Business Impact From People Leaving Big Cities

Topics: Small Business

Summary: Reports show people are leaving big cities and urban centers for the suburbs and rural areas during COVID-19. This demographic shift will have an economic impact on businsses across the country.

Business impact on people leaving cities for suburbs

Data Shows Urban Dwellers Are Moving to the Suburbs During the COVID-19 Pandemic – How Does This Demographic Shift Impact Businesses?

The COVID-19 pandemic has hit urban centers throughout the country particularly hard. In the early stages of the crisis, the major metropolitan areas of New York, Los Angeles and Chicago, with denser populations, experienced very high case rates. As the pandemic continued, it spread south and west to Florida, Georgia, Texas and Arizona.

Many companies allowed employees to continue to work from home to slow down the spread of the virus, leading to a significant decrease in traffic to urban centers, downtown business areas and metropolitan neighborhoods. Reports reveal the pandemic has caused a large number of urban dwellers to move out of the city to rural areas or the suburbs.

The Brookings Institute said allowing telework could “create a more fundamental dispersal of America’s highest-value employment away from large ‘superstar’ metro areas and into lower-priced American heartland.”

It’s not clear how a demographic shift to rural and suburban communities would impact businesses. Businessowners are asking many questions:
  • Will urban areas see a decline in businesses that typically support office workers, such as parking lots, dry cleaners and lunchtime restaurants?
  • If individuals continue to move out of urban areas, will residential support businesses like grocery stores and real estate suffer?
  • As residents and businesses move out of these urban areas, will new business opportunities present themselves in the suburbs and rural areas?

Matt Zender, SVP of Workers’ Compensation Strategy at AmTrust explains that we can only speculate on the impact of the migration on businesses in urban versus suburban settings. “Workers’ Compensation claims tend to lag behind in specific numbers for this shift.”

Are People Moving to the Suburbs Due to Coronavirus?

Is this migration from downtown city centers to suburbs due to the coronavirus pandemic, or is it a demographic trend that has been growing for the past decade? CNBC reported that the stay-at-home orders led to potential millennial homebuyers looking for homes in the suburbs. The need for more space and the ability to work from home has helped spearhead the moves.

Places like the San Francisco Bay Area and Silicon Valley, which have been a haven for technology companies, have already seen residents fleeing in recent years due to the exorbitant cost of living. Remote work options would allow employees to live in cheaper suburban areas without a long commute.

There have been additional reports that New Yorkers in wealthy neighborhoods left for the suburbs or small towns during the height of the pandemic. As Business Insider points out, “Many are rethinking their decision to live in such pricey, bustling places as the pandemic-driven shutdown spells the closure of desirable urban amenities like bars and museums.”

However, some questions emerge when looking at these reports: Are these people permanently leaving their city homes, or have they “panic moved” due to the pandemic? Has there been a demographic shift to move back to the suburbs in the last few years?

A Brookings Institute study found that growth in the country’s metropolitan areas has fallen by nearly half in the past decade. However, the pandemic worries also sped up the moving plans.

Uncertainty For the Future of Urban Centers Due to COVID-19

The most significant impact of the COVID-19 pandemic is the uncertainty many people feel about the future. However, what is known is that if a shift out of urban centers continues, there will be a tremendous economic impact on retail, restaurants, office buildings and other small businesses in downtown areas across the country, Zender said.

According to a YELP study of overall businesses, in both urban and suburban areas, on their platform, there were nearly 140,000 business closures since shutdowns began on March 1. Of these closures, 41% of the businesses will not reopen. Small businesses in the retail, restaurants, beauty and fitness industries have been the hardest hit.

There has been an impact on small businesses in downtown and urban centers that could take a long time to return. Since a large portion of office workers are continuing to work from home, restaurants and shops who serve downtown workers have seen a downturn in customers. The damage that occurred from the riots has also hit the downtown and urban centers very hard. Some of these businesses were just reopening after the coronavirus shut down and then got hit by rioters and looters.

As cities reopen, will people return to their offices and businesses? People still like to be closer to urban centers with their culture, history, arts, theaters, education, health-care and research facilities and sports.

It will take some time, but the economy will eventually recover, but urban centers could have a different look and feel. A small business could be replaced by larger retailers or chain stores and restaurants. There could be a reduction in some mainstay businesses of urban centers, including fine dining restaurants, theaters and individual retail shops.

Its clear there's going to be a number of businesses that fail, Zender said. “The Amazons of the world are thriving, and small businesses are not. They are going to have challenges to come through this period at all.”

There is a silver lining, Zender said. “Those businesses that survive may find themselves in bluer waters, the ones that remain may be stronger and in a position to work more safely.

Changes in How We Work Due To Work from Home Policies

A vital factor of a shift in people leaving urban centers is that workers and employers have adjusted to working from home, no longer requiring the need to physically go into an office.

Even with states allowing businesses to reopen and people to return to office space, a majority of companies will still have their employees continue to work from home until 2021. Facebook, Google and other tech companies have already announced that they would be working remotely until mid-2021 or even making working from home a permanent status. Commuting to work daily may indeed become a thing of the past.

However, many believe that workers will return to their office spaces over time. Zender pointed out that a virtual work environment does have its downside. “In a work from home environment, corporate keeps things clean, and businesses keep going, but the ability to collaborate is challenged. Also, it is harder to explain your company’s culture to new associates being onboarded during the pandemic.”

Protect Your Small Business with AmTrust

AmTrust Financial understands and supports small businesses across the country as they adjust to pandemic operating rules. Contact us for more information about small business insurance options that can protect both your onsite employees and your remote workers.

This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

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