Boston and Cambridge could see major changes as some workers never return, McKinsey report says

Based on surveys of hundreds of businesses and residents in April, McKinsey found that more than a third of local employers plan to reduce their real estate footprint over the next two years. As a result, demand for office space could drop by up to 20% and commuter train use could drop 15 to 50% from pre-pandemic levels, according to the report.

Meanwhile, some retail activity would shift to the suburbs and online, as daily downtown trekking becomes less common. And up to 5 million fewer business travelers could visit Boston each year by 2030, a drop of nearly 30%, leading to an overall 15% drop in total passenger numbers at Logan Airport.

“You can see the center of gravity, for lack of a better word, move a little bit, or maybe we’ll end up with a bunch of centers of gravity,” Gov. Charlie Baker said in an interview. “People will have more options as to where to work and where to live than they had before.”

An alarming prediction is the scale of the upheavals these changes would cause in the labor market. McKinsey has estimated that 300,000 to 400,000 jobs will be cut or phased out over the next 10 years, many in support positions such as office administration or the hospitality industry. This means that up to 10% of the workforce may have to find new jobs over the next decade in a changing economy.

This and other results dovetail with long-standing priorities of the Baker administration, such as retraining a significant portion of the workforce, stimulating housing construction and foster the growth of town centers and town centers. Baker will likely use these results as he urges the legislature to back his proposed state allocations of federal stimulus funds, including $ 1 billion for housing causes, $ 240 million for skills training and $ 350 million to reinvigorate downtowns and business districts. Baker has also started pushing to reduce the amount of office space taken up by government employees, a move he says reflects trends in the private sector.

But with many office employers waiting until September to recall their troops, it’s still too early to draw any drastic conclusions.

Tamara Small, general manager of the NAIOP Massachusetts real estate trading group, said the report’s worst-case scenarios do not match what she sees in the market. The outlook changed dramatically in the three months following the McKinsey employer survey, she said, in part thanks to the successful rollout of COVID-19 vaccines.

She pointed to recent decisions by tech giants Amazon and, more recently, Facebook to significantly expand the footprint of their local offices. Brokers are seeing an increase in requests for office space tours, she said, and people are starting to complain about the awkwardness of hybrid work meetings, as some colleagues return to the office while others continue to teleport from their home.

“It’s very early in the day to talk about companies reducing their office space,” Small said.

How this dynamic plays out could be important for the use of public transport. Bus and metro ridership could drop 5 to 25% from pre-pandemic levels, according to the report, with commuter train volumes declining much more sharply. Some former racers will likely spend more time in their cars. This trend, when taken into account with the near ubiquity of Amazon delivery vans, means congestion levels on the roads are likely to return even as more people work from home.

Baker said he expects the nature of rush hour in Greater Boston to change, with smaller crowds at rush hour and more commuters coming and going at traditionally off-peak hours.

“You’re going to end up with more people doing more things from more places and using more virtual connectivity capacity than what we’ve seen before the pandemic,” Baker said.

Public transport advocates hope the report won’t be used to justify spending cuts.

“If we don’t make it an attractive proposition, then people will be in their cars, and that will only exacerbate the situation,” said Josh Ostroff, acting director of the transportation advocacy group for Massachusetts.

Greater Boston Chamber of Commerce chief Jim Rooney said reliability and scheduling issues are also big factors in transit. Reducing hours because ridership is down would simply be “digging the hole deeper,” he said.

The McKinsey report could help state officials decide how to deploy federal stimulus dollars, Rooney said. But it’s hard to draw firm conclusions, he said, given the cautions and warnings strewn everywhere.

Among the important problems highlighted in the report: economic inequity. Baker administration officials say they are deeply concerned that women and people of color are seeing their earning potential fall further behind. With tens of thousands of people losing their jobs every year, the amount of recycling needed could be unprecedented – perhaps double or triple what the state currently funds.

“We have never been able to train 30,000 to 40,000 people a year,” said Rosalin Acosta, Secretary of Labor and Workforce Development at Baker. “It’s going to be a real challenge.

The report’s priorities align with legislative goals pursued by the Black Economic Council of Massachusetts at Beacon Hill. But BECMA policy adviser Courtney Brunson said she was disappointed that there was no stronger language in the report explaining how the pandemic has exacerbated inequalities. “Every problem in this report is impossible to solve without focusing on equity issues,” she said.

State officials are also concerned about Massachusetts’ economic competitiveness relative to other states. With an increasingly mobile workforce, employers and employees may be more attracted to states where housing is cheaper and more readily available. About a third of workers in Massachusetts can do their work remotely, said McKinsey, one of the highest percentages in the country.

“Coming out of the pandemic, from a competitive standpoint, the high cost of housing is a major concern for us,” said Mike Kennealy, Housing and Economic Development Secretary at Baker. “We have the advantage of being a leading innovation economy for a very long time, [but] competitive dynamics have changed now.

State Senator Eric Lesser, who co-chairs a recently formed commission on the future of work, said the McKinsey report underscores how much Massachusetts is at stake and why policymakers need to be alert to pressing issues such as the ‘Improved access to child care and intercity rail service. .

“Massachusetts has the potential to be a great beneficiary of this new future because of our historic leadership around technology and the life sciences,” Lesser said. “We also have the potential to be on the losing side of many of these changes, due to challenges related to housing, competitiveness and transportation.”

Jon Chesto can be contacted at [email protected] Follow him on twitter @jonchesto.

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