Pandemic Journal (# 33): More Thoughts on the New Normal

Victor Davis Hanson, the Martin and Lile Anderson Senior Fellow at the Hoover Institution at Stanford University and an avowed Trump supporter, [1] has commented on whether changes we already are seeing in the U.S. reaction to the COVVID-19 Pandemic will be part of the new normal after we hopefully survive that pandemic. First, we will look at Hanson’s commentary, and then examine a Minneapolis perspective.

Hanson’s Commentary[2]

Initially Hanson notes, “Rents, home prices and office occupancy rates in major cities, especially on the two coasts, are dropping fast. Techies and young professionals have discovered that they can work from home without paying sky-high housing costs in order to be close to the office.”

Moreover, “Those more fortunate wonder why they should get bogged down with commutes and urban traffic — or navigate city sidewalks amid homelessness, crime, racial tensions and urban unrest — when they can make as much money while staying distant in quieter landscapes. Some react by moving to quieter, low-tax states such as Idaho, Tennessee or Utah. Others flee New York City or the Bay Area/Silicon Valley corridor to upstate New York or California’s Central Valley. Who would have ever believed that housing prices in picturesque San Francisco would be falling while housing prices in pedestrian Sacramento and Fresno are soaring?”

“Worries about COVID-19 in high-density cities, and unreliable city services add to the unhappiness. Residents want less dependence on mass transit and elevator living. Constant human contact is seen more as risky than desirous.” In addition, “gun sales are at record highs. When some cities take steps to defund police and some soften bail laws, citizens quietly go to the local gun store and stock up on ammunition. Many of the people who have never before owned firearms are no longer clamoring for gun control. A ‘man’s home’ is now becoming his armed castle.”

“As a general rule, any business or activity that does not bother, judge or lecture Americans and instead allows them to work or relax in peace is preferred. That may explain why Zoom and Skype use is soaring while TV ratings for the woke NBA and NFL are down.”

“Why are Amazon and Walmart booming while smaller businesses are going broke? Largely because home delivery better serves those who are barricaded at home, terrified both of the virus and government reaction to it. Family businesses [on the other hand] are not vertically integrated. They have few cash reserves and no special insider exemptions from government officials. How ironic that in our quest to become safe and in control of our own destinies, we empower the anonymity of huge conglomerates and erode the viability of reliable, service-friendly, mom-and-pop stores.”

“For the first time in their careers, many teachers and professors are careful not to go off-topic and rant to their high school and college students. Their video streams are not only seen by captive classroom audiences but occasionally peeked in on by the parents and taxpayers who pay their salaries.”

“This is the first autumn in memory that a huge percentage of college students are staying home. And no one is sure of the ensuing consequences. Will students revolt over borrowing money simply to watch lectures on their basement computers? Will they be less likely to vote in November when they are isolated at home, rather than congregating on campus near polling places and subject to constant peer pressures to vote — and to do so in predictable ways?”

“With college revenues dropping, will ambitious promises to hire more diversity administrators, build more self-segregated racial theme houses and increase campus social services be seen as just more costly overhead that shorts classroom teaching?”

“During the pandemic, government has become more intrusive and yet seemingly more impotent and incompetent. Pick a month and some government official issues yet more contradictory orders on mask wearing, social distancing and lockdowns — all to be soon reversed. Taxes stayed high and yet urban services got worse. Increasingly, American city dwellers don’t always count on the power going on when they flip the switch, or the bus or train always showing up, or the police always answering 911 calls.”

Hanson concludes, “We still do not know the full consequences of these radical changes in American life, especially whether they will continue after the COVID-19 virus abates and quarantines end. The cultural currents are often contradictory. They defy easy political analysis and seem at times counterintuitive.”

“But there is one historical constant. When institutions and politicians cannot accommodate radically changed circumstances, people will no longer value institutions and politicians. In their place, citizens will seek to ensure their own livelihoods, leisure and safety in ways that are more reliable and affordable — with their circumstances in their own hands rather than in those of distant others.”

“And their adjustments won’t always be calm or polite.”

Comments

I agree with Hanson that “We still do not know the full consequences of these radical changes in American life, especially whether they will continue after the COVID-19 virus abates and quarantines end.”

Here is a perspective on this issue from downtown Minneapolis, which is seeing positive developments despite current difficulties. First, the business news. Then, a look at residential real estate.

Local Business Developments[3]

Our local newspaper, the StarTribune, reports, “Creating that feeling of safety is job one for Minnesota employers hoping to woo back thousands of virus-leery staffers after months of working from home. It’s been slow going. To date only one in 10 workers in Minneapolis and St. Paul office towers have returned to the office hub. Most businesses expect more to follow sometime next year.”

One of the major downtown employers, Target Corporation’s headquarters, is essentially closed with virtually all of its personnel working remotely and currently not scheduled to return to their offices until next June.

Another downtown employer is the headquarters for Delta Dental of Minnesota, one of the largest providers of dental benefits in the Upper Midwest, serving more than 8,800 Minnesota- and North Dakota-based purchasing groups and 4.1 million members. It recently completed a remodeling of its Minneapolis offices: installation of an automated temperature and face-scanning station that reminds . . . [everyone]  to ‘wear a mask,’ . . . portable air filters, . . . automatic doors that open with the wave of an ID badge or hand, and . . . 180 workstations encased in 6-foot-tall plexiglass.” Now there are only three employees working on one of its floors.” https://www.deltadentalmn.org/about-us

“Commercial tenants inside [downtown Minneapolis] office venues such as the IDS Center, City Center, . . . Capella Tower and the SPS Tower. . .— each home to more than 2,000 workers — are laboring to keep people distanced from one another in elevators, cubicles and conference rooms and adopting motion sensors and software so workers can keep germs to themselves and stagger their attendance.”

When the pandemic hit earlier this year, Buhl Investors, was in the process of “converting a former 1883 railroad warehouse and soap factory” in the downtown (renamed Switch House). To respond to enhanced concerns over virus transmission it installed a ”needlepoint bipolar ionization system,” which produces “electrically charges ions in the air that cling to viruses, allergens, mold and other particles, rendering them inert.”

The 10-story Nordic building, also downtown, installed a different Covid-19 inspired technology. This will allow  the Chicago-based technology consulting firm, West Monroe, to move its 120 Minneapolis employees into its 42,000 square-feet second and third floor offices with 40 phone and meeting rooms.

Other positive news for downtown Minneapolis are the recent announcements by Deluxe Corp., which has expanded its business to include more than its initial check-printing, has decided to move its headquarters to downtown Minneapolis and by Principal Financial’s decision to lease 45,500 square feet of space in a downtown tower.

The most significant and flashy downtown development is the completion of the construction of the $125 million project for the headquarters of Thrivent Corporation, a nonprofit financial services organization (formerly known as Lutheran Brotherhood) with more than $16 billion in assets under management. With 264,000 square feet of open work spaces in a “new, airy , eight-story glass-and-stone building,” it features open work-spaces, sprawling breakrooms, credit union, library, chapel, art gallery (with works from the 13^th century to the modern day), coffee shop, gym and underground parking. I look forward to walking around this new building.

John Breitinger of Cushman & Wakefield’s Minneapolis Real Estate Development Advisory practice is in charge of selling Thrivent’s new building with a 20-year leaseback as a means for Thrivent to recoup its investment in constructing this new building and redeploying the capital to grow and serve more clients. According to Breitinger, “Downtown Minneapolis is still seen as a safe bet by institutional real estate investors, given the diversity of our [institutions] and the quality of our workforce.”

These “efforts suggest that reports of the death of the American office may be premature. Many businesses ‘had this notion that we can do [remote work] forever,’ said Jim Montez, Minnesota leasing vice president at Transwestern. ‘But increasingly, what I’m hearing from business leaders is ‘We can’t do that forever because I am losing the bond that I have with my team. I am losing the culture [and] the brand identity of my enterprise. To maintain that, we need our people back together.’ ”

Local Residential Real Estate Developments[4]

 Jim Buchta of the StarTribune, starts, “As in many U.S. metro areas, the suburbs of the Twin Cities have enjoyed surging interest from home buyers as the global pandemic has upended how and where people work. Amid rising crime and lingering unease following spring riots, many suburban buyers have relocated from the urban core of Minneapolis and St. Paul, where the number of homes for sale has swelled.”

But “this doesn’t mean a new urban exodus is underway. Also on the rise in both of those cities: home sales, driven in part by record low mortgage rates that have enticed entry level buyers despite a grim economy. ‘If there is an exodus’ of buyers exiting urban neighborhoods, says sales agent Pat Paulson, ‘there’s an inflow as well.’

“In Minneapolis, there’s been an 11% increase in listings through the first nine months of this year, buoyed in part by a recent rise in condos for sale. Pending sales, or signed purchase agreements, are also up 3% . . . . In the suburbs, where listings are off 2%, pending sales have increased 7%. In both areas, houses are selling at a record clip and median prices are at an all-time high.”

Conclusion

As a Minneapolis downtown citizen and resident. I hope that these positive developments will continue.

========================================

[1] Victor Davis Hanson, Hoover Institution; Victor Davis Hanson Private Papers, Hoover Institution.

[2] Hanson, Will changes to American life after pandemic become permanent, Washington Times (Oct. 21, 2020); Hanson, Let’s count the ways 2020 will change our lives, StarTribune (Oct. 26, 2020).

[3] DePass, Workers return warily to the office, as employers embrace slew of safety measures,  StarTribune (Oct. 24, 2020); DePass, All Thrivent’s new Minneapolis headquarters needs now is employees, StarTribune (Oct. 26, 2020); Kennedy, Deluxe moving its headquarters from Shoreview to downtown Minneapolis, StarTribune (Sept. 14, 2020); DePass, Safety issues just add to uncertainty facing Minneapolis commercial real estate, StarTribune (Oct. 4, 2020).

[4] Buchta, Minneapolis, St. Paul housing exodus more myth than reality, StarTribune (Oct. 24, 2020).