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    World Built Environment Forum

    It has often been said during the previous 18 months that the COVID-19 crisis has caused people to think again about the things that really matter to them. Among the evidence cited for this assertion has been the apparent exodus of professionals from the world’s cities since lockdowns began. Indeed, during the peak-pandemic summer of 2020, broadsheet profiles of high-achieving ex-urbanites extolling the peaceful charms of rural life became a near daily feature of the mainstream media conversation. It was never entirely clear, though, to what degree the narrative cohered with reality. After all, only a relatively small and privileged section of the population were actually able to swap the city for more tranquil climes. Could they really be so influential as to drag the rest of the developed world to the end days of the urban century?

    The data paints a more nuanced picture.

    “The pandemic has driven some movement out of the largest cities in the US like San Francisco and New York,” says Arjun Ramani, Research Assistant at the Stanford Institute for Economic Policy Research. “But the vast majority of that movement has been to the suburbs of those very cities, as opposed to smaller cities and towns across the country.”

    Working alongside his colleague, Professor Nicholas Bloom, Ramani authored The Donut Effect of COVID-19 on Cities, a National Bureau of Economic Research working paper. From his analyses of US Postal Service change of address requests, he calculates that 84% of household moves during the pandemic were competed within, rather than between, metro areas.

    “This,” he notes, “is about the same as pre-pandemic levels.”

    A corollary result of this movement has been the outflow of economic activity from city centres. Some of the largest US cities have lost roughly 15% of their people. In most cases, those leaving have relocated to the suburbs – in doing so, they have driven the report’s titular “donut” effect. America’s city centres are, in effect, hollowing out.

    It remains to be seen whether this will be a permanent phenomenon; the initial indicators are certainly mixed. As early as June of last year, 55% of respondents to a WBEF survey agreed that “the days of commuting on crowded trains, trams and buses are over.” It may be that this consensus was misguided. Apple CEO Tim Cook has recently asked staff to return to the office three days-a-week. With this intervention, he has added his voice to the swelling chorus of corporate leaders urging a phased return to something like old, familiar arrangements. And while he has since weathered some push back from employees and industry observers, hybrid-working does seem to be the most likely post-pandemic professional workplace norm. In such a scenario, those who used the lockdown to relocate away from city centres will face longer, albeit less regular, work and homebound journeys. This may increase the need for longer-range, lower-frequency mass transit networks.

    Ramani and Bloom’s findings are closely mirrored in recently released research from CBRE. COVID-19 Impact on Resident Migration Patterns, published in April 2021, found that most household moves during the pandemic were made across short-to-moderate distances. Over the course of 2020, there was a 15% uptick in moves out of city centres by comparison to 2019. Unsurprisingly, the largest proportion of movers were affluent, young, childless professionals. And the numbers didn’t track evenly across all city-types: industrial heartlands such as Detroit and St. Louis actually saw a slowdown in net moves out of the city. Meanwhile, San Francisco, home to large numbers of high-tech employees able to work remotely, witnessed a huge increase in net out-migration.

    CBRE expects these outflows to subside post-pandemic, with lower rents among the factors that can entice the leavers back. “As the country reopens, we are already seeing a return to urban centres across the nation’s largest metro areas,” says Eric Willett, Director of Research and Thought Leadership for CBRE’s Pacific Southwest Division.

    “Some of the largest US cities have lost roughly 15% of their people. In most cases, those leaving have relocated to the suburbs. America’s city centres are, in effect, hollowing out.”

    Of course, not everyone who decided to quit America’s top-tier cities will be tempted back, cheap rents or not. But a structural reversion away from full time remote working, as advocated by Tim Cook, will severely limit the scope of professional opportunity in the suburbs. Any quality and cost of living gains would be subsumed by the need to access quality work.

    One “middle-way” solution for those finding themselves caught in this bind could be relocation to one of the nation’s more competitive secondary cities. Traditionally viewed as overly-specialised, undesirable investment destinations, there is a new and growing cohort that are punching above their weight. They have diversified economically and are showing an appetite for challenging more established counterparts. Sylvia Gross, Managing Director – Head of Capital Markets and Investor Relations, HQ Capital Real Estate, cites some notable examples: “Over the last decade we have seen Houston broaden its industrial scope from oil to general energy, and diversifying into medical research. Austin, Denver and Portland have emerged as cheaper alternatives to Silicon Valley. Charlotte has become an affordable alternative to New York for the financial sector.” 

    “There is a new and growing cohort of American secondary cities that are punching above their weight. They have diversified economically and are showing an appetite for challenging more established counterparts.”

    More liveable than America’s traditional economic engine rooms, they are especially attractive to millennials seeking a healthier work/life balance. The right mix of ambitious, youthful talent, switched-on employers and international capital could yet prove potent.

    “Institutional buyers, and in particular international buyers, were originally afraid to invest in secondary cities due to a perceived illiquidity and started going to these cities in search of yield,” explains Ms Gross. “Now that the yield differential no longer exists, they stay for the fundamentals. The pandemic has accelerated an existing trend that has been developing over recent years.”

    The demise of the big city was probably overstated in the feverish early days of the COVID-19 crisis. WBEF columnist Greg Clark was urging caution on this issue as early as June last year. But the course of urbanisation in the developed world has surely pivoted in a subtly new direction. Increasingly, liveability is an animating concern for young professionals. As the armistice in the war for talent draws down, those cities most alert to this fact are primed to prosper.