That Narrative Around Workers Abandoning Cities Was Exaggerated
Early data indicates that a strong rebound is building in the gateway cities, where office leasing activity has increased the most.
The narrative around workers abandoning cities and urban cores as the COVID-19 pandemic shook the US economy was exaggerated, according to a new analysis from Cushman & Wakefield.
Migration occurred, to be sure, but “the data does not support a mass exodus of companies from urban cores and city centers,” writes David Smith, head of Occupier Insights, Global Research at Cushman & Wakefield. “While leasing is down everywhere, the CBD continues to be a desirable location for occupiers attracting and retaining knowledge economy talent.”
The drop in CBD leasing during the pandemic can be attributed to the fact that CBDs were more impacted by the pandemic versus suburban locations, Smith says. CBS leasing is currently in the range of 39.3%, which is “well within historical norms.” Consider the first quarter of 2018, for example: the share of CBD leasing was essentially the same, at 39.5%.
What’s more, early data indicates that “a strong rebound is building in the gateway cities,” where office leasing activity has increased the most. Smith predicts this growth will be long-term: Gateway markets will likely see annual job growth double over the course of this decade, from 0.6% in the 2010s to 1.2% in the 2020s.
A report earlier this year from Graceada Partners noted that smaller secondary cities will likely provide more affordable alternatives for companies rethinking their location strategies, but predicts that the resulting contraction in rents and value of downtown high rises will be short-lived: “ultimately,” the report says, “the business ecosystem that makes primary markets compelling will lead to a recovery of values.”
“This will drive demand for housing, offices and ecommerce warehouse space to support population and job growth in and around these large cities,” Smith writes. “The high frequency data is telling us that the economy is very much on the mend. If cases remain low as the vaccine rollout continues, on-the-ground activity should continue to improve, serving as a boon to office, retail and hospitality activity.”