Big Cities Are Cycling Down Now But That is Temporary
While many people think we may be witnessing a long-term shift away from cities, some observers see more of a cyclical pattern.
New York City has been written off for dead a number of times over the past four or five decades.
Each time, it keeps coming back.
“Think about how many times people felt New York was done,” Chris Ludeman, global president, Capital Markets, for CBRE said on the company’s weekly podcast.
While many people think we may be witnessing a long-term shift away from cities, Ludeman sees more of a cyclical pattern.
“They attract talent,” Ludeman said. “They attract innovation. They attract capital. And when those three things come together, they’ll be near term disruptions.”
Right now, that disruption is being caused by a pandemic. But the shutdowns resulting from COVID won’t last forever.
“I don’t think that hotels are going to stay empty forever,” said Michael Turner, president of Oxford Properties, also a participant on the podcast. “I don’t think office buildings are going to stay empty forever.”
Cyclicality is also a feature of non-gateway, high growth markets. Turner said these cities are growing GDP faster than traditional gateway markets, like New York. This trend is only accelerating after COVID.
“I think the word for all of these cities is cyclical,” Turner said. “These high-growth hubs are going to experience some headwinds as they are now and some downturns, I think, in the overall COVID environment.”
When there are disruptions, Ludeman said cities may have to take a step or two back before they take several strides forward. As cities take those steps back, learning takes place, according to Ludeman. They may also achieve greater affordability as rents decline, which could make them attainable for more people.
“My sense is the big cities will come back,” Ludeman says. “They will continue to be vital centers of innovation and capital deployment.”
The pandemic has also shown the appeal of smaller cities. Emerging second-tier cities are attracting capital and innovation.
“I don’t think they’re going to go away and I think the small cities will teach the old city some new tricks,” Ludeman said.
Still, many think large gateway cities will continue to attract people and businesses.
“I do think that cities are going to come back strong,” Christopher Rhie, an associate principal with the Los Angeles office of global firm Buro Happold, told GlobeSt.com in an earlier interview. “They have a diverse, intelligent workforce. People want to be around others who have creativity and talents. And they want to be around the educational institutions. Cities also give entrepreneurs access to capital.”