What Happens to Cities Next? By: Gabriel PotterMBA, AIFA® 2020.06.02

Since the industrial revolution changed the productive output per worker, humanity has been compelled to increasingly utilize the efficiency and shared resources of cities.  There have been some social trends against this wave – like the suburban migration of the late 20th century – but the dominant trend over the past decade has been urban renewal, revitalization of downtown metros, and concentration of population back into cities. 

The trend towards city living has been solid but the twin crises of the past few months – coronavirus and recent civil unrest – may slow the trajectory of growth.  The lack of affordable space in densely packed metros means that renters (individual and businesses alike) have to significant advantages to operate in a city center.  There is evidence that the novel coronavirus’ rate of transmission is a function of population density, which makes densely packed environments potentially more dangerous.  This week, those downtown metro areas have also been the epicenters of civil unrest.

These factors are going to lower the appeal of living and working downtown for individuals and businesses alike.  Business owners renting entire floors in a downtown skyscraper are going to feel the additional expense of prime real estate isn’t worth it since at-home productivity for many technical, financial, and other service sectors has been very good over the past few months.  (One small silver lining to this crisis is that is has demonstrated the potential and viability of working at home en masse.)   The pressure on brick-and-mortar retailers in an online world has already been well documented, but protests, riots, and infection potential in high-traffic areas create additional safety concerns for street-level urban retailers.  Individuals may also reevaluate the advantages of city living.  A young-urban professional may have previously accepted the trade-off of smaller living space because of the shared amenities of city living and easy access to thriving potential employers.  They may now come to envy suburbanites or mid-sized city peers while living in a cramped Manhattan apartment since museums, restaurants, and shows are off-limits.  If employers continue to allow working from home (and there are many indications that this trend will continue past the current crisis), the advantage to physically living in a city center is reduced.  

 

 

 

 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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