THE REBIRTH OF THE SUBURBS, TOWNS AND COUNTRYSIDE
Landmark report reveals outbound migration from cities is on the rise in both the U.S. and UK
Exclusive new research by IWG, in partnership with Arup, reveals that suburbs and dormitory towns are being revitalised as hybrid workers migrate out of city centres
- Outbound migration from U.S. cities is up 59%[1] compared to pre-2020 levels, with almost half a million set to leave
- In the U.S. and UK, domestic migration to smaller cities and rural areas is also accelerating compared to pre-pandemic levels
- Hybrid working continues to grow in popularity, with over half of UK workers (53%) and 40% of global workers now working in the hybrid model
June 2023: A new study from IWG, the global provider of hybrid work solutions, reveals that suburbs, small towns and rural areas across the U.S. and UK have higher levels of activity than before the pandemic, as workers migrate from urban areas.
Out Migration from Cities Up
The study, undertaken in partnership with sustainability consultancy Arup, reveals that outmigration from major urban areas (especially cities like San Francisco, London and New York has accelerated since before the pandemic, while fewer people are moving to those cities.
The report concludes: “By 2022, patterns of outmigration resemble a continuation of pre-pandemic trends and include the loss of population or slower growth in central cities, growth in suburbs and growth in lower cost, large cities.
“There is evidence that migration to smaller US towns and rural areas is continuing at higher levels. There are also some indications that families and middle-aged adults are moving from London at a faster rate than pre-pandemic times.”
The study shows cities will “remain as a keystone in our society and economy. Our governance systems, transport networks, and overall built environment all situate large, dense conurbations at the centre of our societal systems.”
But the move to hybrid working means people will spend less time in city centres, which will mean their role will evolve and there will be “significant benefits for close-to-home high streets.”
The report cites US research conducted by Stephan D. Whitaker1, [2] from the Federal Reserve Bank of Cleveland, which notes net outmigration from US urban areas with a population of more than 500,000 was 75,000 a month in the early parts of the pandemic. By 2022, they had stabilised at 39,000 a month– which is 59% higher than pre-pandemic levels of 28,000.
Analysis by IWG of those levels of outmigration cited by Whitaker indicates almost 500,000 people (468,000) could therefore leave those urban areas over a year.
Similarly, outbound migration across the UK is continuing at a faster rate than pre-pandemic levels, and there is strong evidence that suburbs and small towns have higher levels of economic activity than before 2020.
The most common move during the pandemic was from the city centre to the suburbs [Patino, Kessler and Holder 2021]. Notwithstanding this large majority, a significant proportion, left large cities altogether, opting for less expensive or smaller cities and towns, or the countryside In addition, as house prices and rent continues to rise, the report cited research that people fled the 12 most expensive U.S. cities, including New York, San Francisco, Los Angeles, Washington DC and Chicago, as migration increased by over 10% - with New York seeing the highest rate of out-migration of them all [Whitaker].
The Re-birth of Dormitory Towns and Increase in Local Spending
A 2021 economic impact story by IWG and Arup found that rural and suburban economies could generate up to an extra and $1.3billion in the U.S. and £327m per year in the UK, due to the forecasted expansion of flexible office and co-working spaces in towns and villages to meet the growing demand for hybrid work. This report confirms that this is taking hold on both sides of the Atlantic. Following the surge of people migrating out of major cities like London and New York during the pandemic, the report confirmed that most opted for small towns and suburbs as workers are now providing a financial boost to areas up and down the country.
Mirroring the U.S., the UK is seeing the same migration trends, with mobile phone data revealing that small towns, suburbs and seaside locations have seen footfall rise by 50%, while transactions at Pret a Manger stores in suburban areas, particularly in northern regions of England and Scotland, have increased sharply. As of November 2022, these transactions stood at 130% of pre-pandemic levels [ONS, 2022].
Furthermore, the report shows a rise in spending in towns outside the traditional commuter belts like East Lothian and Hastings (26% and 10% respectively), as people began to work locally and cut their five-day commute into city centres [Hill and Jacobs, 2022]. Additionally, in-person spending in the City of London fell by 3% between September 2019 and September 2022. In central London (Zone 1), spending was down 2%, but in Zone 6 it had increased 12% compared to pre-pandemic levels indicating this trend stands in the UK’s capital as well.
Rebalancing of Property Prices
Hybrid working continues to grow in popularity with more than half of UK workers (53%) and 40% of global workers saying they operate in this way [AWA Associates]with changing costs in rents and house prices indicating that people have made this change permanently.
The report shows that prices are rising fastest in places that were previously considered too far from urban centres for commuters. For example, the price of a house in Greater Manchester increased by 34% from January 2020 to October 2022, equating to a near £60,000 rise [ONS]. In the City of Glasgow, the average house price rose by £40,000 in the same time period, an increase of 29%. Similarly, in the U.S., the price of a house in Raleigh, North Carolina doubled over the past 5 years, from less than $200,000 to $400,000. In the city of Appleton, Wisconsin the average house price rose by 67% in the same time period.
While levels of domestic migration have fallen since the pandemic, they are still significantly higher than pre-pandemic levels. In the U.S., migration is 59% higher than in 2018/19: while levels fell from an average of 75,000 a month down to 39,000 between late 2021 to early 2022, this is still considerably higher than the pre-pandemic average of 28,000 [Whitaker]. Higher levels of migration among adults aged 35-64 and their families have persisted as hybrid working becomes the standard working pattern across the two countries for both employers and their employees.
Growth of Hybrid Work Solutions in Small Towns + Suburbs
As a result, according to IWG footfall data from the last year, the demand for work spaces outside of busy city centres has grown by 36%. In fact, centres in suburban, town and rural locations have seen some of the largest increases in attendance, with workers increasingly forgoing lengthy commutes to work locally. For example, in the UK, the likes of Henley (+100%) Northampton (+97%), Redhill (+83%), Bolton (+66%), and Oxford (+54%) saw sizable growth in attendance.
To cater to this demand, IWG will add 1,000 locations globally over the next year and the majority will be in suburban and rural locations – including in towns with populations as small as 10,000 including Destin, Florida, Blufton, South Carolina and Stafford, Virginia in the U.S. and across the UK towns such as Crewe, Taunton and Preston.
A greener future
This report follows recent data from IWG that identified potential carbon reductions of up to 87% in U.S. and 70% in the UK, as a result of hybrid working, underscoring that these new working patterns could have a positive impact on the environment, as well as local economies.
Ultimately, this shift means the role of city centres around the world is changing. With the rise of the 15-minute city within large city boundaries, global cities need to future-proof themselves by providing a combination of non-work services, entertainment, residential options and workplace facilities to cater to the new working population.
Mark Dixon, CEO of IWG, commented:
The findings of the report confirm that we’re seeing a fundamental change in the geography of work with significant opportunities for the economies and communities of towns and cities globally. Previously, smaller cities, towns and rural communities were facing an existential threat as many of their most energetic and economically active members were being shipped out to a city five days a week, returning only to rest before setting off again.
Now, hybrid working is allowing easier access to the best talent, invigorating local economies and enriching communities. Not only this, but it’s set to change the role of cities forever. Places like New York and London, whose economies have been geared to meet the needs of millions of itinerant office workers will need to evolve to become hubs for collaboration and entertainment.
Matthew Dillon, Associate Director, Arup commented:
“We are now beginning to see the impacts of hybrid working in many sectors of the economy. If executed well, there may be large advantages to businesses, which can extend their labour market, to employees that can benefit from increased flexibility, choice and an improved work-life balance, and to our major cities, which can retain their place as the command-and-control centres of the economy, whilst freeing up capacity to grow as the economy continues to create new, high value office jobs. This has broad-ranging implications, including a potential effect on where and how people live and carry out their work.
“Areas outside of larger cities also have an opportunity to benefit from new working patterns because property prices tend to be lower, and commuting distances now matter less , giving more incentive to live remotely and work hybridly. In these places, workers are commonly splitting their time between offices, workspaces and the home.”
[1] https://www.clevelandfed.org/publications/cleveland-fed-district-data-brief/cfddb-20210205-did-the-covid-19-pandemic-cause-an-urban-exodus
[2] Analysis of those levels of outmigration indicates almost 500,000 people (468,000) are leaving those urban areas over a year.
