Opinion: Is this the end of the 'City' as we know it?

Question

With everyone working from home these days, where possible, and with the recent news that companies like Twitter are opting for a permanent remote workplace, I think it's clear that commercial real estate will be seriously impacted going forward. But what about residential real estate? The state of the economy is disrupting the housing market which might hurt some home owners and investors in the short-term. But I'm curious what the market will look like when it inevitably recovers and, possibly, comes back stronger than ever. On a local-scale, where will the market trend?

I live in Boston and I've been looking to jump into the real estate market lately. I've been looking nearly exclusively at places that touch the MBTA (the subway system), as the past 30 years has shown these towns/neighborhoods that might be cheap to buy at one point might be worth quadruple their prior value within 10 years. So, people, including myself, have been trying to time the market and jump into the town they believe is next to see that major face lift.

However, I'm starting to think that COVID-19 has permanently shifted the housing market and we won't be able to rely on prior trends.

With more workers being able to work remotely than ever before, will we still see people paying top dollar to live in smaller houses and apartments close to the city? Or will they opt to move further from the city, where prices are cheaper and there is more room to spread out? Will people value square-footage over the walkability of a neighborhood? Will people feel safer buying cars rather than relying on public transportation? If we're spending more time at home, will people prefer a bigger kitchen, some outdoor living space, a home office and a driveway?

I think eventually business in the heart of cities will return to semi-normal conditions, and that a lot of people will still place high value on being near all that for the social/entertainment aspect, especially young adults. And there's also going to be the portion of the population that won't be able to work remotely, and will stay near the city for the convenience of getting to work. And I also think the degree of impact will vary greatly, depending on the city you live. However, in a general sense, I'm starting to think we might see a big migration of people out of city centers and into outer suburbs. And with the migration of people, businesses will likely follow. I think we could see smaller 'cities' popping up in more and more places, creating a more geographically decentralized economy.

Considering we're in the middle of a pandemic that is impacting the world as we know it, relying on norms and trends set prior to the pandemic might be a huge risk, because nothing is really 'normal' any more. And it's making me rethink my whole strategy.

Russell Brazil · Answer

Opinion: people will overreact and look for logical changes in society that will never actually materialize.

Rory Gill · Answer

I'm watching closely some outlying smaller cities that still offer some of the amenities of Boston. It's important to remember that people currently living in Boston and other big cities, by definition, prefer living near activity and transportation options. For that reason, I'm skeptical (though nobody really knows) that exurbs and rural areas will be the big winners. Instead, I'd monitor the numbers for places like Salem, Beverly, Newburyport, Framingham, Waltham, etc.

Nick Jasinski · Answer

I do agree with most of the points here, and I do think there will be a "new normal" but I think that this normal will have a curve, and will even out with due time. Meaning, I think people will eventually return to what they were doing to a degree, even if it's a few years after a vaccine, people get more comfortable going back out, etc.I just think there is too much opportunity, research labs, talent, night life, all sorts of things in Boston (and other cities) that will never cease to attract people.But again, to your point, I think this current situation will affect things greatly. One thing it could present for us is great opportunity - if people flock from cities in the next year, we buy low, few years go by and people migrate back, it could work out well. Just one way to look at it!

Marian Smith · Answer

@Brendan Murphy I have wondered the same thing. Properties get bigger, newer and cheaper as you move out. If more people work from home, office space will be a necessity. But extroverts will not want to work from home. And introverts will then need to show up to be a part of the team. New hires will need face time. I expect it will be a hybrid of results once a vaccine is developed, but until then, who can predict?

Jack Seiden · Answer

You were already seeing suburb's and exurb's grow relative to downtown's grow pre covid. I expect that trend to continue, do i think cities will be decimated, no but around the margins i would bet on suburbs and exurb's.

Greg Ghunt · Answer

I agree, this is the same as a 9/11 event or if everyone went on an extended vacation.. I do think it will speed up the existing switch to computer and robot economy.. a lot of jobs that were on their way out the door, may now be quickly and finally eliminated the way of the taxi medallion drivers and administrative assistants

Greg Ghunt · Answer

Self driving taxis will be here in what.. three years? How will that affect the commute to Boston from the suburbs. I bought a house in Attleboro, hoping the shift to suburbs Philip talks about will happen.

Dave Spooner · Answer

More people will probably opt to move to the suburbs and less populated areas, however there's also a reason that people move to large cities in the first place, and often that has to do with career opportunities. Large cities often have greater concentrations of well-respected companies and job opportunities that are and will continue to be enticing for many people at all career levels. Unless all these companies switch to permanent WFH policies even after stay-at-home orders are lifted, then there will still be a large number of well-established companies going back to business as close to usual as possible, along with people pursuing careers with said companies. That being said, I think you're completely right to assume that we will see a larger migration away from cities than what we have seen in the past. It's hard to make much sense of trends right now, so staying flexible and open to change/rethinking strategies is a good place to be.

Philip Ganz · Answer

@Brendan Murphy the shift will be to the suburbs. People want space.