Time to cheer up and talk about the status of the world after the pandemic is over and one with. We predict that there will be an urbanization boom come 2023.
You might dismiss me as batshit crazy upon making this conjecture. Let’s bookmark this post then return to it in 2023, and see if I’m right! But there’s another side to the coin that is simply not being discussed in real estate news right now, and it’s about not if, but when cities will fill back up.
The pandemic fueled countless moves, and caused institutions to believe that there’s this epic suburbanization boom happening. After all, you got the factors of historically low interest rates, giant swaths of Millennials who just started families or plan on it (or simply want more space if they’ve opted out of kids), and not needing to be as close to urban centers for jobs as they have in the past. After all, remote work is booming to the point that developments are springing up around it like inverse company towns and suburban office spaces are also seeing more leases signed, while urban commercial space is on the decline.
But I’m calling it that there’ll be a massive return to urbanization come 2023, perhaps 2024.
IKEA agrees with me. The pandemic forced them to rethink their infamously labyrinthine ordering process, and make it easy for people who just want a Billy bookcase RIGHT NOW, dammit. IKEA is the go-to chain for people suddenly adjusting to different stages of life: going to college, your first apartment out of college, post-divorce housing, and going a step above thrifting and curb-shopping if you’re moving and don’t anticipate staying there very long, so you’re not going to splurge on a Pottery Barn bed but don’t want your new neighbors to have many legs and leave behind carmine-colored shells.
So let’s dive into why I predict an urbanization boom will come post-COVID.
Lifestyle Changes + Pressure Cooker Homes = Rise in Apartment Living
There’s two groups I don’t see being discussed much: college students whose plans were just disrupted and are now interminably at home doing remote learning, and the intense surge of divorces which have soared 34% this year compared to summer 2019.
Sure, they get a little mention. But none of these outlets crowing about suburban home sales are thinking about them. I am, which is why I predict we’re going to see a huge urbanization boom.
IKEA knows this. They know they’re going to be just as anxious to get out of the house because they plan on rolling out 50 new stores while so many businesses are paring down, or even shuttering completely. And where are most of these stores going? Right in or extremely close to major cities.
That 34% hike in divorces also only tells part of the story. All these numbers you’re looking at do. What about the couples who are just barely holding it together, but toughing it out until their kids stop taking classes via Zoom lest they risk a fine for digital truancy? And even if you are already separated, couples with kids have different considerations than ones who don’t.
There’s god knows how many couples right now who are just about holding it together and will split once the vaccine comes out and/or they recover their income from job loss, having to take on childcare, and other pandemic-related factors. Even if you already split up and moved out now, chances are you’re not in your ideal housing or have ideal income (if you even have it all right now, or were already poor before all this).
Then there’s college students. Traditionally unable to afford city apartments on their own without their parents’ help, something that will be hard to come by right now if their parents lost their incomes, you’re still going to have plenty of students who can’t wait to hell away from their parents despite high housing costs. Whether they make it happen because of student loans, parental assistance, or going to school in a lower-cost region, returning students who find it cheaper to do off-campus housing than stay in a dorm are likely to help spur those IKEA sales and lease signings in a few years.
If there’s a freelancing boom and significant job growth in the next couple years, we just might see more people moving to the cities they want to be in if they don’t want to lock it down in the burbs or move to a rural area to do the whole Stardew Valley thing. There’s this interesting duality in pandemic life right now: some people are using this to escape small apartments in the city–trust, I’m officially sick of this place and I NEED a giant city to tap into–but many are also taking stock of their lives and realizing the things they can live without, and that city living isn’t necessarily expensive depending on how you do it.
Vacancy Rates Are at Record Highs, Leading People to Lock in Leases While They Can
All my life, my barometer for how willing people were to pay for something so batshitly above the board was to see how much they’d pay to rent in Manhattan. Manhattan rent has hit a 7-year low, with over 16,000 vacant apartments and not just ones that oligarchs are using as banks.
That median is still over $3,000, but you can catch some steals right now. Speaking from up here in The Bronx, you won’t have the same luck: most of us can’t or won’t vacate. But you’ve got the intrepid taking advantage of landlord concessions in Manhattan and Brooklyn right now. If you ever wanted to live in one of those utterly insane properties? Now’s your chance!
I’m sticking to my plan to move to LA post-vaccine, but I noticed that rents fell slightly there compared to when I last looked. I don’t see the same level of concessions because it’s simply not the same density as New York where that was a factor that prompted millions of moves, but landlords know (or should learn by now) that charging out the ass in a global crisis isn’t sustainable if other people provide your income and now millions of peoples’ own incomes are utterly nerfed.
My steady drip of Zillow porn also shows me that the condos out there that I’ve been eyeing keep being snatched up by those whose incomes weren’t disrupted. People are definitely moving to and within cities, it’s not all suburban. I just think it’s going to ratchet up in a few years when people are going to realize whether or not they like suburban life and are cut out for it. Speaking just for myself, I envy those of you right now who can build home gyms and spas while my shitty old building’s hot water crapped out twice in the same week, and I can’t just go to the gym or make a spa day of it and use their shower. But I know myself well enough. When this awful chapter in history is over? I don’t want to spend my weekends doing yard work, or my savings replacing a hot water heater when it eventually dies in the middle of the night on a holiday weekend. We’re going to see how many more people feel the same in a couple years!
Remote Work and School Carries Steep Hidden Price Tags for Families
Overall, remote work is awesome. I’ve been an online blogger/game dev/entrepreneur for years, and can’t imagine life any other way! It’s enabled me to travel, take care of my mental and physical health, and make more money than a job would ever grant me. And I’ve BEGGED people to understand that it’s not remote work that sucks. It’s doing remote work in a pandemic, while every level of government has utterly failed us, that’s horrible.
It’s also a different dynamic when you’re a remote employee vs. someone who owns their time. You’ve got uninvited guests in your house now, on top of your children doing remote learning. Everyone is at home to minimize exposure to the virus. The result? Skyrocketing electricity and data bills.
I’ve read many other pieces on this topic, and it was eye-opening and heartbreaking. If you’re single with no kids, and already used to working at home, you might not notice a difference in your bills. In my case, my data usage is significantly DOWN because I’m at home all the time and using my wifi connection instead of data. I only go to the city for medical appointments, so I’m not constantly buying Metrocards or Lyft and taxi rides. Heat is free in NYC, and I had higher than normal electric bills this summer because it was disgustingly hot and I couldn’t just go somewhere cooler, or go on vacation. No biggie, I expect that every summer.
But it’s a lot different when your children are normally in school and one or both parents are also usually out of the home. Even with it being just me, I’d normally be taking my laptop to different places and not having every single meal at home. All stuff I miss, cooking at home SUCKS when it’s just you, but at least I haven’t had $500 power bills regularly sprung on me on top of other household bills to the point that it’d literally be cheaper to revert to commuting, as I hear from other families on social media. Power, data, groceries– it all drastically adds up when you have a family.
While there’s not likely to be a surge of two-parent households with young children repatriating American cities, it could be a different story for families with older children and single-parent households. But even without repatriation, you’ve got millions of people who are now desperate to demarcate work from home again and either come to the office 2-3 days a week or a few times a month, or entirely revert to face-to-face.
And that matters for city life, because it has a chain reaction on all the businesses that depend on commuters–even part-time ones. That fuels economic activity among restaurants, bars, shops, and the railroads and bus systems. When you don’t have $1,000 grocery bills anymore because it’s safe to send your kids back to school and you can eat at restaurants on your lunch hour again, it definitely paints a different picture for cities than the one we’re currently seeing.
People Will Want Lots to Do Post-Vaccine
But it’s not wanting to occasionally get out of the house for work: what about all the fun things we’re missing now, and have to give up for public safety?
I’m moving to an exciting new city expressly because my life is not slowing down after this hell ends. I want clubs, metal shows, bars, game dev things, open mics, hanging at little parks without having to worry about masks and social distancing. TRAVEL. God, I miss travel the most! And well, you’re better-equipped for frequent travel when you’re near major airports, rail stations, and bus terminals.
But even if you’re slowing down the pace a bit in your thirties, or the arrival of your forties and beyond, it makes me think of this thing I randomly saw on Twitter one night where a guy in Ohio started decrying ridiculous LA and Manhattan rents, talking about his 900 square foot apartment that costs $750/month. Someone replied, “You’re enjoying your apartment. I’m enjoying my life.”
It’s simply a lifestyle thing. It’s why Pew Research estimated only 3% of COVID-related moves will be permanent. Sure, people who are happier with their locked-in mortgages and slower pace in the burbs might not be keen on returning to the cities from whence they came, especially if you’ve got a family. But there’s so many single Millennials who want to buy in cities, or just keep renting there regardless of what happens with their love lives. After being pent up for a year or longer, I predict there will be a huge surge in entertainment and dining spending after a sturdy vaccine rolls out and we reach the point that we don’t have to mask up constantly (which probably won’t be 2023 at least).
I won’t decry anyone in the suburbs dotting the NJ Turnpike going out to Chili’s without needing to mask or eat nachos in bitter autumn winds. But so many of us have been so devoid of peopling all this time, that looking at someone smile is going to feel like it belongs on Redtube. City streets will feel vibrant once again! The revolution will be shitposted on Twitter!
Mark my words, the suburbanization boom only tells one side of the story. This is one that is likely to come to pass in 3-4 years.