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It is a curious moment for small businesses in America. More than three years after small businesses were a key pillar of the initial response to COVID-19, small businesses are now grappling with third and fourth order consequences from the pandemic. Supply chain challenges and labor market issues remain. Inflation, while easing, remains high. And today’s elevated interest rates meant to stem inflation have brought about a credit crunch and increased borrowing costs. In venture capital markets, we are witnessing a pullback in activity.

As readers of this newsletter know, my attention has recently turned to the profound macro forces that are reshaping our nation and the world. As an urbanist, I am interested in the interplay between the macro and the metro and the ways in which large, disruptive transnational forces (e.g., rising tensions with China, the existential threat of climate change, the accelerated pace of technological advances, the dissembling norms of democracy) come to ground and affect the shape of communities and the lives of people.

For the past 30 years, with the fall of the Berlin Wall and the dissolution of the Soviet Union, the notion of a “peace dividend” took hold in the United States.  To use an old metaphor, less funding for guns meant more resources for butter.

As CIA Director William Burns asserted in a speech earlier this summer (DCIA William Burns Remarks – Ditchley 59th Annual Lecture), we are living through a rare “plastic moment” in history, one which is fundamentally remaking assumptions and arrangements that have been settled for decades.

Note: This article was originally posted on September 12th on the RealClear Pennsylvania website (How Pennsylvania Fares Amid the U.S. Industrial Transition | RealClearPennsylvania)

By all accounts, the post-pandemic period in the U.S. is characterized by a remarkable resurgence in advanced manufacturing—a response to such challenges as rising geopolitical tensions, the climate crisis, and supply-chain vulnerabilities. This transformation, which we have termed the “industrial transition,” is being catalyzed by increased federal spending—notably, via the Inflation Reduction Act (IRA) and the CHIPS and Science Act. Both acts confront these disparate threats by focusing on two key objectives: reshoring production and accelerating decarbonization.

America’s rental market has changed in many ways. Over the last 30 years, we’ve seen an increase in the number of landlords. We now have different types of landlords: larger landlords, corporate landlords, and laptop landlords. What was formerly a parochial, local operation has changed into a more professionalized, technology-driven business model. These multitudinous changes have coincided with each other, such that people often talk about corporate landlords and institutional investors as one-and-the-same. Yet these interrelated changes are distinct, and require us to disentangle them to understand why they pose a problem for America’s renters and America’s cities.

As the post pandemic economy takes shape, one thing is certain. The structural impact of remote work dramatically undermines central business districts that over-emphasize traditional office work.  Historically, US office vacancy rates have hovered near 13%. As groups like CommercialEdge and Cushman & Wakefield have reported, office vacancy rates today are nearly 17%, with San Francisco at 20% and Houston above 23%. According to Brookings Institution estimates, office utilization is still less than 50% across major downtowns, indicating further headwinds for cities and landlords. This change also hits city coffers, as lower utilization results in lower office building valuations and therefore lower tax revenue. Estimates vary on the magnitude of the effect on city revenue: NYC’s comptroller estimated a decline of up to $1.1B annually or 1.4% of city tax revenues; places like Atlanta are likely to be affected at a far larger scale given their heavy reliance on commercial property taxes.  From there, the troubles compound: with fewer people coming downtown during office hours, the dominoes are already starting to fall, triggering second order effects on small business performance and transit ridership.

Over the past several years, this platform has returned multiple times to a geography found in cities of all sizes across the country – the neighborhood commercial corridor. With many others, we documented the harsh effects of the pandemic on neighborhood serving and locally owned businesses and offered practical recommendations for local stakeholders and state policymakers alike. To the greatest extent practicable, we have tried to be grounded and granular: using Investment Playbooks to identify concrete and fundable projects that can drive a burst of inclusive growth and entrepreneurship in real places, most recently 52nd Street in West Philadelphia.

One of my most rewarding activities this year is to serve as a member of the UK Urban Futures Commission.

On June 13, the Port of Greater Cincinnati Development Authority (the Port) launched the $100 million Cincinnati Jobs Bond. With the proceeds of the bond, the Port aims to acquire, remediate, and prepare manufacturing sites in two distressed areas of the city.

As the country witnesses a boom in manufacturing, Cincinnati and the Port aim to show how cities can participate in the new industrial resurgence. If successful, it provides a replicable model that can be scaled across similar legacy industrial cities.