July 3, 2008
Cities Rebound as Suburban Living Costs Soar
Most people who live in American suburbs are not seriously thinking of moving to the nearest city, but as articles in Atlantic Monthly, The New York Times and Newsweek point out, the cost of living the Pleasant Valley Sunday kind of life is making urban dwelling seem more attractive from a dollar and cents perspective.
The Times piece profiled a family living in a suburb of Denver. The Boyles, who live an hour commute away from their jobs in southern Denver, have seen the cost of filling up their SUV rise to $121 while the price they pay for heating their home is more than double what it was five years ago.
While not looking to move to the city or more closely to it, Phil Boyle can see the logic in it. “Living closer in, in a smaller space, where you don’t have that commute. It’s definitely something we talk about. Before it was ‘we spend too much time driving.’ Now, it’s ‘we spend too much time and money driving.’”
Another factor impacting suburban living is the real estate market. According to Moody’s Economy.com, home prices in Atlanta, Minneapolis, Philadelphia and San Francisco markets are falling more slowly than in outlying suburbs. Another study by Impresa, Inc. found that housing prices in Chicago, Los Angeles, Pittsburgh, Portland and Tampa were holding up better than in suburban areas outside these cities.
According to Coldwell Banker, more than three-quarters of prospective homebuyers are more inclined to live in urban areas today to cut down on commuting times and costs.
“It’s like an ebbing of this suburban tide,” said Joe Cortright, an economist at Impresa. “There’s going to be this kind of reversal of desirability. Typically, Americans have felt the periphery was most desirable, and now there’s going to be a reversion to the center.”
Denver’s mayor John Hickenlooper can see high gas prices causing some to move to city centers. “It can be an accelerator,” he said. “It’s not going to be the dagger in the heart of suburban sprawl, but there’s a certain inclination, a certain momentum back toward downtown.”
Discussion Questions: Do you expect to see larger numbers of consumers moving from suburban to urban areas? How will a change of scenery affect how consumers shop? What will it mean for retailers?
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Since the retail industry is suburban in orientation it isn’t surprising that the responses here skew that way.
1. Sure there are more people who work at home. But it’s still a small portion of the total workforce.
2. Look at Edward Glaeser’s work, specifically about the increased knowledge agglomeration advantages of being in cities.
3. And at Leinberger’s new book “Options of Urbanism.” Basically he says that most housing produced in the past decades has been a particular type, oriented to the suburbs, and while 30% of the population prefers cities and 40% suburbs, the other 30% can go either way, except that they couldn’t because all that was offered for the most part was suburban housing choices.
This is changing. And the book’s research was conducted before the most recent run-up in oil prices.
4. It does lead to more work for David Livingston. I just wish that supermarkets would look at urban stores in urban ways, rather than opportunities to squeeze suburban store formats into cities. Use the ability to open up to and emphasize the connection between street and store… (I’ve written quite a bit about this in my blog).
Whole Foods is starting to use the space on the outside of their stores as marketing space, for plants and some produce. Take the Whole Foods super store idea with coffee, prepared food, pizza stations, etc., and put that on the streetside. Use glass “garage doors” and roll them up.
Safeway really blew this with the Lifestyle format as tested in downtown Portland.
I wish some grocery chain would jump forward by stepping back and bringing back these age old techniques; techniques that are still in use in places like Manhattan, Brooklyn, and Queens.
The other major trend that gets talked about all the time, but not in the context of this latest spate of stories, is how many people now work out of their homes. When I asked my boss if I could move from suburban NYC to Vermont 7 years ago, he had one question: “Is there an airport in Vermont?” I said, “Yes.” And he said, “Well, then, why would I care?” So instead of fighting with the Metro North train into Manhattan, I walk downstairs to the den/office. My town is full of ex-New Yorkers and ex-Bostonians who do just what I do. And in talking to people who work for the major food companies all over the country, it is clear to me that a great many people now work out of home offices, which works out to a win-win all around. Yes, I think more folk will be moving to the city from the suburbs, but I don’t see this as a huge trend worth realigning all your stores. Not yet anyway.
This is not a new migration; just visit any major city in this country from Houston to Chicago, to Philadelphia and you see more and more people moving back into the city. Will this accelerate? Yes. Will it become as mass movement? No. Will more and more companies allow more people to telecommute? Yes. Will more stores be build to serve this migration? When ever there is a market that is under served, retailers will come.
When everyone realizes the ‘impending’ recession has been caused by the state and consumers borrowing too much and debts cannot afford to be paid then yes, people will move. Many banks are highly in debt. Where are they going to recoup their money from? Oil prices are unlikely to come down significantly in the short term. Time to export your SUV to Saudi Arabia.
Less credit is available, credit card companies are struggling. Combine this with rising unemployment and deflation in houses and other expensive assets then people will look to offload their debt and move closer to cheaper public transport and bigger employment hubs. The early mover will spend less and save most.
In terms of retail, more, smaller stores in Urban areas are going to be on the agenda. Risk for properties in outlying areas will rise. Targeting and understanding the new urban demographic by store will be key to product selection and marketing.
This latest trend is more of a short term fad. Brookings Institute showed that the population of suburbs is booming in their book, The Boomburbs. Mesa Arizona for example is now bigger than Atlanta, Miami or Minneapolis. Mesa is a suburb of Phoenix. There are 50 other boomburbs blossoming in the US.
Sure some consumers who are able will move closer to work. But we know that right now the public rail service is full and exceeding capacity and other systems are being planned. Further, the internet makes the mobile “Nomad” worker (The Economist) the wave of the future for many many others who don’t want to work in a cube farm anyway. What I am suggesting is that the mountain may move to Mohamed here, not the other way.
Doing supermarket site research, I am doing more and more projects for site analysis in downtown urban centers. I see more people moving back to the city. Right now with housing prices crashing, buyers can pick up a nice condo downtown at a fair price. With cheap housing, low mortgage rates, and high gas prices, moving downtown makes sense for a lot people. Plus, living downtown is fun. Anyone been to Atlantic Station in Atlanta? In downtown Houston, Randall’s opened a supermarket. They have seen terrible overall same store sales except with that store, sales continue to surge. In Milwaukee, Roundy’s now has two supermarkets within two blocks of each other, both doing well; about a million dollars per week combined. Lunds in Minneapolis is doing downtown stores. Look at what Whole Foods and Dominick’s have done in downtown Chicago.
Large numbers of people moving back to city centers? No, but certain types of people and families will find this option attractive. Families in suburbia will not move back in for the most part, as they covet the peace, space, and relationships they enjoy, not to mention schools for their kids and recreational activities that occupy their weekends.
City life is convenient for work, but not necessarily so for many other facets of life. Poorer schools, crime, air quality, traffic congestion, etc, are just a few of the drawbacks to consider.
The comment on property values also makes the move back to cities less compelling. I need to sell my suburban home at a depressed value so I can buy something much smaller at a higher cost per square foot price so I can save on commuter time and higher gas prices? Not an overwhelming rationale for most suburbanites.
The trend here on the left coast is that the cities are moving to the suburbs, rather than suburbanites moving to the cities. I live just outside Sacramento and never, ever go there. That’s because everything I need or want has established outposts just down the street from my suburban/rural hacienda. There are even corporate office satellites here in the sticks, so workers are spared the commute into the city. Having lived and worked all over our country, it’s my impression that this phenomenon is not limited just to California, either.
The Financial Times had a story earlier this week about the impact on out of town retailers of high gas prices and low disposable income (or more conservativism about spending).
The British government is also trying to find ways of building many more homes, in spite of house prices falling along with builders’ shares. The approach being taken is to create so-called eco-towns that will be environmentally friendly and carbon neutral. By allegedly being self-contained so people don’t have to drive to work (some may not even have roads or places to park). But they will be all over the country and some of the proposed sites are getting strongly negative responses because they are in the countryside. Many of us cannot yet reconcile the actual plans with the idealistic principles.
So…on the ground, individual consumers may be cutting down on the miles they are willing to travel to work, school, shop etc but do we really, honestly, think retailers are going to shut down their out of town stores and move back into town? I think not.
Best solution: more 4-day work weeks. Your folks can work 4 days a week, 10 hours a day instead of 5 days a week, 8 hours a day. Save 20% on commuting costs, and turnover plunges. Everyone wants a 3-day weekend every week.
The big question mark here regarding population growth in the cities is public schools. If the new administration (whether it be McCain or Obama) does not deal with the issue and leaves the cities and states alone on the education front, chances are that the status quo will continue.
This status quo will maintain the current trend where middle-income couples in their prime child-rearing years (30-55) will continue to gravitate towards the ‘burbs with their children aged K-12. Yes, there will continue to be movement of singles, childless couples and married couples with kids under age 5 to the cities, along with “empty nesters.” That’s a good trend, I think. But, as long as there is a “donut hole” of middle-income people aged 30-55 flocking to the ‘burbs as soon as their kids hit kindergarten, the potential health of U.S. urban centers will unfortunately continue to suffer.
However, if there is reform that makes publicly funded education more attractive to these 30-55 year olds, they will start to see the housing inside cities as bargains, and they will begin to move back to the cities. If and when that move starts, then other services–full-service family-oriented health clubs, retail stores, quality childcare for preschoolers, etc–will follow.
Yes, transport costs will be a factor. But, bottom line is that middle-income parents in this country rarely want to send their children to free public schools where the majority of their kids’ classmates come from single-parent households and poor neighborhoods (which is often the case in urban public-schools today). Alternatively, those same middle-income parents cannot afford to shell out $5,000 per year per child in after-tax income to pay for K-12 private schools as they anticipate paying even more–$20,000-plus per year for college–after Johnny graduates high school.
This all comes down to schools. Let’s hope this country finally faces its responsibility to provide quality education for all children: rural, urban and suburban. The way I see it, that will be good for families, good for the environment, and good for retail.
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Since the retail industry is suburban in orientation it isn’t surprising that the responses here skew that way.
1. Sure there are more people who work at home. But it’s still a small portion of the total workforce.
2. Look at Edward Glaeser’s work, specifically about the increased knowledge agglomeration advantages of being in cities.
3. And at Leinberger’s new book “Options of Urbanism.” Basically he says that most housing produced in the past decades has been a particular type, oriented to the suburbs, and while 30% of the population prefers cities and 40% suburbs, the other 30% can go either way, except that they couldn’t because all that was offered for the most part was suburban housing choices.
This is changing. And the book’s research was conducted before the most recent run-up in oil prices.
4. It does lead to more work for David Livingston. I just wish that supermarkets would look at urban stores in urban ways, rather than opportunities to squeeze suburban store formats into cities. Use the ability to open up to and emphasize the connection between street and store… (I’ve written quite a bit about this in my blog).
Whole Foods is starting to use the space on the outside of their stores as marketing space, for plants and some produce. Take the Whole Foods super store idea with coffee, prepared food, pizza stations, etc., and put that on the streetside. Use glass “garage doors” and roll them up.
Safeway really blew this with the Lifestyle format as tested in downtown Portland.
I wish some grocery chain would jump forward by stepping back and bringing back these age old techniques; techniques that are still in use in places like Manhattan, Brooklyn, and Queens.
The other major trend that gets talked about all the time, but not in the context of this latest spate of stories, is how many people now work out of their homes. When I asked my boss if I could move from suburban NYC to Vermont 7 years ago, he had one question: “Is there an airport in Vermont?” I said, “Yes.” And he said, “Well, then, why would I care?” So instead of fighting with the Metro North train into Manhattan, I walk downstairs to the den/office. My town is full of ex-New Yorkers and ex-Bostonians who do just what I do. And in talking to people who work for the major food companies all over the country, it is clear to me that a great many people now work out of home offices, which works out to a win-win all around. Yes, I think more folk will be moving to the city from the suburbs, but I don’t see this as a huge trend worth realigning all your stores. Not yet anyway.
This is not a new migration; just visit any major city in this country from Houston to Chicago, to Philadelphia and you see more and more people moving back into the city. Will this accelerate? Yes. Will it become as mass movement? No. Will more and more companies allow more people to telecommute? Yes. Will more stores be build to serve this migration? When ever there is a market that is under served, retailers will come.
When everyone realizes the ‘impending’ recession has been caused by the state and consumers borrowing too much and debts cannot afford to be paid then yes, people will move. Many banks are highly in debt. Where are they going to recoup their money from? Oil prices are unlikely to come down significantly in the short term. Time to export your SUV to Saudi Arabia.
Less credit is available, credit card companies are struggling. Combine this with rising unemployment and deflation in houses and other expensive assets then people will look to offload their debt and move closer to cheaper public transport and bigger employment hubs. The early mover will spend less and save most.
In terms of retail, more, smaller stores in Urban areas are going to be on the agenda. Risk for properties in outlying areas will rise. Targeting and understanding the new urban demographic by store will be key to product selection and marketing.
This latest trend is more of a short term fad. Brookings Institute showed that the population of suburbs is booming in their book, The Boomburbs. Mesa Arizona for example is now bigger than Atlanta, Miami or Minneapolis. Mesa is a suburb of Phoenix. There are 50 other boomburbs blossoming in the US.
Sure some consumers who are able will move closer to work. But we know that right now the public rail service is full and exceeding capacity and other systems are being planned. Further, the internet makes the mobile “Nomad” worker (The Economist) the wave of the future for many many others who don’t want to work in a cube farm anyway. What I am suggesting is that the mountain may move to Mohamed here, not the other way.
Doing supermarket site research, I am doing more and more projects for site analysis in downtown urban centers. I see more people moving back to the city. Right now with housing prices crashing, buyers can pick up a nice condo downtown at a fair price. With cheap housing, low mortgage rates, and high gas prices, moving downtown makes sense for a lot people. Plus, living downtown is fun. Anyone been to Atlantic Station in Atlanta? In downtown Houston, Randall’s opened a supermarket. They have seen terrible overall same store sales except with that store, sales continue to surge. In Milwaukee, Roundy’s now has two supermarkets within two blocks of each other, both doing well; about a million dollars per week combined. Lunds in Minneapolis is doing downtown stores. Look at what Whole Foods and Dominick’s have done in downtown Chicago.
Large numbers of people moving back to city centers? No, but certain types of people and families will find this option attractive. Families in suburbia will not move back in for the most part, as they covet the peace, space, and relationships they enjoy, not to mention schools for their kids and recreational activities that occupy their weekends.
City life is convenient for work, but not necessarily so for many other facets of life. Poorer schools, crime, air quality, traffic congestion, etc, are just a few of the drawbacks to consider.
The comment on property values also makes the move back to cities less compelling. I need to sell my suburban home at a depressed value so I can buy something much smaller at a higher cost per square foot price so I can save on commuter time and higher gas prices? Not an overwhelming rationale for most suburbanites.
The trend here on the left coast is that the cities are moving to the suburbs, rather than suburbanites moving to the cities. I live just outside Sacramento and never, ever go there. That’s because everything I need or want has established outposts just down the street from my suburban/rural hacienda. There are even corporate office satellites here in the sticks, so workers are spared the commute into the city. Having lived and worked all over our country, it’s my impression that this phenomenon is not limited just to California, either.
The Financial Times had a story earlier this week about the impact on out of town retailers of high gas prices and low disposable income (or more conservativism about spending).
The British government is also trying to find ways of building many more homes, in spite of house prices falling along with builders’ shares. The approach being taken is to create so-called eco-towns that will be environmentally friendly and carbon neutral. By allegedly being self-contained so people don’t have to drive to work (some may not even have roads or places to park). But they will be all over the country and some of the proposed sites are getting strongly negative responses because they are in the countryside. Many of us cannot yet reconcile the actual plans with the idealistic principles.
So…on the ground, individual consumers may be cutting down on the miles they are willing to travel to work, school, shop etc but do we really, honestly, think retailers are going to shut down their out of town stores and move back into town? I think not.
Best solution: more 4-day work weeks. Your folks can work 4 days a week, 10 hours a day instead of 5 days a week, 8 hours a day. Save 20% on commuting costs, and turnover plunges. Everyone wants a 3-day weekend every week.
The big question mark here regarding population growth in the cities is public schools. If the new administration (whether it be McCain or Obama) does not deal with the issue and leaves the cities and states alone on the education front, chances are that the status quo will continue.
This status quo will maintain the current trend where middle-income couples in their prime child-rearing years (30-55) will continue to gravitate towards the ‘burbs with their children aged K-12. Yes, there will continue to be movement of singles, childless couples and married couples with kids under age 5 to the cities, along with “empty nesters.” That’s a good trend, I think. But, as long as there is a “donut hole” of middle-income people aged 30-55 flocking to the ‘burbs as soon as their kids hit kindergarten, the potential health of U.S. urban centers will unfortunately continue to suffer.
However, if there is reform that makes publicly funded education more attractive to these 30-55 year olds, they will start to see the housing inside cities as bargains, and they will begin to move back to the cities. If and when that move starts, then other services–full-service family-oriented health clubs, retail stores, quality childcare for preschoolers, etc–will follow.
Yes, transport costs will be a factor. But, bottom line is that middle-income parents in this country rarely want to send their children to free public schools where the majority of their kids’ classmates come from single-parent households and poor neighborhoods (which is often the case in urban public-schools today). Alternatively, those same middle-income parents cannot afford to shell out $5,000 per year per child in after-tax income to pay for K-12 private schools as they anticipate paying even more–$20,000-plus per year for college–after Johnny graduates high school.
This all comes down to schools. Let’s hope this country finally faces its responsibility to provide quality education for all children: rural, urban and suburban. The way I see it, that will be good for families, good for the environment, and good for retail.