Is Working from Home Hurting Cities?


Companies in urban centers are working from home, but is it good for cities?

The pandemic has made working from home the de facto setup for many companies, but it’s a phase that’s likely to fade as the pandemic recedes and businesses re-experience the benefits of face-to-face interaction.

Heavy reliance on new forms of communication conflicts with millions of years of human evolution. Companies know this and it’s why they’ll continue to do business in offices located in urban centers. Yet, in the meantime, worker uncertainty could impact municipal credit ratings in the near to medium term, according to HilltopSecurities Head of Municipal Strategy and Credit Tom Kozlik.

Employers Embrace Remote Working
The freelancing platform Upwork surveyed 1,500 hiring managers before and during the pandemic and an analysis of their results largely trended in favor of remote working:

  • 56 percent felt the shift to remote work went better than expected
  • 40 percent felt that zero commute, fewer unnecessary meetings, and less in-office distraction were a net positive
  • 1/3 found that worker productivity increased
  • 61.9 percent say their workforce will be remote in the future

“We are beginning to see survey after survey that is leading some to believe that the workplace could have a much different complexion after the pandemic,” wrote Kozlik in a Sept. 25 commentary. “Supporters of the thesis seem to be arguing that this is evidence of a soon-to-be widespread shift in the workplace backdrop.”

Wall Street and C-Suite Chime In
Many large companies and investment banks are considering how working from home is impacting their overall productivity. The most vocal among them worry about losing the collaborative nature of an in-office environment.

“There’s no replacement for the benefits that can only be derived from face-to-face communication,” says Kozlik. “This is true in terms of fostering a corporate culture and collaborative interpersonal relationships.”

Here’s what the top brass has to say about the remote work experiment:

  • JPMorgan Chase CEO Jamie Dimon: “There's a huge value to working together, in terms of collaboration and creativity and training the younger people."
  • Black Rock Inc. CEO Larry Fink: “The most difficult issue for all of us is retention of a culture … Cultures were not meant to be done in a remote fashion.”
  • Apple CEO Tim Cook: “In all candor, it’s not like being together physically. And so I can’t wait for everybody to be able to come back into the office. I don’t believe that we’ll return to the way we were because we’ve found that there are some things that actually work really well virtually.”
  • Facebook Inc. CEO Mark Zuckerberg: “I think we’re going to be the most forward-leaning company on remote work at our scale, for sure, but we’re going to do this in a way that is measured, and thoughtful and responsible, and in phases over time.”
  • Simon and Schuster Publisher Dana Canedy: “We’re all grown-ups and we have adapted to these new work realities. That’s going to produce permanent changes in how we all work. I’m getting my work done, and so are my colleagues. I don’t have an issue with it.”

While many C-suite executives appear to be embracing remote work, there may be more hesitancy than meets the eye, according to Kozlik. Facebook gave employees the option to work from home until summer 2021. However, the company announced that employees who fled the Bay Area during the pandemic and fail to return by Jan. 21, 2021, could face a cost-of-living salary adjustment.

Tech companies have a history of backpedaling from remote work. In 2017, IBM abandoned its remote work experiment and Yahoo banned working from homein 2013.

How Will Remote Work Impact Municipal Ratings?
The current adoption of remote working policies is more of a reflection of pandemic fears than a belief that it contributes to success in business, according to Kozlik.

“On an individual basis, when the fear from COVID-19 subsides, workers will remember what decades of evidence have shown,” says Kozlik, referring to Edward Glaeser’s seminal work, The Triumph of the City.

“We think the basics from his book as it relates to the importance of face-to-face interaction and cities make a strong case for why in the medium and long term remote work will not likely continue to be used by successful companies,” Kozlik continued.

The corporate real estate implications of remote working could further complicate fiscal matters for state and local governments and other issuers. While workers will return to the office at some point, it’s not certain where and when that will happen.

“Short-term shifts in where workers are located are inevitable and there may even be the acceleration of trends already in progress due to technology,” says Kozlik. “Business will be conducted in offices, and cities will remain important. The uncertainty is more about how long it will take for workers to feel comfortable riding mass transit, being around concentrations of other humans, and thus returning to the office paradigm.”

The rating agencies are following how remote work could factor into near- to medium-term ratings. In July 2020, S&P Global wrote: “We expect that there could be longer term implications for the commercial and residential real estate market related to the recession … We will continue to analyze shifts in the property tax base as well as taxes generated by business and consumer demand.”

Learn More
For a more in-depth analysis of how remote work may impacting municipal ratings, read Kozlik’s recent municipal commentaries:


Follow Tom Kozlik on Twitter, @tomkozlik, or connect with him on LinkedIn.

The paper/commentary was prepared by Hilltop Securities (HTS). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS as of the date of the document and may differ from the views of other divisions/departments of affiliate Hilltop Securities Inc. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. This material has not been prepared in accordance with the guidelines or requirements to promote investment research, it is not a research report and is not intended as such. Sources available upon request.

Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS are wholly owned subsidiaries of Hilltop Holdings, Inc. (NYSE: HTH) located at 1201 Elm Street, Suite 3500, Dallas, Texas 75270, (214) 859-1800, 833-4HILLTOP

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