The history of urban living is long and winding. In early civilizations, density served to provide protection from invading forces. Maritime trade prompted a clustering of sailors, shipbuilders and financiers. And economies of scale brought factories together to share labor, intermediate inputs and shipping infrastructure during the Industrial Revolution.
By the 20th century, however, many U.S. cities were found to be crowded and full of crime and disease. As the automobile became affordable to the masses by 1950, urban areas hollowed out and many opined the end of the urban residential experience. It took about half a century, but recent experience shows that these prognostications proved false.
Beginning around the turn of the millennium, U.S. cities entered a stage of renaissance. Buildings and streets again became filled with restaurants, cafes and (importantly) a critical mass of socioeconomically diverse residents. Urban life was back — and this time it was more resident-driven than business-driven.
Modern urban life in America has become marked by lifestyle choices rather than a focus on the proximity to an office job. As evidenced by private buses that take tech workers from San Francisco to suburban campuses in Silicon Valley, many households have shown a willingness to sacrifice time, space and money to live in a vibrant urban setting, something that was unheard of only a few decades earlier.
It would be naive to claim that there will be no negative pressures on urban residential areas in an era of hybrid and fully remote office work. It is true that as households age into child-rearing stages, the typical pull of suburban (or even exurban) life becomes even stronger if one only has to travel to the office once or twice a week. But it also is true that a particular style of living only exists within a critical density of people.
The “dance of street life” images depicted by urbanist author Jane Jacobs
Urban life may change a bit in this new and emerging era. Traditional office-centric neighborhoods may have to diversify toward residential. Urban residential areas will likely pick up a greater share of restaurants and retail as changing foot-traffic patterns alter optimal locations for bars, cafes and shops.
But to borrow a well-worn phrase, the more things change, the more they remain the same. Even through the worst of the COVID-19 pandemic, Big Tech continued to lease or purchase space in dense urban markets. Often, their cited rationale was the need to be where their most optimal and diverse set of employees wanted to live.
And after a short hiatus from urban living, Moody’s Analytics multifamily housing data shows a lightning-fast rebound for both urban occupancy and rent levels. In fact, as the accompanying chart shows, national rent levels for multifamily properties in central business districts have eclipsed their 2019 averages by about 11%. Even in many expensive cities where demand declines were most pronounced, such as New York, the recovery is quite apparent.
Could these rebounds be temporary? Certainly, as the evolution of how people work and live continues over the next few years, it is possible that there will be bumps along the road for urban areas.
The largest concerns for urban vitality will be lifestyle-related. Maintaining public safety, transportation infrastructure, affordability and overall quality of life will be the keys to keeping a critical mass of residents — one that should help to sustain a critical mass of businesses and a flourishing economy. ●
