URBAN vs. SUBURBAN EXODUS

URBAN vs. SUBURBAN EXODUS


The COVID-19 pandemic resulted in the abrupt closure of everyday businesses and public amenities. The repercussions changed people’s perspective on the use of public spaces, transportation, and the workplace. Many companies offered employees the opportunity to work remotely. People soon realized that it was possible to work anywhere with a stable internet connection. It also prompted the question of whether to stay in their current location or to relocate for the foreseeable future. The flexibility of the new work environment resulted in many people leaving cities and relocating outside city limits. The recent shift has negatively impacted urban infrastructure  and city centers, but the shift is likely a temporary one, as professional and social opportunities in urban centers will continue to attract people to maintain residences.

In looking at current migration trends, it is important to consider the history and relationship of cities and their suburbs. In the mid-1950s and 1960s, many working-class Americans moved out to the suburbs because of low housing costs and the GI Bill benefits. According to the article by Khan Academy,  “Hoping to provide servicemen and women with a measure of financial security upon their return (and, hopefully, siphon a substantial proportion of veterans away from the labor market and into educational programs), President Franklin D. Roosevelt signed the Servicemen’s Readjustment Act on June 22, 1944. Commonly known as the GI Bill, the Servicemen’s Readjustment Act offered veterans a year of unemployment pay after their homecoming; guaranties for loans to purchase homes, businesses, or farms; and tuition and living stipends for college or vocational programs.”1 This allowed many working-class families to settle outside of cities, “By the 1950s, as many as one-third of home buyers in the United States received support from the FHA and VA programs, and home ownership rates rose from four in ten U.S. households in 1940 to more than six in ten by the 1960s. The vast majority of these new homes were in the suburbs.”2

The need for cars and transportation increased as many families moved out of cities. The interstate system became critical in providing access to the city for working Americans. Per the Vox article by Joseph Stromberg, the interstate highway system dates to the 1930’s when General Motors, and other industry groups, formed the “National Highway Users Conference” to influence transportation policies. The highways, that the National Highway Users Conference pushed for, would link distant cities and suburbs, and cut through the downtowns of cities to provide easy access for people commuting to and from the office. Overtime, the highways became a major link connecting working Americans to cities, regardless of how far away they lived from their workplace. The centralized downtowns, where most offices were located, soon became too expensive for families to live in, which resulted in working Americans moving further out into the suburbs where there was more space and opportunity to live comfortably. Urban job losses stoked unemployment and poverty. Declining tax revenues forced cutbacks on infrastructure, schools, and other services, which reinforced the suburban trend. By the 1960s, commentators pointed to a full-fledged “urban crisis.” Meanwhile, the suburbs boomed.3

Aerial View of Levittown New York, Photographer Mark Matthosian
Levittown New York c. 1948 | Photographer: Mark Matthosian

During the 1980’s, businesses that suffered from the urban unemployment and poverty in large cities began to boom again as people returned to city centers. Young professionals chose to move into cities where they could build their careers and enjoy a more vibrant social scene. In places such as New York City and San Francisco, living costs sky-rocketed and the demand for real estate remained at an all-time high, through 2010’s to the pandemic in 2020.

 


In March 2020, COVID-19 forced cities world-wide to impose stay-at-home orders. The corporate workplace landscape quickly converted to a remote work-from-home setup. Teleconference software and broadband internet allowed businesses to adapt quickly to the new work mode, with many people continuing to work remotely a year later. This ultimately led to the realization for many industries that people were no longer tied to their geographic region and led to a sudden migration out of the nation’s urban centers, similar to the migration the country saw back in the 1950s and 1960s. According to an article by Multi Housing News, “U.S. Postal Service change-of-address records filed from February through July (2020) indicate that Manhattan lost 110,978 net residents, while Brooklyn saw a net decrease of more than 43,000. San Francisco, Los Angeles and Chicago lost anywhere from roughly 26,000 to 31,000 residents each, the data compiled by Yardi Matrix and MYMOVE shows.” Many people moved to less densely populated coastal cities. Markets such as California’s Inland Empire and Sacramento, Phoenix, Indianapolis and Tampa, Fla., are all seeing rental increases.4

 


Suburban and urban centers can vary depending on their location, infrastructure, community options, and social opportunities. While the suburbs promote isolation and self-reliance through car culture and distance, the city promotes connection and interaction with neighbors because of the shared experience of transportation and housing density. The difference depends on the public transportation provided, as well as the walkability of the area. For example, dense urban areas, such as Manhattan and San Francisco, have a wide range of public transportation options, that include subways, light rail, trains, buses, and sidewalks. When moving further away from an urban area, a more suburban landscape begins to take shape, often with no public infrastructure. An example is Pasadena, CA, which has some public transportation and sidewalks, but significant distance between infrastructure. As a result, travel by car is preferred. Arlington, TX, positioned between Dallas and Fort Worth, is the largest city in the United States without a public transportation system. 


The people leaving heavily populated cities and moving to cities such as Austin, TX, Nashville, TN and Miami, FL, are contributing to a change in the dynamic of high-income earning industries and creating new hubs in locations that were not previously considered. Silicon Valley is now on the move and being dispersed throughout the country. The migration is changing the way industries operate. “After the pandemic, it might be better to think of Silicon Valley as an idea dispersed across many places rather than a specific piece of geography” writes Kim-Mai Cutler, a partner at the venture fund Initialized. According to the company’s recent survey, 42 percent of its firms said that starting a remote company was better than being headquartered anywhere, including California. (Last year, that figure was just 6 percent.)”5. Populations moving away from cities such as New York City, San Francisco, and Los Angeles can have a long-lasting effect in that these migration trends impact a city’s municipal services since they rely on property taxes, sales taxes, and urban-transit revenue.6 Migration patterns can affect housing prices, tax revenue, job opportunities and cultural vibrancy.7


With commutes no longer necessary during the pandemic, agencies running the nation’s largest transportation systems became financially strained, particularly in locations such as New York City, where most of the population is reliant on local subways and buses. From the time lockdown began in March 2020, through the end of May 2020, it was reported by New York City Transit that subway ridership had fallen 93.4% from February 2020. In addition to drastic reduction in commuters, many cities suffered from a lack of tourism, because of the pandemic. With the fear of contracting the virus, many people began walking more, riding bikes through the city, and even buying cars to get around and out of town. According to a report by NYU Wagner Rudin Center for Transportation, “Traffic across the city’s bridges and tunnels has risen to within 60 to 70 percent of pre-pandemic levels, according to city officials — a turnabout from earlier this month, when city streets were all but empty.” Also, in May 2020, “the number of trips taken on Revel, an electric moped ride-sharing service in Brooklyn, Queens, and parts of Manhattan, jumped by over 200 percent compared with before the pandemic. Bicycle shops have experienced record sales with long lines of customers.”8

An image of a vacant Times Square with barely any traffic due to Coronavirus lockdowns
Times Square at the height of the Pandemic | Credit: Lucas Jackson

In a survey conducted by PWC into attitudes about remote work, many companies are heading towards a hybrid workplace, where many employees rotate in and out of the offices configured for shared spaces. The hybrid workplace allows for flexibility to those who have adapted, and perhaps now even embrace working from home. There are groups who believe that office culture has permanently evolved. The concepts of engagement and collaboration, previously beholden to being present in the office, are now removed from physical location. The top findings conclude that remote work has been an overwhelming success, the role of the office is set to change, employees want to return to the office more slowly than employers expect, there is no consensus on the optimal balance of work days at home versus in the office, least experienced workers need the office the most, and real estate portfolios are in transition.9

For executive leaders, the PWC survey established that they anticipate changes to their real estate strategy in the next 12 months. These changes include consolidating office space in the premier business district location, open more satellite locations, and consolidate office space outside of major cities. Only a handful of executives stated that they would make no changes to the company’s real estate strategy over the next 12 months. Vacant office space in New York City is the highest it has been in over three decades. According to a report by Cushman & Wakefield, the office vacancy rate in Manhattan has reached 16.3% in the first quarter of 2021, the highest since 1994.10 With vacant office spaces, it is expected lease prices will decline, which will be an incentive to bring occupants back into the office. However, in large metro areas, most people did not relocate very far. In the country’s 50 most populous cities, 84% of the moves were within the perimeter of the central metro area, down just slightly from pre-pandemic levels. Many of the local moves were likely related to the economic downturn. The February Pew Research Center survey of those who moved during the pandemic found that the most common reason people cited was financial distress, including job loss. This local movement shows that residents who moved further from an urban center remained part of the same regional economy. Most of those who moved further tended to stay within a radius of 100 to 150 miles.11

Whether people who left cities in 2020 return to the same locations now that vaccines have rolled out and the virus is more controlled, remains to be seen. People returned to cities in the 1980’s and 1990’s with the need to collaborate, to compete, and to be around like-minded people. There will always be professionals who have the drive to grow their careers, which may be difficult to do from the suburbs, or smaller cities, where the talent pool and level of competition may be smaller. The determining factor on whether people come back into the cities or settle into suburban life will be a personal one. Ultimately, the shift of returning to cities will be a result of a generational and gravitational desire for connection and collaboration. While Covid changed the way people collaborate through new means and technologies, the ultimate need to physically be where activity and opportunities are strong will most likely drive people back to urban environments for the forseable future.