t need to be physically present to do a job, you can live and work in a more flexible setting.  No trend is all positive, and there will be lots of negatives to the changes (further divide between urban and rural, educated and not, haves and have-nots), but the trend can’t be ignored.  It is happening.

It’s ironic:  the site of all of those construction cranes, an old-economy job, may be due to the new-economy technology.