Here’s something interesting: A recent poll shows that 40% of adults currently living in US cities are considering moving to less populated areas because of the coronavirus outbreak.
And those who can afford to are already doing it. Over 420,000 people have already left New York City—that’s 5% of its population.
About 43% of urbanites also said that they recently looked at what’s available on Zillow and other real estate websites, compared to 26% of suburban and 21% of rural residents.
This has many real estate investors wondering if social distancing will become the new lifestyle and how that will affect the property market.
Goodbye to city life?
In an interview with The Financial Times, urban studies theorist Richard L. Florida said that cities will likely thrive post-coronavirus—just as New York did after the 1918 flu— but with fewer shops and offices, more housing, and a younger population.
The new remote-work trend will probably have a huge effect on the commercial real estate outlook. Some 40% of the workforce is currently working at home these days, and if half of that population continues to do so even after the pandemic, there will be big shifts in the office leasing industry.
Who exactly will leave cities in favor of the suburbs? Florida theorizes that middle-aged office workers with kids—especially those who established solid professional and personal networks—will want to buy homes with more space. These upscale workers will of course bring with them the service class of plumbers, hairdressers, and baristas.
He also says that these moneyed migrants may choose to buy city pieds-à-terre even if they will mostly work from their home offices.
Some big-city retail and office spaces will fall empty, too—and they will likely be converted into residential buildings. This can potentially reduce urban house prices in major cities including New York, where price and fiscal adjustments are expected.
What cities and towns will boom?
Experts like Florida expect a real estate boom in places with good airports, universities, restaurants—nice towns with access to good coffee and some public outdoor spaces for concerts and other such activities. Barren suburban wastelands certainly don’t appeal to former urbanites. They want a good balance of privacy and convenience.
Second-tier US cities with great transport links and better-quality restaurants and shops are good candidates. But upscale workers who are used to the bustle of New York will likely consider just a handful of locations like the Hamptons, Hudson in upstate New York, and Miami.
Which cities will suffer?
The pandemic-induced recession will be harsher on long-struggling cities like Detroit. Zillow statistics show that 15% more Detroit residents searched for homes outside the region in April 2020 compared to last year.
The pandemic might also be bad for “quaint” towns with long commutes, poor schools, and small universities that may not survive huge enrollment rates. Buffalo, Cleveland, Akron, Toledo, and cities like these—as lovely as they are—may never fully achieve planned revitalizations because of the difficult economy.
Where should real estate investors buy?
Florida believes that big cities continue to be good investments, especially if prices fall. Properties in New York, London, and Paris will be good investments for those who can afford to buy and hold.
That said, buying opportunities might be scant—and many other investors are waiting for good discounts, so the competition may be tough. It’s important to act quickly if a deal presents itself.
The bottom line
Pandemics have a way of changing towns and cities, driving many people to flee to “safer,” less crowded places. But those effects seem temporary.
The Black Death devastated major European cities in the Middle Ages. The Spanish Flu killed over 50 million people globally. Still, London, Paris, and New York all boomed when they were over. History has shown that people tend to move back into cities after recessions and pandemics to take advantage of job opportunities and higher wages in such areas.
Fear of density plus a desire for more private surroundings will undoubtedly make many people leave their city apartments for homes with a backyard out in the suburbs. Some may even be pulled to rural areas where they can build a self-sustaining lifestyle. As we know, the world will be changed by the digitalization of many aspects of life (most notably retail), the switch to a cashless economy, and the normalization of remote work. Streets may be pedestrianized and public transit will change to accommodate social distancing adjustments. Micro-mobility solutions and driverless cars may change subways and trains.
But eventually, people will be compelled back to great urban centers. The young and ambitious will likely continue to live in cities as they search for both professional and personal opportunities. Lower rents may draw artists and musicians back. Economic fallout from the COVID-19 crisis may create a window for unaffordable and hyper gentrified metropolises to rearrange, reorganize, and reset—hopefully for the better.
There will be major real estate investment opportunities in metropolitan areas in the wake of this pandemic. Make sure you’re ready to seize them with reliable funding solutions. Contact Capital Investor Direct to explore your options.