Greetings from Munich

My apologies in advance for an abridged Profit+ this week but I’m writing to you all in the midst of our summer family trip. We are in Munich this week and really enjoying being back in Europe again after a 5-year hiatus.

In the weeks leading up to this trip, something funny kept happening. Whenever I would talk with people about our summer plans, I would get one of two responses. From those who’ve never been here, I’d get this subtle, slightly-confused look followed by “wait, why are you going to Germany and Austria?” But from those who have been to this part of the world in the summer and know, I would get that insider nod of approval followed quickly by “oh, you are about to have an amazing time.”

Almost 15 years ago now, I came to Southern Germany in the summer for a work trip. I was here with a colleague and friend and we made the most of our nights and weekends touring around. I have such good memories from that trip and have always wanted to come back. There’s something really special about this place in the summer.

Here’s a flavor of what it’s like here at this time of year:

The Work From Home Crisis

While Europe has just as many economic and political problems as we do in the US, one thing is for sure, they are way better off when it comes to quality of life in urban living. This is all about public transit and intelligent zoning.

At rush hour the other day we went down into the Munich subway and it was a thriving scene. It was clean, full of people, and bustling with economic activity. There couldn’t be a starker contrast to what you find on a typical day on the dystopian LA Metro.

Back in the US, the work from home phenomenon is proving to be an existential threat to already compromised public transit systems.

It also fast becoming a major problem for state and local budgets, which rely heavily on things like sales and property tax. A study done by the Institute on Taxation and Economic Policy back in November of 2021 warned that this could be a big problem for cities across the country, who, by the way, already struggle with budgetary constraints.

What’s really scary is that this study was only forecasting a 12% decline in commercial property values and we’re already seeing some offices trade down over 50%! Imagine what that might do to these estimates.

Many corporations have figured out already that work from home is not so ideal and are busy demanding or begging their employees back into the office. I think it would be wise for state and local governments to lead the way on this. Afterall, they have the most to lose here. Not only do they own a bunch of downtown properties, their funding streams rely heavily on the urban office ecosystem. In my mind, it’s a no-brainer move, which probably means it won’t happen.

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