The Covid-19 pandemic appears to have permanently rearranged the world’s cities. A new study, published in the Proceedings of the National Academy of Sciences, assembles data from an astonishing variety of sources—from Mastercard transactions to GPS signals—to document what has changed.
Fundamentally, the disruption comes from employers’ rising acceptance of working from home. In the United States, for example, those with jobs spent only a small share of workdays at home before the pandemic. This spiked to about 60 percent in the spring of 2020 dropping back down, quickly at first and then gradually over the next few years. Now it’s leveled off to a more stable proportion: throughout 2023 and in the first half of 2024, roughly 30 percent of Americans’ workdays were spent at home.
When workers can stay home, they no longer need to live as close to their employers, clustered in expensive city centers. Hybrid workers might opt to live farther out, since they’ll make the longer commute only sporadically—and even those who don’t move will spend less time in the office and at nearby lunch establishments. A fully remote worker, meantime, can live basically anywhere. (For example, I work for the Manhattan Institute from the Green Bay, Wisconsin, suburbs.) Cities’ real-estate and retail markets, commuting patterns, and, ultimately, finances reflect these dynamics.
Population flows, rental rates, and home prices tell the same story: the central areas of big cities saw population outflows and declining demand, relative to their own suburbs, as well as smaller cities elsewhere. The centers of America’s biggest 12 cities, defined as ZIP codes with centers within ten miles of the city’s central business district, suffered population outflows of about 8 percent from the pandemic to mid-2023 after accounting for pre-pandemic trends, while their outer suburbs saw inflows (a pattern called a “donut” effect).
This trend was less dramatic in other Top 50 cities and absent in smaller cities. As the study’s authors point out, the largest cities have the greatest concentrations of white-collar jobs amenable to working from home, as well as the steepest price gradients between downtown and the suburbs. The authors also show statistically that cities’ work-from-home levels correlate with the strength of the donut effect, both in the U.S. and globally.
The researchers use numbers from Data Axle, a company that tracks addresses, to break down exactly where folks who moved out of big city centers in the wake of the pandemic ended up. About three-fifths of them stayed in the orbit of the same city, with 36 percent moving to the suburbs and 22 percent remaining in high-density areas, albeit outside the city center. The other 42 percent, however, left their city entirely, mostly heading to smaller cities as opposed to other major cities or rural areas.
The authors’ extensive Mastercard data, meantime, shows that in 118 cities around the world, suburbs 10 to 50 miles out saw spending grow about 10 to 15 percentage points relative to city centers. This change, too, has stabilized. Restaurant spending was hit particularly hard, as it’s greatly affected not only by residents moving out but also by commuters coming in less often.
Despite the overall population shift toward the suburbs, fewer people are commuting from suburbs to city centers, since so many can just stay home. The authors cite GPS data from an unnamed large auto manufacturer suggesting a 20 percent decline in rush-hour vehicle trips on such routes. Rail trips have also fallen 30 percent overall.
These trends are hardly all bad. The work-from-home revolution offers employees far more freedom, reduces the time-waste of commuting, and makes life easier for those with family commitments. Further, big cities remain expensive places to live. Too many public officials are unwilling to expand housing supply to bring prices down, so it’s hard to get upset about a moderate drop in housing demand.
But there are real challenges, too. Not every city fighting these dynamics is as in-demand as New York. City budgets naturally take a hit when people leave or visit the office less. A lot of downtown office space once used by commuters is no longer needed; some cities are looking to convert it to residential use. Perhaps most importantly, it remains to be seen whether an increasingly home-based workforce can provide the same innovation that city-based, in-person collaboration traditionally has done.
Trends have stabilized, and it’s clear that some of the changes wrought by the pandemic will be with us for the foreseeable future. The jury’s still out on the long-term effects.
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