Some people predicting RE in metropolitan areas is going to get creamed over the next few years as companies deal with the fallout from covid and the work from home concept. I don't buy it. Some firms will retreat but i think many people want an urban experience and people will eventually flock to big cities again sooner than later. Cities go through cycles and this is just a major disruption but I don't believe for a second that this is going to kill major cities. There will be some pull back and maybe 2019 was the top for most markets but don't see it getting killed and prob back to par within 5 years.
Anyone have any thoughts on the subject?
Every time I hear someone predicting the downfall of density I kind of laugh because the person making the claim is always 40+. Sure, in their position there’s no reason to not live in the ‘burbs, but chances are they are already living there. In my opinion, making these claims is out of touch with the target demographic of these areas. At the end of the day though, those 40+ people are the ones making investment decisions so it will be interesting to see who makes that bet. My money is on young people continuing to want an active social life/dense urban area. Hell, every one night stand you risk catching something arguably worse than COVID lol
I’ll take the opposite side of that bet. No one can predict the timing exactly, and major cities may rebound for a while before declining. But I would bet that the overall trend during our careers will be down.
Cities do go through cycles, but the cycles are long: much longer than typical economic cycles. There was a huge influx into big American cities between maybe 1890 and 1950, an outflux to the suburbs between 1950 and maybe 1990, and a new influx between 1990 and 2020. We’re getting due for a reversal.
In the earliest transition, the push was the decline of family farms due to mechanized agriculture, and the pull was factory work in northern industrial cities (like in Pittsburgh steel mills and Detroit car factories).
In the later suburbanization, one of the pushes was the decline of those urban factory jobs due to containerization and outsourcing. Another was the crime wave that swept over American cities between the 1960s and the 1980s, following criminal justice reforms in the 1960s. The suburbs pulled people out for lower crime, better schools, and jobs. And the new interstate highway system made commuting easy.
The most recent re-urbanization period started with Giuliani’s crackdown on crime in the early 90’s NYC and similar policies across the country. The brutal commutes that resulted from built-out suburbs made city living more desirable. People just got tired of the suburbs and wanted city life. And city life was actually affordable, due to the long decline that lowered rents.
And now…a lot of the trends that drove the recent re-urbanization are reversing. Crime is trending up for the same reason that it did in the 60s- criminal justice reform. San Francisco looks like garbage, and DeBlasio is working to make NYC catch up. Commuting will become less of an issue with partial remote work (and, eventually, driverless cars). And brutal real estate costs are pricing people out.
Back to the future. Younger people have always liked to socialize, but that didn’t prevent the previous suburbanization, and it won’t prevent the next one either.