The few people on the streets of the City of London or lower Manhattan have got used to a familiar sight in recent months: empty shops, boarded up storefronts and cafés struggling for survival in once bustling financial districts.
Their eyes do not lie — city centres have become ghost towns. According to FT research which analysed Google mobility data, London and New York have seen a dramatic drop in visits to restaurants and retail venues since the start of the pandemic.
Few cities have escaped the impact. Visits to central Paris were down 40 per cent in the week to October 9 compared with the pre-pandemic average in January, and even Stockholm, which has had much lighter restrictions, has suffered a decline of 20 per cent.
But it is cities like New York and London, where high-rise office buildings host a large number of professional services and banking staff now mostly working from home, which have suffered the most.
In the City of London, the number of people visiting cafés, restaurants and retailers in the first week of October was less than one-third that of pre-pandemic levels — with some of the gains over the summer lost in recent weeks as the UK fights a second wave of coronavirus infections.
That stark figure shows that the City has been substantially more depressed than the UK as a whole, where visits to restaurants and entertainment venues were just above 70 per cent that of pre-pandemic levels.
In Manhattan, the number of visits to amenities was less than half that of pre-pandemic levels, compared with 85 per cent for the national average, with similar depressed levels seen in the technology hub of San Francisco.
These are the most startling results of a comprehensive FT analysis of Google mobility data for city centres and other areas across advanced economies and large developing countries for which data is available. Google does not track mobility for China.
In major urban areas, from Boston and Milan to Tokyo and Mexico City to New Delhi and Toronto, city centres show larger falls in mobility.
Footfall in most cities and countries have been recovering since the lockdown lows, but the latest data show the trend reversing in some countries as infections have started rising again in the autumn.
Since lockdowns were first implemented in most countries around the world, urban experts have speculated about the long-term impact on city centres whose economic success is largely based on the agglomeration of a skilled workforce with disposable income.
With a vaccine yet to be approved and with many governments reintroducing tighter restrictions, many experts say some changes in the way cities are organised will start to become permanent. They believe that Covid-19 could accelerate the pull of the suburbs for families and shift more jobs out of city centres.
“The pandemic will not only reshape cities but it’s going to reshape suburbs and rural areas,” says Richard Florida, a professor at the University of Toronto’s School of Cities and Rotman School of Management and a distinguished visiting fellow at New York University’s Schack Institute of Real Estate.
Falling office demand and drying up investment are signs that the shift towards a more diffuse urban landscape could have already started.
“Some of that work will be shifted out to more remote locations in the suburbs and rural areas,” Mr Florida says. “It’s clear that we can rebalance work so that not everyone has to go into the central business district all the time.”
Homeworking has rapidly eroded the need to fill large towers with office and knowledge workers, which Mr Florida refers to as the “last gasp of the industrial revolution”. Instead, it has created the possibility for businesses to consider smaller units or less expensive locations.
Nicholas Bloom, a professor of economics at Stanford University, says the pandemic has already transformed the US into a “working from home economy”, with almost twice as many employees working from home as at the office.
As nearly 60 per cent of those now working from home were based in cities, according to a Stanford survey, he believes the trend could mark the reversal of the fast growth of the largest US cities since the 1980s.
Across Europe, nearly 40 per cent of employees worked remotely in the first half of the year, according to the European Commission. In Germany, the labour ministry has announced that it will present a proposal this autumn that would provide all employees with an enforceable right to work from home.
About three-quarters of British businesses say they will keep increased homeworking in place after coronavirus has been suppressed, according to a survey run by the Institute of Directors, a UK business organisation.
Real estate data suggest that widespread homeworking resulted in an immediate shift in demand.
About 60 per cent of global surveyors indicated a shift in office space from urban to suburban locations, according to the latest commercial study by the Royal Institution of Chartered Surveyors, while about 50 per cent indicated that the footprint of the office would be scaled back over the next two years by up to 10 per cent.
Global commercial property prices are down 6 per cent in the third quarter compared with the same period last year, according to Adam Slater, lead economist at Oxford Economics. “It’s possible that demand for office, retail and hotel space, and even urban multifamily housing may never recover to pre-crisis levels.”
Jeremy Kelly, director of global research at the real estate advisory group JLL, sees a similar fall in investment. The company reports a contraction in leased office space of 59 per cent for London, 66 per cent for New York and 77 per cent for Tokyo in the second quarter of this year, compared with the same period in 2019.
He thinks that demand will “bounce back eventually”, but with lower density and “more space for innovation, face-to-face interaction and more meeting space”. He adds: “There could be more people travelling to urban cores but perhaps less frequently.”
Joel Kotkin, a fellow in urban studies at Chapman University in Orange, California, believes that with the impact of Covid-19 the role of cities “will be diminished”.
With suburbs able to offer improved jobs and learning opportunities as well as services, he believes urban centres “are not going to be the place of aspiration they used to be”, while “suburbs will become more interesting over time”.
The “next phase of urbanism will be dispersed and with lower density”, Mr Kotkin says, adding that young people will still flock to cities as they will continue to be the best place to start a career. But “people who would have stayed in the cities until 35 would leave at 30”.
Many urban areas are preparing for big changes. Paris is championing the concept of the “15-minute city”, where living spaces are a short commute from work and amenities; Melbourne is proposing “20-minute neighbourhoods”; Montreal is working on defining a hybrid system that combines remote working and the continued use of physical space.
“The pandemic is changing the city in . . . lasting ways,” says Thomas J Campanella, an associate professor of urban studies and city planning at Cornell University, New York. “Firms will downsize to small flexible workplaces with conference rooms and hot desks where employees can collaborate face to face as needed,” he says, while “new forms of shared facilities will crop up in neighbourhoods and suburban centres”.
However, the possible rebalancing of work to suburban areas could be the chance to make city centres greener and possibly more lively, some experts argue.
“There is a momentum today,” says Lamia Kamal-Chaoui, director at the centre for regions and cities at the Paris-based OECD. “Many major cities have already started to engage in a complete rethinking of their urban planning, their overall recovery strategy in light of life with Covid-19.”
Some cities are “seizing this opportunity to go more inclusive . . . more green . . . and more digital”, she says, adding that the suburbanisation trend seen in some OECD countries before the pandemic could now “accelerate”.
Cities such as Paris, Montreal, and London have already taken measures such as including additional bike lanes, better hygiene on public transport, such as contactless fare payments, and encouraging low-emission transport options, such as electric vehicles and scooters. This is true also for many cities in developing countries, including new bike lanes in Chennai, India, and more investment into smart and green cities in China.
Mr Florida envisages future cities with offices converted into affordable housing, less space for cars in the streets and more for outside dining and other social activities. “I think health and resilience will become part of the design of cities generally,” he says.
Edward Glaeser, an economics professor at Harvard University, says the debate in the US has sometimes focused on urban problems that have been exacerbated by the pandemic, such as violence and falling tax revenues.
“What I have seen is a huge amount of debate around rioting and policing — not about bike lanes,” says Mr Glaeser. “In the US, we are going to have fiscal problems in our cities that are going to be persistent for many years.”
Although coronavirus will continue to weigh on commercial activity in the near term, he is “optimistic” about the future of cities. Their attraction will not vanish because “there are huge losses not being face to face” and because people continue to want to have human interaction.
Moreover, falling commercial and residential property prices might make cities more lively, with “younger and scrappier firms more willing to go back” and “older people moving out as younger people move in”.
If the crisis makes it easier for younger people to live in city centres, it could end up being the spark for their renewal, not the start of their decline.
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Teachers grapple with how to help students scarred by pandemic
As staff at Strive Collegiate Academy in Nashville prepare for the school’s reopening this month, principal LaKendra Butler is grappling with the best way to support pupils after a traumatic year in which their education was thrown into chaos by the pandemic.
“Our students are performing 10-15 per cent below the level a year ago,” Butler said. “Right now I’m prioritising their time during the school day and making sure we’re focused on bringing them back . . . [but] longer-term we need to look at how to do school differently. We can’t go back to the status quo.”
Strive is one of tens of thousands of schools around the world, from the US to the UK and the Netherlands, that will reopen their doors in the coming weeks, as students return to the classroom after months of often solitary online study.
A first priority will be regular Covid-19 tests and measures to cut the risk of the virus spreading in schools. The longer-term challenge will be assessing how far behind pupils have fallen in their academic and emotional development and finding ways to rectify the problem with often limited resources.
Getting students back into the classroom is just the start. Many educators believe schools will need to adopt radical new approaches to learning and spend eye-watering sums of money to close the “learning gap” and prevent a generation being scarred, their prospects set back permanently.
“Covid has been the largest disruption to education in history,” said Per Engzell, a researcher at the Oxford Leverhulme Centre for Demographic Science in the UK. “Ninety-five per cent of children were affected and in many countries schools have remained closed since [last] March. It’s totally unprecedented.”
Using detailed testing in the Netherlands, his team has identified an “alarming” average loss of learning equivalent in that country to one-fifth of the academic year — the entire period students were out of school in 2020. The finding “seems to bear out some of the worst misgivings on the magnitude of learning loss and social disparities”, he said.
The pattern is similar elsewhere. Jonathon Guy, research officer at the Australian Education Union, said the learning loss was even more marked for children from marginalised communities and disadvantaged groups. “Demographic factors, low levels of prior achievement and a lack of access to technology are the main concerns,” he said.
Surveys in Australia and other countries suggest widespread disparities in access to computers, affordable internet, safe places to learn and supportive home environments.
Luke Sibieta, a researcher at the UK’s Institute for Fiscal Studies, has estimated that British pupils could lose a combined £350bn over their lives as a result of missed education during lockdown. According to a forecast by the World Bank, globally the loss could be as much as $10tn if effective policy responses were not introduced.
Those responses will not come cheap. In the UK, Sibieta suggested £30bn — equal to six months of spending on schools — as a useful benchmark for what the government should consider spending on “radical and properly resourced ways to help pupils catch up”.
Some teachers have sought to learn from approaches adopted after previous disruptions, such as when Hurricane Katrina overwhelmed New Orleans in 2005. Then, a so-called spiralling technique was used to reteach essential missing skills before proceeding with scheduled lessons.
David Steiner, head of the Johns Hopkins Institute for Education Policy in the US, who led a review of “catch up” techniques for Unesco, said the evidence was against strategies that promoted students automatically to the next grade regardless of the gaps in their learning or got them to retake the entire year with a younger class.
Instead, he called for “acceleration” programmes to test students and focus on missing skills essential to the next stage of study. “You need to narrow the list of topics to those that really matter and do ‘just-in-time’ instruction so they’re ready to take regular classes with grade-level peers,” he said.
Butler has carved out two hours during her school’s daily schedule away from normal lessons, to focus on teaching in one-on-one and small group sessions, guided by periodic assessments of students’ progress and surveys of their parents.
She is also exploring more use of tutoring, an approach that has garnered attention around the world, including in a £1.7bn package in Britain. The UK has also appointed an “education recovery tsar” who has made clear that the catch-up would take years of work and “radical” curriculum changes.
James Turner, head of the Sutton Trust, a charity participating in the UK tutoring programme, said this was an essential response. “It’s not the complete solution but the evidence is very strong,” he said, estimating that the country would need 20,000 additional tutors to meet its objective of supporting 250,000 pupils in the current school year.
Matthew Kraft, associate professor of education and economics at Brown University in the US, cautioned that while there was strong evidence for the value of tutoring in small groups, “we know much less about scaling and maintaining its effectiveness”.
He proposed a “peer-to-peer” volunteer system where older students helped younger ones, to reinforce their own learning and give something back.
Jelmer Evers, a teacher in the Dutch city of Utrecht and vice-president of the country’s General Education Union, said the task was best tackled by qualified teachers, despite a backdrop of falling numbers entering the profession. They had greater knowledge of their students’ needs and of the curriculum than external tutors, he said.
For Amy Wood, principal at Mossbourne Riverside Academy in London, student wellbeing and social activities would be as important as academic work when her pupils return on Monday.
She remained optimistic. “Children are more resilient,” she said. “They’ll bounce back.”
Pandemic shift to premium brands leaves drinks makers in high spirits
Drinks industry chiefs may be hoping for a new “roaring 20s” when coronavirus restrictions ease, but millions of households have already embarked on an era of upmarket stiff drinks in their living rooms as Covid-19 reshaped global drinking culture.
Global sales of tequila, vodka and liqueurs outperformed the broader alcohol market in 2020 as housebound consumers took to sipping high-end spirits and mixing their own cocktails.
While parts of the population faced acute financial hardship because of coronavirus, wealthier consumers who kept their jobs have been left with extra disposable income as holidays and going out became all but impossible.
That has resulted in “huge trading up” when it comes to alcohol, said Ed Mundy, analyst at Jefferies, as these cash-rich drinkers also took advantage of lower retail prices compared with those for the same drinks served in bars and restaurants.
“If you’re stuck at home and you don’t want to go out to the shops, it’s easier to buy a big bottle of spirits than 24 beers. There’s more cocktail making at home going on . . . people are trading up from brandy to cognac, from cheap drinks to expensive drinks,” said Mr Mundy.
Sales of prestige spirits, which cost more than $100 a bottle, are forecast to grow by more than two-fifths to 2024, about four times faster than standard brands and almost twice the growth of premium bottles, according to drinks analytics group IWSR.
The world’s largest distiller Diageo said its tequila sales shot up 80 per cent last year, driven by the high-end brands Don Julio and Casamigos, which was co-founded by the actor George Clooney. The boom, centred in the US, has followed a resurgence of upmarket “pure agave” tequila as a sipping drink.
“The trend of moving to spirits away from beer and wine has accelerated in the pandemic,” said Ivan Menezes, chief executive of Diageo. The group’s North American chief said late last year that household penetration for spirits had increased in 2020 at three times the rate of beer, and double that of wine.
Pernod Ricard said its whisky brands Jameson and The Glenlivet had shown “solid growth” despite the closure of stores in airports and train stations, which have traditionally been a major sales outlet for spirits.
Globally, overall alcoholic drinks consumption fell just 8 per cent in 2020 by volume from the year before despite many pubs, bars and restaurants being closed, according to IWSR figures. But there were substantial differences between countries.
Shifts in drinking patterns, at first glance, appear similar in the UK and US: sales through the “on-trade”, which includes pubs, bars, restaurants and clubs, dropped by half in 2020 in both countries, while retail sales rose 12 per cent.
Yet overall drinking was far higher in the US last year, since retail sales of drinks to consume at home account for much more of the market. Before Covid-19, a fifth of alcohol sales by volume took place in bars and restaurants in the US, while it was twice the level in the UK, Jefferies said.
In South Africa, where periodic alcohol bans have been imposed, and Turkey, where drinks sales are closely linked to tourism, consumption dropped by about a third. Many countries still turned to a spirit of choice: Brazilians favoured gin, Colombians liqueurs and vodka, said Diageo.
While all drinks makers suffered to some extent from pub closures, brewers were especially hit: the world’s second-largest brewer Heineken announced 8,000 job cuts this year as it struggles to deal with the drop in beer drinking.
In China, where the pandemic originated but where the virus was brought relatively quickly under control, drinking declined by 9 per cent but retail sales of drinks by volume were up 23 per cent, the highest among major markets. Kweichow Moutai, which makes a luxury version of the national white spirit baijiu, reported a 10 per cent sales rise for the year.
For those with a thirst for less fiery drinks — Kweichow Moutai comes in at 35 to 60 per cent alcohol — another trend has taken hold: the cocktail in a can.
Ready-to-drink cocktails, a broad group that also includes the flavoured alcoholic sparkling water known as hard seltzer, were the only category to record growth last year. Sales increased by more than 40 per cent, a surge that began in the US but is also evident in other markets such as the UK and China.
As vaccinations are rolled out, analysts at Bernstein expect a return to “near normal” in terms of socialising by the middle of 2021. “As the vaccines are rolled out and lockdowns ease, there will be enormous pent-up demand to socialise, glass in hand,” said Trevor Stirling, analyst at Bernstein.
And entrepreneurs are making a similar bet; in the UK, despite the pain of coronavirus, the Wine & Spirits Trade Association said a record number of new distillers were registered in 2020.
Pandemic fuels fast food’s appetite for UK expansion
Fast-food chains are gobbling up high street sites left vacant by struggling retail and casual dining operators as they target aggressive expansion in the UK.
Adam Parkinson, European vice-president of the Filipino fried chicken group Jollibee Foods Corp, said the company wanted to be in “every major city in the UK” with plans to invest £30m, including opening 10 new outlets in 2021 and a further 15 to 20 next year.
The first will be a flagship site on Leicester Square in London, which is set to open as lockdown restrictions on restaurants lift in May.
German Doner Kebab claimed to be the UK’s “fastest growing restaurant chain” after it announced plans to open between 47 and 49 new outlets this year, doubling its estate and creating roughly 1,800 jobs.
The group, which launched in Berlin in 1989 but is based in Glasgow, had originally planned to open about 25 UK sites this year but Imran Sayeed, its chief executive, said the pandemic-driven boost in demand for takeaway food had spurred wider expansion. “New communities discovered us during the pandemic [and] that opened up avenues for us to look at some of the territories that we had not been looking at,” he said.
Same-store sales jumped 51 per cent last year compared with 2020 and were already up a further 38 per cent this year, Sayeed added.
Others that have announced plans to open multiple sites this year include “fast pizza” company Fireaway, which intends to double its UK estate to 110 sites, aviation-themed Wingstop, a US fried chicken brand, and the US fast-food chain Wendy’s, which has secured five sites for its return to the UK after it exited the market 20 years ago blaming high rents and operating costs.
The growth is being fuelled predominantly by overseas chains which see the UK as an attractive market from which to launch a European expansion.
Jollibee also plans to open its first continental European site in Spain this year, while Wendy’s chief executive Todd Penegor said the company planned to “solidify a good beachhead in the UK to really prove out the model for the broader European business”.
Graeme Smith, managing director at consultancy AlixPartners, which advises Burger King UK, said the UK was a popular place for fast-food chains to establish themselves in Europe because of its “proximity to the US market is terms of cultural trends and even simple things like language”.
Thomas Rose, co-founder of property consultancy P-Three, said established brands such as McDonald’s and Burger King were also weighing expansion but were “more sensitive” about publicising their plans as negotiations were continuing with existing landlords over rent while stores had been closed.
The growth of fast-food chains stands in stark contrast to the travails of the wider restaurant sector, which has suffered under a series of government lockdowns that have allowed takeaway food to be sold but ordered dine-in restaurants to close.
One in six casual dining restaurants shut during 2020, according to the industry research firm CGA, as the pandemic hit a sector already struggling with high debts as a result of private equity ownership, over expansion and increasingly steep operating costs. Overall, 3,267 food-led venues closed — equivalent to 63 a week — CGA data showed.
Rose said that the closure of casual dining chains and the administration of several large retailers such as Philip Green’s Arcadia, owner of Topshop, and Paperchase had opened up opportunities for new entrants to the UK’s fast-food market that would not have been possible before, as landlords desperately seek tenants to take up empty high street lots.
“Fast food was historically excluded from real estate because rents were too high and landlords were more discerning about what brands they chose,” he said.
Parkinson said: “Our prime location is always on the main pedestrianised street on a corner site and they were few and far between pre-Covid but now they are jumping into our laps.”
The rush to expand has in part been driven by significant drops in property prices as the pandemic accelerates consumers’ shift to shop, order food and entertain themselves online.
Rents have fallen as much as 40 per cent in some locations such as London’s Oxford Street but are typically down around 20 to 25 per cent.
Tom Grogan, director of Lemon Pepper Holdings, the franchise owner of Wingstop UK, said the crisis “has allowed us to secure preferential agreements with landlords”.
Sayeed said German Doner Kebab found that demand was driven by teenagers and 20-somethings who were looking for alternative types of fast food: “McDonald’s and Burger King are great brands but people are looking for new things rather than just eating burgers and fried chicken.”
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