What Happens If COVID Prompts Consumers And Businesses To Flee Cities?

Might one casualty of the coronavirus be the city center? One of the pandemic’s effects has been to spur individuals and companies to physically relocate from their city’s downtown area to its outskirts.

Realtor.com data show real estate searches in suburban ZIP codes were up by as much as 13 percent in May, doubling the search growth seen for urban areas.

Bloomberg also reported that page views for Zillow’s suburban listings outside of formerly hot urban areas like New York City and San Jose, Calif., rose as much as 10.5 percent during the pandemic’s height in April.

Hessam Nadji, president and CEO of real estate firm Marcus & Millichap, told CNBC this week, “I think the next 18 to 24 months are going to show a lot of exodus out of central business districts, as you can expect… We’re seeing there’s a lot of office vacancy, for example, in the suburbs that have now been absorbed. There’s [also] a lot of demand for rental homes that we’re seeing because people are fleeing especially hot spots like New York.”

There’s also a demographic tailwind at work here.

Nadji said that in COVID-wracked Seattle and New York City, more than 60 percent of millennials have reached their 30s and are embracing life changes like marriage and having children.

“While they really enjoyed the lifestyle of central business districts and the lack of commuting … we were beginning to see them migrate back out as they were getting married and having kids,” he said. “The health crisis has [only] accelerated that pattern.”

However, the CEO said an eventual rebound seems in the cards for central business districts given U.S. downtown areas’ history of resurgence even after events like 9/11. Still, he thinks such a resurgence could take three years.

For now, the ripple effects are growing as people and firms leave urban areas. For example, the U.S. Conference of Mayors says cities need as much as $250 billion to offset tax revenues lost to the pandemic’s economic slowdown.

After all, the “new normal” of everyday life amid the pandemic had many people working and shopping digitally — bad news for local businesses depend on foot traffic in densely populated areas. PYMNTS has seen the creation of the fully digital consumer in just 12 weeks.

At least some of the shifts will be long lived — perhaps permanent — especially when it comes to doing everything from home. For example, extrapolating a bit from our survey data indicates that some 53 million of the 156.6 million U.S. consumers who were eating at restaurants less often plan to place restaurant orders from home more often. And 24.7 million are simply done with dining out in restaurants altogether, even after the pandemic passes.

Meanwhile, roughly 136.6 million consumers were grocery shopping less often than they did before the outbreak. And of that tally, 48.2 million plan to permanently do so less often even after the pandemic is over.

Drill down even more and 19.7 million U.S. consumers will simply not go back to shopping for groceries in brick-and-mortar stores at all. In fact, a full 32.5 percent of consumers shopping across retail are doing so online.