Urbanization in the Age of Pandemic | Episode 17

  January 13, 2021

Has social distancing changed the projected urbanization rate? As we enter 2021, signs from the housing market show that life hasn't slowed down; however, different decisions on where to live, work and travel patterns are being affected. What will the long-term effects be on vehicle miles traveled and urban metro regions of the country? We caught up with Jeff Wood, principal at The Overhead Wire, and dug deeper on the signs the housing and e-commerce market are displaying in spite of a global pandemic.

Transcript

John Eichberger: Jeff, how you doing, man?

Jeff Wood: I'm doing all right, I'm doing all right. How are you?

John Eichberger: I'm doing great. 2020 has been a strange dichotomy of experiences for everybody. For me, it's been great because I haven't been traveling at all. So I've actually been able to rediscover what living is supposed to be like when you're not on an airplane every day. So that's good.

Jeff Wood: Yeah, I hear you. I used to travel a bit more, but I guess we're all kind of grounded for the moment.

John Eichberger: Yeah, we'll see how long that lasts. One of the reasons we reached out to you was that I wanted to touch base with you. You joined us for one of our conferences a couple of years ago, we were talking about the trends of urbanization, urban development, and urban planning. I wanted to touch base, has anything changed? The experience we've had this year with social distancing and a recasting of how people interact and where they live. I know in Virginia, we've seen a massive increase in home sales as people try to get more space because they're at home so often they want to get away from their families. They're buying bigger houses to give that distance to themselves. But is that going to have an impact on the urbanization trends we've seen and how that's ultimately going to affect transportation? You watch all the news pretty closely. What are the trends you're seeing happening now?

Jeff Wood: Well it's interesting. I think we see Redfin actually just released a report yesterday that showed that drivable neighborhoods actually increased in value 15% while walkable neighborhoods is 11%. That increase was different from previous years, which I think was like 2% or something along those lines. So you're seeing a little bit of a rush to purchase property. Now people believe that it might not just be people moving out of the cities. It might be folks buying second homes and things like that. So that might be causing part of it. So there's just a big kerfuffle over what the actual end game will be because of the pandemic. And it's really interesting to watch because you see people digging in on their perspective side. So if you were an anti urbanist before, you're probably still anti urbanist and you're using the data to tell you exactly what you want to hear.

Jeff Wood: And if you're an urbanist, you probably are using the data to tell you what you're looking at as well. So it's interesting to see people fall on those lines with their preconceived notions, but at the same time, it is interesting to see what's happening in places here like San Francisco, where we are seeing something like the outdoor restaurants and things like that, that would have never happened before because the merchants were so freaked out about parking, but now they're freaked out about not having customers. And so if you give them the choice, they'll do the outdoor restaurants, which has been, in my neighborhood specifically, blowing up. Almost every place on the street on 24th street has its own little outdoor restaurant, a wooden build that they put together for 15, $20,000.

Jeff Wood: And what's frustrating now is that the state is closing down the outdoor dining. So I think some of folks are like, "Well you're putting these restrictions on us. What can we do? What do we have to do in order to stem the Coronavirus, but at the same time do the things we were doing before?" So back to your original question a little bit, I think we're still trending in the same direction. I think urbanization is still happening. I think that agglomeration effects are still really important to people in businesses, even though we're having Zoom calls.

Jeff Wood: I think that for some people, that will stay, probably not as much as it's happening now, 30, 40, 50% of professionals, but at the same time, you're still going to have those people who want to be in cities, want to be around other people. And there's been some really interesting pieces about that specifically. There was one in the financial times about young people and sex and how cities are always going to be needed for people to meet other people, even with apps and everything else. So I just think it's fascinating from that perspective. And I think that's what we're seeing.

John Eichberger: Yeah, when we just had it a couple of years ago, we were talking about the new urban developments and how we're trying to plan them, make them more livable, try to address some of the transportation issues, try to rediscover use areas that are dedicated to garages and can we possibly limit that? And now we see a big trend, I think, and I'm wondering if it's going to continue in terms of people. We have telecommuting. We know people are working from home, we're working from home. We just released a study that 37% of Americans could feasibly do their job from home. And if they did that one day a week, we'd actually reduce emissions by three to 5%, pretty big number for one day of work at home.

John Eichberger: But we're also seeing the corporations who have these big footprints in metropolitan areas rethink the need for a central location and leveraging the distribution of their workforce to possibly reduce the amount of money they're spending on real estate. I'm wondering is that going to change the whole dynamic of the urban setting? We think that's going to continue in, how does it affect our transportation planning for those areas?

Jeff Wood: Yeah, and I think for certain companies, I think that's going to be something that happens. And we saw this happening before the pandemic. Exxon moved from downtown Houston out to the Woodlands in a suburban landscape. We see other companies doing somewhat similar where they're pushing some of their satellite offices to other parts of the country, to Texas, from California to Idaho, places like that. They're going to different locations to, in some instances, be closer to where their customers are. But I think you'll also see a lot of companies still hold on to that urban location. And I think that that's partly because you see these agglomeration effects. Tony C, who just passed away, the former head of Zappos, was famous for putting together downtown Las Vegas, not the strip, but downtown. And thinking about what it means to have collisions, to have people connecting with each other.

Jeff Wood: And unfortunately, his experiment for himself is past. But I think that that still holds true to a certain extent that there's going to be a lot of people and heads of companies that want to continue that experiment to see how innovation happens, how agglomeration happens. There was a number of articles recently, I think maybe in the Guardian and some other places, that talked about how there's companies that are looking at productivity and the productivity for the first couple of months of the pandemic was sky high. People were working and they were getting stuff done, but then once the innovation waned, their productivity waned as well.

Jeff Wood: And so not being in an office together, not being able to go into somebody's room and tap somebody on the shoulder and say, "Hey, I have this thing that I'm thinking about." I think that's pushed back on that innovation and led to a little bit lower productivity. People can work from home, people can stay apart, but at the same time, it's not quite the same as much as you have chat and Slack and Zoom and all that stuff. I think there's still something to be said for people connecting with each other.

John Eichberger: I think you're right. I'm actually going to the office later this week to sit down with our staff leaders to plan what's going on next year. We've tried to do it over the computer and yeah, you can make progress, but there's nothing really to replace that, getting in a room with people and diving deep into the subject. And I think you're right. I think that's going to draw people back in, but I'm really curious to see what kind of level we're going to see that. We saw when it comes down to travel, COVID earlier this year dropped miles traveled by about 40, 45% from pre COVID days. Gasoline demand dropped about 50%, right around the same thing. And we know people aren't all going back to their offices yet, but by the end of September, VMT was back to within 10% of what it was before COVID. Gaston was back to about five, 10% of where it was before COVID. And so what I assume from that is people may not be driving to the office, but they're still driving. They're doing other things.

John Eichberger: Maybe they're going to the lake. Maybe they're going to the mountains, maybe they're doing more recreational stuff. But when you start thinking about that urban environment, one of the big strategies that we've been discussed in the last several years, how do we get people out of the personally owned vehicles, get them into something a little more efficient, a little more compact, reduce the number of vehicles on the road, become less car centric in our design elements. Is that transportation dynamic that we're seeing this year going to affect the urban cities going forward, and do we have to rethink our plan? I've seen a lot of data about people, their love affair with a personal vehicle has grown because it's a safe space. They don't necessarily want to get into mass transit. They don't want to get into public transit or even use shared services. So I'm wondering how long will that affect the linger and will it really undermine the ability to take the car out of the central framework of urban design?

Jeff Wood: I think that's going to be a fight over framing because what we found from research recently, especially from NYU and some other folks have been doing is that transit is not a disease vector for airborne diseases like the flu and other things. This report just came out a couple of weeks ago. And I think we've seen from COVID that in cities around the world, even, Tokyo, Milan, and other places that the pandemic really isn't facilitated by mass transit, even though it seems like being in close quarters would be something that led to people connecting and sharing something that we don't want to share. But I also see that the transportation trends are such that we don't have any space in cities. And I think I mentioned this at the conference, cities are growing to a certain extent to the point where we don't have space for all the Uber's, all of the package delivery that Donovan likes to use.

Jeff Wood: And all of the stuff that people traveling around in cities are accustomed to. And so with that lack of space comes a need to think of alternatives. And I think that we'll continue to see this kind of bifurcation. Like I said at the beginning, I think you're going to see the people that like cars and they appreciate their cars, they're going to stay in the cars. And I think the people that like to live in cities and like to be on transit and those types of things are going to be on transit. I think we're splitting in the way that we look at things. It was interesting to see the vaccinations happening in England over the last couple of days, and the woman who was first that people when asked what she's looking forward to when she gets able to go places again, she's like, "I'm looking forward to getting back on the bus."

Jeff Wood: So I think you're going to see some of that where there's preconceived notions and preconceived ideas of self reflected in your transportation choices. With that said, there's a situation where you're not going to be able to take transit to the beach in a lot of places, you're not going to be able to take transit to the mountains. And so for some people, that car is going to be always there, even if they are transit people. I have friends that are transit people that have their Subaru's so they can go to the mountains and it's something that it's really important. And for me, even, I miss being able to drive to the other side of the golden gate bridge and do day trips. Because I sold my car in 2010, but at the same time, it's just a trade off that we have for transportation.

John Eichberger: The data you site about Tokyo, Milan and public transit not being a source of infection. That may be fact, but we also know in this environment, facts, don't always influence people's minds, people choose the facts they want to use. And so I think there is a huge learning curve and an effort to be made, to get people back to a comfort level of using these transit options. We're going to have to do a lot of education. And try to break through that social media malaise that people are feeding into, they get all their news from Twitter and Facebook and everything else. They're not really paying attention to the facts. They're just listening to an echo chamber and that's going to be a challenge.

Jeff Wood: Yeah, and that's why at the beginning, I said, it's a battle of frames. I think that for the most part, the language that people use and the way that people, like you said are in their echo chambers, I think that's going to be a big part of how people come back from the pandemic and how fast we come back from the pandemic. I have no doubt that we'll be back at some point in the future. Now whether that's in 2022, late 2021, or 2025, it's going to be a function of how people deal with coming out of a year where their brains got mushed.

John Eichberger: Didn't you also mention in the studio that Donovan raised before we started recording about home delivery of goods and services and how we get packages to these. Clearly it's been a huge spike in home deliveries this year. And every time I place an order, almost all my Christmas shopping was done online because I don't have time to go out and I don't have to go from store to store to store. But every one service that I used said, "Hey, be aware because of the pandemic, deliveries could be delayed." I don't know if we're going to continue relying on e-commerce as much as we are now once we get back to whatever the new normal is going to be, but how do we start planning and how do we see the impact of these home delivery services on transportation, on fuel demand, on transit demand?

John Eichberger: If people are able to get things brought to them, are they going to need to go out as much? Or is there just a freedom they get from not having to go shopping from store to store. It just shows up, I have it, now I can go do my own thing. Are you seeing any type of indications of what impact that service environment is going to have on travel as a whole?

Jeff Wood: Well not on travel necessarily. That's not something I've been paying as much attention to, but I have noticed that Amazon and other places are actually driving up the cost of-in town warehousing. And so you see this increase in value that wasn't there for the last several years, you've seen industrial zones fade away in cities. They're getting replaced by housing and other things. But now you see a rush between these companies to start to figure out how to purchase local warehousing so they can get closer to their customers, which I think is a really fascinating thing. There's also the other... A couple of years ago, we had the Amazon sweepstakes where the headquarters of this company, this large behemoth the company was being shopped around to different cities.

Jeff Wood: And then you saw the pushback from that. And I think that pushback is actually bleeding into other parts of the business. So this, actually two days ago, some lawmakers in New York state wanted to float a $3 per package tax to pay for mass transit because of the pandemic because we're losing revenue from people not riding at the moment. And so I think as we get closer to packages becoming more ubiquitous, which they're starting to, I think this has actually accelerated the process of people going towards that new normal, we're going to start to see some pushback as well from lawmakers, from folks that see this as moving the transportation world in a certain direction that they don't want to see. So those are two interesting points to that.

Jeff Wood: From a transportation perspective, there is some value in delivering packages together versus everybody going to the store, you can trade VMTs that way in terms of are you going to get it delivered or is everybody going to drive to the store to get what they're looking for? For me, I think I'm increasing BMTs when I take a package because I can walk a quarter mile to the grocery store or on my street where there's things that can get delivered. So I think for every neighborhood, it's going to be a little bit of a trade off in terms of how much traffic you're causing, how much transportation is changing. But I think you will see a change. I think, one of the folks that I've had on my podcast recently talked about autonomous deliveries, which is way different than delivering people.

Jeff Wood: So delivering goods versus delivering people. And one thing that they're seeing and they believe is that the shift was slowly happening and then the pandemic made it happen faster. And so you're going to start to see more people take more goods at home. And like you said, I think it's going to actually change the dynamics of people's time, just like the pandemic has changed the dynamics of people's time. I'm surprised that people are complaining about the amount of time or the boredom of staying in because I feel like I'm busier than I was before, but I think for a lot of people, the ability to not have to go shopping, and especially if you have kids, you have all these chores and things that you have to do. The ability to get things delivered is likely going to make your life easier. And for us singletons and for the people like me, that also like to go to the grocery store to pick my avocados, that option is still going to be there, but you're going to see this shift and the shift has been aided by the pandemic.

John Eichberger: Yeah, I think you raised a lot of questions that we have too, and I really want to understand the whole VMT shift. So we're not driving from store to store to store, but we're having more delivery vehicles, heavier vehicles come deliver our stuff. What does that do to the overall environment, to fuel demand, energy demand? I think it helps accelerate the transition to more efficient vehicles because these fleets can establish an ROI that makes a lot more sense than a personally owned vehicle can. So I think you're going to see that transition. On the autonomous delivery thing, I have this vision and it kind of ties into what's on your shirt there. I can see a big truck pull up to the edge of my neighborhood, open up the doors and all these droids go scattering through the neighborhood, dropping off packages, come back in, then they go to another neighborhood.

John Eichberger: And I don't envision seeing these vehicles driving down the main road by themselves, but I can totally see these large vans with individual droids delivering packages and the efficiency, the energy savings, the cost, all of that would improve. You also mentioned the in-town warehousing. We have these big shopping malls that when we were teenagers and preteens, we used to hang out at, they're ghost towns. The stores are closing down, the anchor tenants are leaving. And there's a mall here in Northern Virginia that I know they were looking at converting an entire section to a warehouse for these home deliveries. And so I see that trend. I don't see it going away. I think it'll probably mellow out a little bit once we are unlocked and able to go to the stores as we choose. But I still think it's going to stick around for a long time because it is such a freedom enabler in terms of timescale.

Jeff Wood: And I also hope that if we do transition a little bit to more home deliveries, that some of the storefronts that are in our neighborhoods and in our communities start to transition to something and be more available for more innovative things. So there's actually a store, a half block away from me that I've always dreamed of opening an art studio or a podcast studio or just even having a space where people can gather, it's a cool nifty little space. And the rent on it is like $8,000 a month or something ridiculous. I'm in San Francisco, and at one time there was a post for a dispensary that was potentially going to be there. So there's big money items that could possibly come in. But I see these storefronts as the possibility for something innovative.

Jeff Wood: So the transition, we might see it as something that's scary to deliveries and things like that. But at the same time, it opens doors that you might not have thought of it opening before because of the innovation that happens from that. So I'm actually... As much as I'm not quite sure about the delivery futures with our autonomous droid overlords, I do see that there's some value in some of that from these stores and the possibilities that they could be something else that's helpful for the neighborhood or even just something that makes our cities weird again.

John Eichberger: I think a lot of businesses are very worried. They're very nervous, understandably. Well what I'm seeing in terms of the people and the behavior and what's happening is if you're not commuting to work, they have more time to do other things. They're still putting miles on their car, they're still consuming energy, they're still doing things, but they might be doing things that are actually benefiting their family structure. They might be benefiting themselves, bringing themselves more joy, making them a little more satisfied with their conditions in life instead of being hectically rushing to the office all the time.

John Eichberger: I can see the same thing with home delivery where, okay, I don't have to go spend an hour and a half at the store, I can just go online, have it delivered to me. And while I'm waiting for it to be delivered, I'm going to go to one of those neighborhood storefronts that are offering something new. So I agree with you. I think we have an opportunity here. And we've been saying internally is 2020 was a reset year for a lot of things. We don't have to do what we've always done. We can invent something new in every aspect of our lives. And I am excited to see what's going on materialize from it.

Jeff Wood: Yeah, yeah. And you see that the shifts happening in a lot of different places. What was it yesterday or two days ago, England opened its first all electric fueling station. And it's interesting to see what comes from that. I don't like the footprint because it looks really sprawly for me. But at the same time, what happens to all the fueling stations? And you've probably thought about this, but what happens to all the fueling stations if gasoline ends up going away over the next 30, 40 years? It's really interesting to think of convenience stores and the way that they serve communities in certain ways, the same thing as a bodega here in San Francisco, around the corner from me. And so you're seeing that shift and I think that the land uses that result will be really fascinating to see what changes.

John Eichberger: Yeah, and I think the biggest opportunity here is for those who are looking at it as an opportunity, those who are just saying, "Oh woe is me. Oh no, what's going to happen?" Probably we can predict what's going to happen. But those who are saying, "Okay, I need to reinvent myself. I need to reinvent my go to market strategy. I need to take advantage of any opportunity I can." Those are the ones that are going to survive going forward. So like I said, I'm excited to see what's going to come on the other side of this. I'm hoping the other side is quick. Not that I want to start traveling a lot again, bu man I really want to a live concert so bad. Just counting down the days.

Jeff Wood: Yeah, yeah. And I think some of those businesses also, the good ones are good ones no matter what. On this street over here, we have a lot of businesses that are thriving, even during the pandemic. And so I think that a bakery here, they're having lines out the door because people really wanted fresh bread and baked goods that they maybe could do themselves, but also just wanted something of comfort.

John Eichberger: There was a time you couldn't buy yeast.

Jeff Wood: I know, right? Yeah. I have a 50 pound bag of flour in my house now. So I was part of the problem maybe. But yeah, I just think that there's going to be innovations coming down the line and I'm really excited to see what happens.

John Eichberger: Well John, thanks for taking the time. I appreciate you joining us on Carpool Chats, and let's stay in touch.

Jeff Wood: Yeah, thanks for having me, John.

John Eichberger: We'll talk to you soon.

Jeff Wood: All right, bye.