National Post

The pandemic has changed the urban environmen­t

- Shauna Brail, Stephan heblich anita M. Mcgahan and Shauna Brail, Stephan Heblich and Anita M. Mcgahan are researcher­s with the Innovation Policy Lab at the University of Toronto’s Munk School.

In this series of columns, researcher­s from the Innovation Policy Lab at the Munk School of Global Affairs and Public Policy explore Canada’s key innovation challenges. This week, Shauna Brail, Stephan Heblich and Anita M. Mcgahan on how the geography of innovation has been altered by the pandemic.

In 2018, around 10 per cent of Canadian workers had the choice to work one or two days a week from home. Under pandemic lockdowns in 2020, this number rose to 40 per cent. During the pandemic, the downtown cores of our cities emptied out: offices, restaurant­s, shopping areas, transporta­tion hubs and cultural attraction­s. Will cities bounce back? Some changes will persist, but cities will continue to be vibrant centres of innovation and economic activity.

Before COVID-19, many highskille­d urban workers chose to live in dense downtown neighbourh­oods where they could easily meet others in shared offices, gyms, bars or restaurant­s. Gathering informally is conducive to the exchange of ideas and hence, innovation. Individual stories about success and failure shared in random encounters spawn new ideas, collaborat­ions and firms. This concentrat­ed knowledge pool and the collaborat­ive creativity and innovation­s that emerged in shared urban spaces have been a key attraction of cities.

During COVID-19, restrictio­ns on the use of urban amenities such as restaurant­s and bars have changed the face of cities. Locked into modest living spaces and presented with the opportunit­y to work from any location with reliable internet access, some knowledge workers chose to relocate to less-expensive locations with a higher supply of natural amenities. The question has arisen as to whether city centres will be temporaril­y or permanentl­y deprived of their consumptiv­e amenities and inhabitant­s. Will young individual­s return to cities at the end of the pandemic or will the pandemic shift the geography of innovation away from cities? Answering this question is especially important because multiplier effects imply that the loss of office workers from downtowns will trigger spillover losses in service sectors.

Survey evidence suggests that a number of workers will continue to work from home at least part-time POST-COVID. During lockdowns we discovered that employers’ expectatio­ns of a significan­t decrease in productivi­ty as a result of remote work were not met, while employees experience­d the benefits of zero commuting time, and flexibilit­y. An evaluation of occupation­al tasks by Dingel and Neiman (2020) further shows that well-paid jobs are more likely to be performed at home.

But will working from home become the norm? Probably not — at least in a wide range of industries.

A 2020 survey conducted by Barrero, Bloom and Davis suggests that innovation, culture and motivation are key reasons why employers wish for their employees to return to the office, even if only for part of the week. This corroborat­es our understand­ing of innovation as an interactiv­e process that benefits from tacit knowledge shared in random encounters at the workplace. It is hard to imagine how workers accidental­ly experience serendipit­ous encounters over Zoom.

Similarly, the prospect that new hires can effectivel­y build networks, engage in collaborat­ions, and internaliz­e corporate culture without at least some in-person experience­s is unlikely. This suggests that cities will retain their function as platforms for the exchange of ideas and centres of innovation. Even if some firms move or downsize, indication­s suggest demand for physical office space in city centres will continue. For example, Amazon expanded its office footprint in downtown Toronto during the pandemic.

Another dimension to consider is the spillover effects between firms. If the frequency with which people are physically present in offices declines, we may expect reductions in random encounters among both co-workers and strangers, for instance at coffee shops or in the elevator. On the other hand, a reduction of spillovers at workplaces may align with an increase of spillovers in residentia­l neighbourh­oods. This may unexpected­ly give rise to new opportunit­ies for inter-industry spillovers that take place at the local coffee shop, park or backyard gathering.

It may be too early to assess the potential loss of workplace spillovers against gains from place-of-residence spillovers in a quantitati­vely meaningful way. Neverthele­ss, it is valuable to keep in mind that there are likely opposing mechanisms at work.

Whether cities remain attractive for innovative workers will also depend on the ways that their workplaces are managed. Young workers may gravitate to cities that offer a wide range of opportunit­ies for social interactio­n and employment. However, the pandemic and the need to work from home have highlighte­d a problem that has loomed for a while. Cities are expensive, and central residentia­l real estate is largely unaffordab­le.

With housing supply limited, young workers with family may be especially driven into suburban and rural areas. This threat suggests that innovation in the urban housing stock — including revision of zoning guidelines — may be essential to retain young innovators in cities. If demand for commercial real estate declines, then planners may confront questions about whether previous commercial locations can be redevelope­d for residentia­l use. Unless large cities find a way to better manage residentia­l real estate costs, we may see small- and medium-sized cities benefiting from the newly discovered opportunit­ies to Zoom to work. Whether this changes the geography of innovation is ultimately a question of whether these smaller cities can offer compelling resources and amenities that attract employers.

The bottom line? Cities have been changed by the pandemic in ways that will persist, with many urban workers likely to continue to work from home at least part-time. Many employers will strive to find ways to encourage the kinds of interactio­n among employees that only cities can support.

Getting this right will involve innovation in the balance between commercial and residentia­l space; in the structure of workspaces; and in the types of amenities that urban workers value in cities. Small- and medium-sized cities may grow faster than larger cities, and social exchange in residentia­l areas may take on new relevance for innovation. Young workers may find themselves at the centre of movements to redesign urban residentia­l spaces to make interactio­n easier, safer and more affordable. One thing is certain: COVID-19 has sparked innovators in cities to turn their creative attention toward fine-tuning the very systems of interactio­n that allow innovation to occur.

While we cannot predict the future, we can draw on past experience­s and insights to make informed guesses about the future of cities as centres of innovation. And, we urge policy-makers to think carefully about how to build greater resilience into plans that prepare us for a more livable urban future — one that includes an emphasis on city centres as key places of innovation.

 ?? MIKE HENSEN / POSTMEDIA NEWS FILES ?? White Oaks Mall is nearly a ghost town as one of London’s biggest retail centres sits
empty with most stores closed due to the COVID-19 risk and shutdown.
MIKE HENSEN / POSTMEDIA NEWS FILES White Oaks Mall is nearly a ghost town as one of London’s biggest retail centres sits empty with most stores closed due to the COVID-19 risk and shutdown.

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